Sell an Inherited Condo

Probate Sales: Court Confirmation and the Independent Administration of Estates Act

Whether a court must approve the sale is the question that shapes a probate condo sale more than any other. The answer depends on the authority the court granted the personal representative and on whether anyone objects.

The starting rule is Probate Code section 10308: except as provided in Probate Code section 10503, all sales of real property must be reported to and confirmed by the court before title passes to the buyer, whether the sale is private or at public auction, and even if the will directs or authorizes the sale. If the personal representative does not file the report and petition for confirmation within 30 days after the sale, the buyer may file them, and notice of the hearing is given to the persons the statute designates and to the buyers named in the petition.

The Independent Administration of Estates Act lets a court grant a personal representative authority to act with less court supervision. When a representative has full authority under the Act and uses it to sell, the sale goes forward through a notice of proposed action, a written notice to heirs and beneficiaries describing the sale and giving them a chance to object. Under Probate Code section 10503, the court-confirmation requirements, such as published notice of sale, court approval of commissions, the appraised-value rule and the court's examination of the sale, do not apply to a sale made with that authority.

Generally, if the court granted only limited authority, or if someone entitled to the notice objects to the proposed sale, the sale goes through a court hearing for confirmation. The estate's attorney can say which path the letters allow. More detail on the sequence is in selling during probate in California.

The Stepped-Up Basis and Capital Gains on an Inherited Condo

Basis is the starting figure the tax law uses to measure gain or loss when property is sold. For inherited property, 26 U.S.C. § 1014(a) generally sets the basis of property acquired from a decedent at "the fair market value of the property at the date of the decedent's death," with alternatives the statute gives: a value at an alternate valuation date if that election is made, a value under a special-use valuation election, or, to the extent a conservation-easement exclusion applies, the decedent's own basis.

In plain words, if a parent bought the condo decades ago for far less than it was worth when they died, the heir's starting basis is generally the date-of-death value, not the original price. This is what people call a stepped-up basis.

Inheriting the condo does not itself trigger capital gains tax; any gain or loss arises when it is sold. The basis is fixed by the date-of-death value, and a later rise or fall in value does not change it. That later movement is what shows up in the result of the sale. A sale close to the date-of-death value tends to produce little gain or loss. A sale for more than the basis produces a gain, and a sale for less can produce a capital loss.

A date-of-death appraisal is usually the document that anchors these figures. A CPA, an enrolled agent or a tax attorney reviews the basis calculation, any gain or loss, and how it is reported for a particular estate or heir.

California Property Tax and Proposition 19

California generally reassesses real property to current market value when ownership changes, and for a condo bought long ago that can mean a much larger tax bill. Proposition 19 narrowed the family exclusion that once avoided most of those reassessments.

For purchases or transfers on or after February 16, 2021, Rev. & Tax. Code section 63.2 excludes, in whole or in part, a transfer between parents and children of the parent's principal residence, for which a claim is filed, when the home becomes the child's principal residence within one year of the transfer and the child files for the homeowners' or disabled veterans' exemption within a year. The same rule reaches grandparents and grandchildren only if all of the grandchild's parents who qualify as the grandparents' children are deceased as of the transfer. When the home's market value exceeds the prior taxable value plus a limit the statute sets, the excess is added to the new taxable value. The county assessor's office publishes the current figure and forms.

A claim is generally due within three years after the transfer, or before the property is transferred to a third party, or before an eligible transferee stops occupying it, whichever is earlier; alternatively, a claim filed within six months after the mailing of a supplemental or escape assessment notice issued because of the transfer is treated as timely.

A condo inherited and then sold, rather than lived in by the child, generally does not keep the parent's tax value: the buyer's purchase is a new change in ownership. The county assessor's office is where an exclusion claim is filed and reviewed.

HOA Rules, Condo-Specific Disclosures, and Condition

The homeowners association is what most separates a condo sale from a house sale. Under Civil Code section 4525, the owner of a unit must give a prospective buyer a set of association documents as soon as practicable before title transfers, including the governing documents, the most recent budget and financial documents the association distributed, a written statement from the association of current regular and special assessments and any unpaid assessments, fines or penalties, any unresolved violation notice, any board-approved changes in assessments not yet due, a statement describing any rental or leasing prohibition, and the most recent inspection report the statute names.

Under Civil Code section 4530, the association must provide those documents within 10 days of the mailing or delivery of a written request, may charge the seller a reasonable fee based on its actual cost, must give a written estimate of fees on request, and must itemize them separately; the seller pays the association and gives the buyer copies already in the seller's possession at no cost. The HOA's management company or board is the source for current fee amounts.

