Sell Probate House Fast in California

The Two Paths: Full Authority and Limited Authority Under California's Independent Administration of Estates Act

When the court appoints a personal representative, it often grants authority under the Independent Administration of Estates Act, a set of rules that lets the representative take many actions without asking a judge first. The authority comes in two forms, and the difference matters more to the pace of a sale than almost anything else.

With full authority, the personal representative has the power to sell or exchange real property of the estate, under Probate Code section 10511. Under Probate Code section 10503, the court-confirmation requirements, such as published notice of sale, court approval of agents' and brokers' commissions, the appraised-value rule and the court's examination of the necessity for and advantage of the sale, do not apply to a sale made with that authority.

Full authority still requires notice. The personal representative sends a notice of proposed action describing the sale, its price and any commission. Under Probate Code section 10586, the notice must be delivered to each person entitled to it not less than 15 days before the date in the notice on or after which the sale is to be taken. The Judicial Council's DE-165 Notice of Proposed Action, Objection - Consent form states that a person who does not object in writing or obtain a court order is treated as consenting, and that if someone objects, the personal representative may take the action only under court supervision.

With limited authority, the form states, there is no authority without court supervision to sell or exchange real property. So whether a sale needs a court's confirmation depends on two facts: the authority the court granted, and, with full authority, whether anyone objects to the notice of proposed action. The DE-165 form adds one tradeoff: a sale without court supervision is not presented at a hearing where higher bids may be made.

Court Confirmation: What Happens When a Sale Goes Before a Judge

A confirmed sale is one a judge approves at a hearing before title passes to the buyer. Probate Code section 10308 provides that, except for a sale made under the independent-administration authority described above, all sales of estate real property must be reported to and confirmed by the court, whether the sale is private or at public auction, and even if the will directs or authorizes the sale.

The process starts with value. Under Probate Code section 8800, the personal representative files an inventory and appraisal of the estate's property within four months after letters are first issued to a general personal representative, and the court may allow further time that is reasonable for the case. In a confirmed sale, the accepted offer is measured against that appraised value, and the estate's attorney can say what minimum the Probate Code sets for a particular sale.

The personal representative then files a report of sale and petition for confirmation. The Judicial Council's DE-260 Report of Sale and Petition for Order Confirming Sale of Real Property asks for the appraised value, the manner and terms of the sale, the commission requested, and the efforts made to get the highest and best price reasonably attainable, such as multiple listings, advertising and open houses. If the personal representative does not file within 30 days after the sale, Probate Code section 10308 lets the buyer file instead. Notice of the hearing goes to the people the code designates and to the buyers named in the petition.

At the hearing, other buyers may bid more than the accepted offer, and the form sets out a formula for the first overbid. Scheduling, notice and any bidding are built into this path. A buyer paying cash and a buyer with a loan stand in the same place: the court's steps do not change with how the buyer pays. Which steps apply follows the authority question above.

Three Ways to Sell a Probate House in California

Families weighing speed often find that the way of selling matters less to the court and more to the work in between. Each of the three common ways to sell has real tradeoffs, and none of them changes the estate's authority, the notice of proposed action, a required court hearing, any lien or any tax.

A listing with a licensed real estate agent. The house is exposed to the open market, which tends to bring the widest field of buyers. In exchange, the estate pays a commission, usually prepares the house for showings, and often depends on a buyer's loan approval and appraisal. For a confirmed sale, the commission is subject to the court's approval. A closer look at how this compares with a direct sale appears in the guide to a cash offer versus a listing.

A sale by the owner without an agent. The personal representative saves a commission but takes on the marketing, the showings, the negotiation, the paperwork and the coordination with the estate's attorney. This can be a heavy load for someone grieving or living far away.

A direct sale to a buyer who pays cash and takes the house as it is. The buyer accepts the property in its present condition and takes on the repairs, the risk and the cost of reselling. That is why a direct offer is often lower than what the house might bring on the open market. What the estate gets in exchange is less preparation, fewer showings and less dependence on a buyer's financing. Houses with deferred maintenance raise their own choices, laid out for an inherited house that needs repairs.

The way a family tells which fits is by comparing written offers and estimated net proceeds: the price, less commissions, repairs, carrying costs, loan payoffs and closing costs. Where heirs disagree about selling, or someone suspects misconduct, a contested matter is a different subject, handled by an attorney who litigates trust and probate cases.

Disclosures a Seller Owes on a Probate Property

Many personal representatives have never lived in the house they are selling, and wonder how they can describe a property they barely know. California's Civil Code takes up part of that question directly.

Civil Code section 1102.2 lists sales to which the Civil Code article containing that section does not apply. Among them are sales or transfers under court order, including sales ordered by a probate court in the administration of an estate, and sales or transfers by a fiduciary in the course of administering a trust, guardianship, conservatorship or decedent's estate. That fiduciary exemption has an exception in the same subdivision: it does not apply if the trustee is a natural person who is trustee of a revocable trust and is a former owner of the property or was an occupant in possession of it within the preceding year. The section's list goes on to include other transfers, such as sales from one co-owner to another and sales to a spouse or to a person in the line of consanguinity, meaning a blood relative in the direct line, of a transferor.

That exemption reaches only the article it names. Other disclosure duties may still apply to a particular sale, and the estate's or trust's attorney can confirm which ones do.

Selling "as-is" describes the condition the buyer agrees to accept. It does not change what the seller owes in disclosures. A house can be sold in its present condition, and whether any repair, inspection or installation is required before a particular sale is a question for the estate's attorney and the local building office.

