Part 1 – Getting Things In Order
Being the Personal Representative of a probate estate can be a stressful task, especially if the heirs and you don’t see eye to eye. When property and money are involved, people tend to get a little crazy. Trust sales are a bit easier because the owner left a living trust stipulating who is to oversee the estate and often the courts don’t get involved like for a probate. I’ve created a checklist of the important things you need to get in order.
I’m assuming that you are the person who selected an attorney that filed the petition for probate on your behalf. You’ve been given a court date that your attorney will attend. If all goes well the judge will appoint you as the personal representative (PR) of the estate. You’ll either be appointed the executor if the decedent had a will or the administrator if there is no will. A few weeks after the court date you should be receiving Letters Testamentary (if there is a will) or “Letters of Administration” (no will). These probate documents affirm your appointment as the PR of the estate. The letters give you the authority to handle the financial affairs of the estate and to sell any real property.
Assuming there is real property to dispose of here are my pre-sale recommendations for your probate property whether it is a house, condo, or an apartment building.
Order a Preliminary Title Report
As you may know, a Prelim shows anything recorded against the property. Things like loans, IRS or State tax liens, judgments, notice of unpaid property taxes, etc. We need to check title right away. Hopefully there is nothing recorded other than the mortgage (unless it is paid off). However, let’s say a tax lien shows up. If it is legit, it is going to have to be paid off at the close of escrow and of course will reduce the amount the estate will receive.
If it is a mistake, then it will have to be removed. Lots of times a tax lien or judgment will be recorded against someone else with the same name as the decedent. If that is the case, I can have my Title Officer remove it from the report at no charge so that a sale can proceed. I can obtain a Preliminary Title Report from a reputable National Title Company free of charge for the estate.
Check for a Notice of Default (NOD) or Notice of Sale (NOS)
The other thing a prelim will show is if a Notice of Default or a Notice of Sale has been recorded against the property (if the property has a mortgage). It is not uncommon for a PR to start administering a probate and then find out the lender has started foreclosure proceedings against the decedent’s property. In my experience, this happens when the decedent was quite elderly and not maintaining their affairs property.
If the lender has filed a Notice of Default or a Notice of Sale, I can contact the foreclosure department on your behalf to stop the proceedings. The lender may request the Death Certificate and your Probate Letters authorizing you as the PR to prove the borrower is deceased and the property is in probate. Lenders are very flexible about working with PRs. They do not like to foreclose on a probate property if the family is actively working to either
bring the loan current or sell the property.
Pull Permits and the Certificate of Occupancy
You should always pull the building permits and the Certificate of Occupancy, especially if the property is older or has some additions. We want to ascertain that there are any unpermitted additions. Un-permitted bathrooms, kitchens, lofts, family rooms, converted sunrooms, and garage conversions are very common in Southern California. It is generally OK to sell a property with un-permitted additions but the catch is it must be disclosed to the buyer and the property should be sold “As Is” with no repairs. You do not want the buyer to find out after the close that there are un-permitted additions to the property that were not disclosed. I can obtain permits and the C of O from a reputable local permit company free of charge to the estate.
Check for Code Violations
I always check the Department of Building and Safety to see if there are any pending Code Violations filed against a property. It’s common with probate properties that are in really bad condition. If the decedent was a hoarder and never maintained the property, it is not uncommon for a neighbor to complain to the city who then files a citation against the property. Things like non-operational cars on the lawn, overgrown weeds and bushes, trash on the property, busted windows and other things that are an “eyesore” to the community. I can go online to the Building and Safety website and request a code violation report for the property.
Belongings Removal Plan
This is the one thing that drives most PRs crazy. How to go through the belongings and then remove all the junk, trash, furniture, and non-valuable personal items from the house in a timely manner. This is especially difficult if you do not live near the property and you have a busy life. Let me share how I clear out my probate listings for my PR clients.
