When an individual dies, the person likely leaves property behind. Frequently, a last will and testament is also left behind, which indicates how the decedent wanted any property or assets distributed. Consequently, the last will and testament may be subject to "probate." Probate is the process by which the court oversees the administration of the decedent's last will and testament. The probate process is usually necessary, unless there are no assets in the estate or if the value of the estate is less than a certain amount of money. Each jurisdiction has different thresholds as to the amount of the estate which is not subject to probate, so it is important to check with the laws of your region. In any event, when the will is subject to probate, there may be property which must be disposed of pursuant to a sale. This sale is also known as a probate sale. Sometimes a probate sale is necessary in order for the estate to get money to pay off debts of the decedent, while in other instances, the sale may be done simply to liquidate the assets of the estate.
Each state has different statues applying to the probate of a last will and testament. For example, in Florida, a will must be submitted to probate within a certain number of days following the death of the person who issued the will. Conversely, New York has no requirement to file the will within a certain time period following an individual's death. Because each state has its own laws, every state has different laws which apply to probate sales. Therefore, you should be aware of the particular law in your jurisdiction.
At the outset of a probate sale, it is necessary to ensure that the executor or administration of the decedent's last will and testament has the authority to enter into a sale of property. The executor or administrator is the individual appointed either by will or by the court to oversee the administration of the decedent's wishes. Some states do not require the court to become involved in a sale, while other states, such as California, follow a specified process whereby the court confirms the authority of the seller to enter the transaction. In those states that do not require confirmation, the executor or administrator is nevertheless under a duty to act as a fiduciary in good faith when entering a sale.
In certain states, a probate sale is subject to court confirmation. Whenever the purchase is subject to confirmation, underlying proposed sale may not come to fruition because there are so many contingencies that can affect the outcome. Frequently, the proposed buyer has to preliminarily place a certain amount of money into escrow. In addition, the sale may have to be published in the newspaper and allow for other individuals to bid on the property at an open forum. If there is a higher bid from the one proposed, this amount will prevail, and this bidder will win the right to buy the property.
When a property is subject to a probate sale, it is necessary that the sales price be fair for the type and size of property. Therefore, a property appraisal is usually a requirement of all probate sales. If the appraisal does not meet a value within a certain percentage of the proposed sales price, the probate sale may be cancelled without any liability of either party.
One aspect to be aware of when either seeking to purchase a property or sell a property pursuant to a probate sale is the issue of delay. When the court must confirm the probate sale, this process can be very tedious and is subject to the calendar and workload of the overseeing court. As a result, the process is not akin to a typical real estate transaction and can take significantly more time to complete.
Real Estate Commissions
Another factor to be aware of when entering a probate sale transaction pertains to real estate broker commissions. Generally, jurisdictions that require court confirmation of the probate sale also reserve discretion on whether or not real estate commissions are to be included in the probate sale. As a result, there is no guarantee that the broker will receive his commission based upon a percentage of the sale.