Property Tax and the Proposition 19 Reassessment Rules

A family deciding whether to sell or keep a parent's home often hears about Proposition 19, the measure that changed how inherited homes are reassessed for property tax. For a transfer on or after February 16, 2021, the parent-child and grandparent-grandchild exclusion from reassessment is Rev. & Tax. Code section 63.2.

Under that section, a transfer of a parent's principal residence to a child (or, where all of the grandchild's qualifying parents have died, from a grandparent to a grandchild) may be excluded from reassessment, in whole or in part, when a claim is filed. The home must have been the transferor's principal residence and must become the child's principal residence within one year of the transfer, and the child must file for the homeowners' or disabled veterans' exemption within a year of the transfer. The exclusion is removed when the eligible child no longer qualifies for either exemption. The section also includes a value test that compares the home's market value with its prior taxable value plus a fixed dollar amount; the county assessor's office can give the figure that applies.

A claim is generally due within three years after the transfer, or before the property is transferred to a third party, or before the eligible child stops occupying it, whichever is earlier. Alternatively, a claim is timely within six months after the mailing of a notice of supplemental or escape assessment issued because of the transfer. A late claim, where the property has not gone to a third party, may still be considered, with the exclusion applying from the lien date of the year the claim is filed.

Because the exclusion follows a child who lives in the home, it does not pass to an outside buyer. Reassessment questions and exclusion claims go to the county assessor's office.

Stepped-Up Basis and Capital Gains on an Inherited California Home

The tax figure that matters most in a sale is the basis, the starting value from which gain or loss is measured. Under 26 U.S.C. § 1014(a), the basis of property acquired from a decedent is generally the fair market value of the property at the date of the decedent's death. The statute gives alternatives: the value at the alternate valuation date where an election is made under the estate-tax rules, the value determined under the special-use valuation rules where that election is made, and, to the extent a conservation-easement exclusion applies, the decedent's own basis.

The statute also reaches some property that did not pass by will. Under 26 U.S.C. § 1014(b), property in a revocable trust the decedent could revoke counts as acquired from the decedent, and so can the surviving spouse's one-half share of community property, if at least half of the whole community interest was includible in the decedent's gross estate. How the house was held, and whether a spouse survived, can therefore change the basis.

The basis is fixed by those rules, not by later market movement. Whether a particular sale produces a taxable gain, and how it is reported, depends on the price, the selling costs, the basis and the estate's or heir's circumstances. A CPA, an enrolled agent or a tax attorney reviews the basis and capital-gains question for a specific sale, including the California income-tax side.

The Due-on-Sale Clause and Inherited Property

A mortgage on a parent's home raises a common worry: can the lender demand full payment just because the owner died? A due-on-sale clause is a loan term that lets a lender call the loan due if the property is sold or transferred without its consent.

Under 12 U.S.C. § 1701j-3(d), for a loan secured by residential real property with fewer than five dwelling units, a lender may not exercise a due-on-sale clause on certain transfers, including a transfer by devise, descent or operation of law on the death of a joint tenant, a transfer to a relative resulting from the death of a borrower, and a transfer where the spouse or children of the borrower become owners of the property. The statute's list includes other transfers as well.

That protection concerns the passing of the house to family at death. It does not make the loan disappear, and it does not address a later sale to an outside buyer. In a sale, the loan's payoff is part of the net-proceeds math described above, and the lender's payoff statement shows the amount. Continued payments while the estate is open protect the property's equity; the estate's attorney or the lender can say how a specific loan is handled.

California's Simplified Procedures: When Probate Court May Not Be Required

Some families learn, part way through planning a probate sale, that a full probate case may not be needed at all. California offers shorter procedures, which the Judicial Council names by what each covers: the affidavit for collection or transfer of personal property, the petition to determine succession to the decedent's primary residence, the affidavit for real property of small value, and the spousal or domestic partner property petition. The first of these covers personal property, not a house.

Under Probate Code section 13151, the successor to a decedent's primary residence in California may petition the Superior Court for an order determining that the petitioner has succeeded to it, without letters, when the home's gross value does not exceed the limit in that section as adjusted periodically and 40 days have passed since the death. Notice of the petition goes to each named heir and devisee within five business days of filing. The California Courts publish the current adjusted limit.

Under Probate Code section 13200, no sooner than six months after the death, a successor may file an affidavit for real property of small value with the Superior Court. For a death before April 1, 2022, the limit is $55,425; for a death on or after that date, it is the adjusted amount in effect on the date of death. The affidavit requires, among other items, a probate referee's inventory and appraisal, a notary's acknowledgment and a certified death certificate.

A house held in a trust is handled by the successor trustee under the trust instrument. The estate's attorney confirms whether a particular property qualifies for any of these routes.

What to Bring to a First Conversation About Selling

Whether the first conversation is with the estate's attorney, a real estate agent or a buyer, a few documents answer most of the early questions. Having them together lets the personal representative or trustee move once the family has decided to sell. For many families the gathering is also the hardest part, because it means going through a parent's papers.

• The will and any trust instrument. These show who was named and what powers the document gives.
• Letters testamentary or letters of administration. These are the court's proof of appointment; for a trust, the trust instrument and any amendments show who serves as successor trustee.
• The court's order and the authority it grants. Whether the authority is full or limited sets which path the sale takes.
• The legal description and assessor's parcel number. Both appear on the deed and the property tax bill.
• Mortgage, lien and other encumbrance statements. These show what must be paid from the sale.
• The inventory and appraisal, if completed. Probate Code section 8800 also requires, along with it, a certification that a change in ownership statement has been filed with the recorder or assessor of each county where the decedent owned property, or that none was needed because the decedent owned no California real property.
• Contact information for the estate's or trust's attorney. Buyers and title companies often need to coordinate with that office.

How the estate handles a sale while the case is open is set out further in the guide to selling inherited property during probate.