First you and the family need to go through the home and remove all valuables, sentimental items, and anything else you want to keep. Some items may end up donated to a charity. Once that is done it is time for step two.
Next I’ll get a 40 cubic yard roll off dumpster delivered to the property. Then I get 3 or 4 laborers that will remove the remaining items and trash from the property and put them in the dumpster. We need to have plastic trashcans, shovels, brooms, and plastic garbage bags on hand as well. Every room in the house will be swept clean after the contents are removed. All electronic waste like computers or printers get put out for the city’s E-Recycle pickup. Big bulky items like sofas or mattresses go to the curb for the city’s bulky item
I can generally trash out a 3 bed 2 bath home in 8 hours and with one dumpster. Occasionally for real hoarder situations it might take two dumpsters. Getting a property trashed out always seems like a milestone in the probate process!
Contact the Lender
If the property has a conventional loan or reverse mortgage, we need to contact the bank, see if the loan is current and get an exact payoff. Hopefully you have the decedent’s current mortgage statement that shows the balance. If the PR can’t find the mortgage statement we will have to contact the lender.
All properties need to have working utilities on during the marketing and escrow period, unless the house is a total teardown. The buyer will want to inspect the plumbing, electrical, and heating system during the due diligence period. If they have been cancelled for nonpayment you will need to turn them on in the name of the estate. The main thing of concern is the heating system, especially if the property has an old wall heater or a floor furnace. Banks require a functioning heating system and the appraiser is probably going to check the heating. If the gas is not on the heating system cannot be checked. If you are not sure about the utilities I will be happy to contact LADWP, PG&E, SoCal Gas, or the local gas co to determine the status.
You will need to maintain a fire and hazard insurance policy during the probate and sales process. If you have the policy, contact the agent and let them know that the property is in probate. However, a few companies do not cover vacant houses and they may drop you. If this is the case, you may need to shop around. As a last resort you can contact the California Fair Plan who is the insurer of last resort. Let me know if you need some help or advice in regard to insurance.
If the property is a rental, we have a few things I need to find out. Are they regular tenants paying rent? Are any of the renters family members? Do you have their leases? Do you have their phone numbers? Are they cooperative or uncooperative? Are they paying their rent on time or are they behind? Will they willingly move out or does this look like an eviction situation? Should we just sell the property with them in the property (if it is an apartment building) or do we need to get them out? I’ll need to determine what’s going on with them so I can make the proper recommendations on how to handle tenants. As an apartment and probate broker for 34 years I have a ton of experience dealing with tenants, rent control, and how to make things happen.
If the tenant is refusing to move or not paying rent, you may need to hire an eviction attorney. I commonly see is family members who are living rent-free because Grandma said they could. They don’t want their free ride to end and will often put up a big fuss to delay the process and stay as long as possible. They know the law and often hire a tenant rights attorney to stave of the process. If this is the case you will absolutely need to hire an eviction attorney. If you have tenants in the property, I can help you determine the best plan of action to deal with them. I am a rent control expert and can absolutely give you some great advice and strategies. I have negotiated with many tenants and know how to work out a win-win result with them. I also own rentals and have dealt with tenants for many years. If you do need an eviction attorney I work with several good ones. Give me a call and let’s have a discussion.
Once the property is cleaned out it’s time to do the repairs (unless it is a total rehab project). Most of the work probably consists of landscaping, painting, refinishing hardwood floors, installing carpeting, and minor handyman type repairs to make sure everything is working properly. With most probates we are not doing a complete rehab we are just doing a minor cosmetic fluff. After the repairs are complete, I will coordinate with a cleaning company to get the property thoroughly cleaned including windows. I will also get a gardener out to get the lawns and garden looking good and make sure the sprinklers are working properly.
Depending on the situation I sometime recommend rekeying the property. Say you had several family members living there or if a lot of family members have keys it might be prudent to rekey the premises.