Unpaid dues matter too. Under Civil Code section 5650, assessments are a debt of the owner and become delinquent 15 days after they are due unless the declaration allows longer, after which late charges, collection costs and interest can be added. Because lenders and buyers routinely ask for this package, families often request it early.

Rental limits affect who will buy. A buyer who plans to rent the unit will read the leasing statement closely, and the association can confirm the current rules.

On disclosure, Civil Code section 1102.2 exempts from California's statutory transfer disclosure article, among other sales, sales ordered by a probate court and sales by a fiduciary administering a trust or decedent's estate; the fiduciary exemption does not apply if the trustee is a natural person who is a trustee of a revocable trust and is a former owner of the property or lived in it within the preceding year. Other disclosure duties may still apply, and the estate's attorney can say which do. For units with deferred maintenance, there is more on an inherited house needing repairs.

Three Ways to Sell an Inherited Condo in California

Families weighing a sale while managing an estate from another city usually find that the choice comes down to price, time and how much work they can take on. Each way below has a real tradeoff.

Listing with a licensed agent. The agent prices and markets the condo, handles showings and negotiation, and manages the transaction, and the commission is paid from the proceeds. A listing usually reaches the widest pool of buyers and may produce the highest price, but it often means preparing the unit, accepting inspections and waiting on a buyer's financing.

Selling by owner. The seller handles marketing, showings and negotiation without an agent, so no listing commission is paid. The work shifts to the seller, and the legal and disclosure duties stay the same.

A direct as-is sale. A buyer purchases the condo in its present condition without open-market marketing. A direct offer is often lower than what the unit might bring on the open market, because the buyer is pricing in the repairs, the risk and the cost of reselling. What the seller gets in exchange is less preparation, fewer showings and less reliance on a buyer's loan approval.

Whoever the buyer is, the estate's authority, any court confirmation, any notice of proposed action, the HOA documents, recorded liens and taxes all apply in the same way. A comparison of these paths is in cash offer vs listing.

Comparing written offers side by side, along with estimated net proceeds (the price less commissions, repairs, carrying costs such as HOA dues, loan payoffs and closing costs), is how a family tells which way fits its own facts.

California's Simplified Procedures: When They Apply to a Condo

Not every inherited condo needs a full probate. California has four simplified procedures, named by the Judicial Council as 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 covers personal property, not the condo itself.

The petition to determine succession to the decedent's primary residence, under Probate Code section 13151, lets the successor to a California primary residence ask the Superior Court for an order that they have succeeded to it, without letters, if 40 days have passed since the death and the residence's gross value does not exceed a limit adjusted periodically; the petitioner must deliver notice of the petition to each heir and devisee named in it within five business days of filing.

The affidavit for real property of small value, under Probate Code section 13200, may be filed no sooner than six months after the death, with a probate referee's inventory and appraisal and a certified death certificate attached, when the gross value of the decedent's California real property, apart from certain excluded property, does not exceed a limit; for deaths on or after April 1, 2022, the limit is the adjusted amount published under the Probate Code and in effect on the date of death. The California Courts publish current adjusted amounts and forms.

A condo held in a trust skips probate entirely, and one that passed by a transfer on death deed goes to the named beneficiary, who records the affidavit the code requires. Where none of these fits, a full probate proceeding in the Superior Court of the county where the estate is administered gives someone authority to sell, as it does for families selling in San Diego County or any other California county.

What to Gather Before You Sell

Most of the questions a buyer, a title company or an HOA will ask can be answered from a handful of records. Gathering them is mostly a matter of knowing where each one lives.

• The deed. It shows whether the condo was held alone, in joint tenancy, as community property, in a trust or under a transfer on death deed, and title decides the transfer path.
• Authority documents. These are letters testamentary or letters of administration, or the trust instrument and a certificate of trust, or the recorded transfer on death deed and affidavit.
• HOA records. These include the governing documents, the current dues statement, any special assessment notices and the association's disclosure package.
• Tax records. The decedent's most recent property tax bill, any supplemental bill issued after the death, and the assessor's parcel number belong here.
• Loan and lien information. Any mortgage, home equity line or other recorded lien is typically paid from the sale proceeds or otherwise resolved at closing, however the sale is structured.

On the mortgage, 12 U.S.C. § 1701j-3(d) provides that for a loan on residential property with fewer than five dwelling units, including a lien on stock allocated to a cooperative unit, a lender may not exercise a due-on-sale clause upon transfers including a transfer to a relative resulting from the death of a borrower, or a transfer where the borrower's spouse or children become owners. A later sale to an outside buyer is a different transfer, and the lender's payoff statement shows what is owed.