If you’ve addressed these issues your property should be ready for the next step, selling the probate, which I address in Part 2 of Selling Inherited Property the Right Way.
Part Two – The Probate Sales Process
Ok, you’ve received your letters testamentary, the property is empty and clean, and you’ve got things under control. Let’s talk about the selling process. By the way, the process is similar if it is a trust sale or a conservatorship. The same lessons apply.
Ok, you’ve decided I’m the right broker for you and it’s time to get started. First I’ll want to review the particulars of your case. I’ll review the Petition for Probate to determine if you have full or limited authority to sell the property and if a bond is required. I’ll check the L.A. County Superior Court website to review the case summary and minute orders. I need to see where you are in the probate process, if the Order for Probate has been filed, and if you have received your Letters Testamentary. I want to get a good handle on the overall status of your case. I’ll also take down your attorney’s information as well since we will be interacting during the sale of your property.
Next I want to go look at the property. If it is occupied, we need to make an appointment with the occupant to get me access. If the property is an apartment building, I will give the tenants 48 hour written notice by placing a notice to enter on their front door. At the inspection I will be taking photos and video, taking notes, and looking for obvious problems like roof leaks, mold issues, and termite damage.
I’ll also be looking for hazardous conditions, illegal structures, un-permitted additions, and other code violation and safety issues. Many cities in L.A. County do an inspection during escrow and make sellers correct violations before the property can be sold. If I find any of these issues exist during my initial inspection, I will discuss how to correct them before we ever get to escrow so we can avoid any delays.
We also need to decide if it is a complete rehab fixer, a cosmetic fixer, or in good condition. I categorize probate properties three ways:
Severe Fixer or Teardown – Is the property in original condition? Not been rehabbed for decades? Original electrical, galvanized plumbing, old windows, cottage cheese ceilings, vinyl floors, needs paint, old roof? Is the landscaping or lawns dried up or seriously overgrown? Is it obvious that the owner owned lots of animals? Did a hoarder own the home? If the property falls in to this category, you probably have a severe fixer or maybe even a tear down.
Cosmetic Fixer – Perhaps the house is in decent condition but maybe a bit dated. Perhaps there are nice hardwood floors underneath the carpets. The owner was not a hoarder or junk collector and had some pride about taking care of his or her home. Maybe the kitchen or bathrooms are not remodeled but they are not gross. Maybe some paint, refinishing the hardwoods, some minor repairs and brushing up the landscaping a bit is all it would take to make the property livable. If the property falls into this category than you have a cosmetic fixer.
Good Retail Condition – Occasionally I see a probate property that is in great condition. All you need to do to this type of property is to clear the contents out and get it professionally cleaned. This type of property will sell for the full retail price with no discounting for condition.
Next we need to decide on what, if any, repairs or fix up is to be done Before we decide on what if any repairs, I have to know one thing first. Is there any money in the estate for repairs? If there isn’t, or you don’t want to come out of pocket for the repairs, then we will just have to sell it as-is and skip the repairs due to lack of available funds. Let’s assume that there are adequate funds for repairs and cleaning. If the property is in good retail condition than obviously let’s just get it professionally cleaned up and make sure the lawn and garden
are trimmed and watered. If the property is a light cosmetic fixer, I will get bids and coordinate the needed repairs like paint, carpets, and landscaping. The goal here is to enhance the selling price by doing these minor cosmetic repairs. If the property is a heavy fixer, needs a new kitchen and bathrooms, I will probably recommend selling it as-is to an investor. As you know, there are many people who like to purchase fixers, rehab them, and
flip them for a profit. That’s the most likely target buyer for this type of property. One of the issues with a heavy fixer is financing. It is tough to get a loan on a property whose kitchen is missing or there is no heating, or there are large holes in the ceilings. It is especially tough to get FHA financing on these types of properties. Your best course of action in this case is to just market it as a rehab project and it will sell as-is to an all cash investor. After the repairs are complete, I will coordinate with a cleaning company to get the property thoroughly cleaned including windows. I will also get a gardener out to get the lawns and garden looking good and make sure the sprinklers are working properly.
Remember the utilities need to be on during the sale process. Obviously workmen or cleaners will need electricity and water. Buyers will need lights and water to look at the property and test water pressure. The buyer’s inspector will need to test the lights, plumbing, and heating system. If the utilities are currently not on you will need to open an account and get them turned on
If your property is occupied by a tenant or family member that does not want to leave you’ll need to make some decisions on how to handle that. Maybe the daughter or brother of the decedent was living in the property and has a feeling of ownership. Perhaps it is just a tenant that was renting the home. Maybe it was a “friend” of the decedent who is basically a “squatter” and is not going to go without a push. The bottom line is we need to come up with a strategy to gain possession of the property. A buyer is not going to want to buy a property that is occupied by a hostile tenant or family member. You may need to retain the services of a good eviction attorney. Another strategy might be to do a “Cash for Keys” agreement with the occupant. You’ll pay them X amount of dollars upon them vacating the house and giving you the keys. Fortunately, I have a lot of experience dealing with this situation. If this is your situation, we can discuss your options and I’ll give you my opinion on the best way to handle it.
Assuming you are going to sell the property, you need to know what the property is really worth. Not a theoretical value or what the probate referee appraises it at, but what it is worth in the real world. In other words, the highest price a ready, willing, and able buyer will pay for the property. Knowing the exact value of the property will help you with planning. I will prepare an accurate, detailed market analysis that will tell you what the property is really worth. As an experienced broker for 35 years, I know how to accurately value a property whether it is a home, condo, townhouse, apartment building, commercial property, or land. I will email you the analysis and you can share it with other family members.
Decide on the listing price (full authority)
Once I finish the Market Price Analysis, I will email it to you and we can go over the details of the report. At this point we can decide on what you want to list the property for. Since you have full authority you usually do not have to take in to account of an outside appraisal done by a court-appointed probate referee.
Decide on the listing price (limited authority)
If you have limited authority the court has to confirm the sale of the property. Prior to any sale, the court will order a probate referee to independently appraise the property. We need to take in to account the valuation the referee came up with. However it is important to note that referee evaluations are notoriously inaccurate They are not brokers, they don’t intimately know the current market, and to top it off, they only do a “Drive By” appraisal
which means they don’t inspect the interior of the property. If the valuation done by the referee is too high than I will have to ask him to reassess the value and I will supply him the necessary comps and market data so he can adjust the valuation.
Seller’s Net Sheet
Once I finish the price analysis, I will get you a Seller’s Net Sheet. This net sheet will accurately calculate the exact amount of cash the estate will receive at the close of escrow. We take the gross sales price and deduct the escrow and title fees, commissions, any existing loans, and any existing tax liens, judgments, etc. Whatever is left is the “net” that the estate will receive. You should know exactly how much the estate is going to net. My escrow officer will be happy to prepare a Seller’s Net Sheet for you at no charge.
Prepare the Probate Listing Agreement
In California we use probate specific agreements for the listing and sale of probate properties. The probate listing period cannot be more than 90 days. I will email you a draft as soon as I complete it and we can review it together.
Send your probate attorney copy of the PLA. Many of my clients want their attorney to review the listing paperwork prior to signing it. Some don’t, it just depends on the individual. Just let me know how you want to handle it and if you want, I will email the docs to him or her right away.
Sign the PLA via Docusign
Once you are ready to proceed and sign the paperwork, I will send you the PLA via my Docusign account. Docusign is a super convenient web-based electronic signing service that allows you to legally sign documents on your computer screen. No more printing, signing, faxing or scanning. It is so convenient and efficient I am sure you will love signing docs this way. If you want to see how Docusign works, you can try their Interactive Signing Demo free. Once you start using Docusign you will never want to print and scan or fax a document again!
Input Listing in to the Multiple Listing Service
Once I receive the signed PLA from you, I will put your property in our local MLS with a complete description, photos, and explicit instructions on the procedures to submitting a probate offer. Many agents have never sold a probate property so sometimes I have to help them through the process.
Install Lockbox and Sign
The next step is to install the sign and lockbox on the property. I will need a couple spare keys for the lockbox and a backup. If for some reason there is an issue with the keys or if there are too many copies floating around we may want to consider getting the locks changed.
Marketing the Property
I use a variety of marketing methods to promote your property. Besides the MLS the property will be listed in about 12 different websites like Realtor.Com, Zillow.com, Trulia.com, Redfin.com, and others. About 85% of all buyers start their search via the web so it is important to have massive web exposure on the Internet. If the property is in good or fair shape I will create a single property website like the probate listing I sold in Hollywood Hills. If the property is a rehab fixer than I will email your property to about 150 rehab investors in my email distribution list.
Order a termite report
I generally don’t recommend doing tenting or termite repairs when selling a probate property. However, I do recommend providing a report to the buyer, as most buyers will request one. Most local termite companies will provide a termite report free of charge. If the property is occupied I will give the occupants at least a 24-hour notice to inspect the property.
Order a retrofit report
In Los Angeles County, most cities require that residential properties get retrofitted prior to a transfer to a new owner. This generally entails installing smoke and carbon detectors, a gas shut off valve for the gas meter, and strapping the water heater with earthquake straps to prevent a tip over is case of an earthquake. I want to get a handle on what the costs of the retrofit repairs are up front.
Once an offer is emailed to me I will review the price and terms and make sure it is filled out correctly. If the buyer’s agent did not use a Probate Purchase Agreement, I will instruct him or her to rewrite and submit the offer on the PPA form. I will also review the buyer’s credentials. If the offer is all cash I will review the buyer’s bank statements to verify they have the cash to close. If the deal is to be financed then I will review the buyer’s qualifications to obtain financing from the mortgage broker. I will also review the bank statements to verify there are sufficient funds for the down payment and closing costs. Once I have reviewed everything, I will email you the offer with my recommendations. If you prefer I will also email the offer to your probate attorney for review. At that point we can either decide to accept the offer as-is or we can prepare a counter-offer for the buyer. Again, if we prepare a counter offer it will be sent to you to be signed via Docusign.
There is a good chance that your probate property will attract several offers. In that situation we will probably be countering several potential buyers. I have a lot of experience handling multiple offers and will be able to guide you through the process. You can be assured that you will receive top dollar as the buyers will be competing against each other to get the property.
Deposit 10% of the purchase price to the estate’s account
Once we have executed the entire offer with the buyer, the buyer will wire the deposit escrow or to your attorney for deposit to the estate’s checking account depending if you have full authority to sell or if you have to go through a court overbid process.
At this point if you have full authority to sell the property then we will open escrow, as no court-overbid process is necessary. I will send the escrow officer the signed contracts, the buyer’s info, the other agent’s info, your info, the attorney’s info, and the lender’s info if it is not a cash sale.
Set Court Date
If you have limited authority to sell, once the deposit is received, the attorney can petition the court for a sale date. Once the attorney notifies me of the court date, I will publish the date and overbid price in the MLS and give instructions to other agents on how to make an overbid on the property. It usually takes about 30 days to get a court date.
For Limited Authority Sales: The court overbid process
If the sale requires a court overbid process, I will be there at the courthouse with your attorney, the original buyer, his or her agent, and any other buyers and agents that care to show up. Of course, you may show up too but it is not necessary. Once our case is to be heard all parties will approach the bench and the probate judge will start the process. He will let the other bidders know in what increments they must raise their bid. After the winning buyer makes his or her bid and the sale is confirmed, the clerk will hand the attorney or the PR the probate paperwork that confirms the price, terms, and buyer’s name. I will take the overbid document to escrow company in order to open escrow. Note:
Limited authority sales subject to overbid do not give the buyer any contingencies. He or she will lose the deposit if he or she does not close the escrow.
If required, order a City Pre-Sale Report
Certain cities in Los Angeles County like Inglewood, Culver City, Compton, Monterey Park, Carson, South Gate & some others require that the seller provide the buyer a “Pre-Sale Report” before the close of escrow. What happens is once a property goes in to escrow, the seller is required to fill out a pre-sale report form and pay a inspection fee to the city. The seller also has to provide escrow instructions. These forms can be downloaded from the city’s website. Once that happens the city will send out an inspector. They are looking for code violations, hazardous conditions, unpermitted additions, and illegal structures. If any of these conditions exist they will have to be rectified.
Buyer Inspection of Property
After you have accepted an offer on the property, the buyer generally has about 2 weeks to do a thorough inspection of the property. He or she will hire an independent inspection contractor to inspect the interior and exterior of the property, even if it sold as-is with no repairs. We want to make sure the buyer is satisfied with the condition of the property and wants to proceed with the sale. If there are some serious concerns the buyer has 3 choices: Walk away from the deal, try to negotiate with the PR for repairs, or just take it as-is. As your agent, I will if course negotiate on your behalf for the best outcome if we get to that point.
Install Smoke & Carbon Monoxide Detectors, Gas Shut off Valve
Most cities have requirements that must be done by the seller prior to the close of escrow. The main issues are installing smoke and carbon monoxide detectors, installing gas shut off valves for earthquake safety, and making sure the water heater is strapped to avoid tipping over in case of an earthquake. I will coordinate these repairs with a retrofit company prior to the close of escrow.
Prepare Disclosures for Buyer
Probate sellers are exempt from certain disclosure requirements. Obviously, it wasn’t your home and if you live in another state you may have only visited it a few times. You can’t possibly know everything about the house and all its flaws. I however have to do a complete and thorough inspection of the property and document my findings on a disclosure form call an “Agent’s Visual Inspection Disclosure”. After I fill out the disclosures, I will send them to you to sign via Docusign.
Sign Escrow Instructions
California is an Escrow State. If you live in another state that uses Real Estate Attorneys instead of escrow companies to handle property sales, you may not be familiar with the escrow process. Here in California the escrow company handles the paperwork, the funds to purchase the property, and coordinates all of the parties, buyer, seller, probate attorney, Title Company, and lender. At the close of escrow the escrow officer will disburse all of the funds to the estate, vendors, and agents. You will receive a package of escrow instructions that we will go over when you receive them.
Provide Copy of Death Cert and Letters Testamentary to Title Company
I will need to provide the certified death certificate and the letters testamentary or letters of administration to the title officer. These certified documents are what give the PR the authority to sell the property and sign contracts on behalf of the estate. If you do not have copies of these documents I will ask the attorney to provide them.
Coordinate with lender and appraiser
If the buyer is obtaining a loan for the purchase of your probate property then I will be working closely with the lender. I will also be meeting the appraiser at the property and providing him with comps and anything else he or she might need.
Finally we are at the end of the escrow process. The buyer’s loan is approved and funded, the buyer has wired their down payment to escrow, the probate attorney has filed all of the documents with the court, and the escrow officer has set up the recording with the title company who will get the grant deed recorded at the County Recorder’s Office. Success! That’s one big thing off of your plate and now you can proceed to finally wrap up the
If you follow my recommendations on this report you should have a pretty easy time getting the probate sold. It is wise to have an experienced probate broker in your corner, especially for the more complicated cases. Fortunately I have over a 2 decades of selling inherited property including probates, trust sales, and conservatorships. If you have any further questions, feel free to send me an email at [email protected] or call me at
310-308-3174. I look forward to helping you and your family through this. Thank you.
Best regards, Derrick Ruiz – Apartment Broker and Expert