Creative Problem Solving in Probate Sales

Leah Nelson is a Bakersfield Realtor with a special certification: Probate & Trust Specialist. We ate lunch at Sequoia Sandwich Company and discussed our experiences in probate realty sales.

Probate realty sales can take a long time to complete, but they also can be completed in less than 17 days. The Realtors in the transaction should repeatedly set expectations for clients. In my experience, when a probate sale goes bad, poor communication caused all the problems.

Leah and I discussed what to do about a manufactured home that will be available for sale in Southwest Bakersfield. She’s receiving cash offers, but the Probate court has not yet issued Letters of Administration. What should she do?

Real estate agents will take different approaches:

Make a Contract

Technically, without Letters of Administration, the future Administrator has no legal authority to enter a contract. But, I find that most buyers, if fully informed, are willing to enter an agreement and have the Administrator ratify the contract after receiving letters. The risk for the buyers is that the Administrator could choose not to approve the document after she has authority. 

How do you protect against this risk? Set timelines based on the ratification and don’t spend any money investigating the property until the Administrator re-affirms her intent to be bound by the contract.

Be Mindful of Market Fluctuations

When parties enter a contract too early, there is an excellent chance that the market price will change before escrow closes. The market fluctuations can cause significant problems with the attorney or with the court, especially if the probate referee sets a price toward the end of the process. If the house price is less than 90% of the market value, the court may void the contract. 

To reduce the risk that the court will reject the contract based on price, you draft the agreement and allow the price to change in the final month of escrow.

Because of recent market volatility, we see this kind of clause in new home construction. New home construction makes the buyer set the price based on the appraisal when the home is complete. The buyer does not know the price of the house until the end of a very long process. During the months of waiting, they sit worrying that they will lose their non-refundable deposit. Can you imagine that stress!?

Remember the Safe Option

Most real estate agents will do the safe thing despite the above options: Do nothing and tell the buyers to wait.

The buyers will move on, but who cares? There will be other buyers. Ultimately, this becomes the safest strategy. It doesn’t always make the sellers happy, but it makes life a lot easier.

I prefer the safe option, but I make exceptions . . .

I prefer the easy route. I like to avoid contracts until the Probate Court issues Letters of Administration. However, I make exceptions. In the past 12-months, I made two exceptions. In one case, we entered a contract to show the bank that they didn’t have to foreclose on the property. 

The second situation was more complex. The Seller did not yet have the authority to sell, but the Seller found a buyer and wanted to “lock up the deal.” After fully informing the buyer and the Seller of all the risks, we entered a contract that made the Seller feel more comfortable and protected the buyer’s interests.

Both situations became complicated. It’s important to note that when you have to make an exception, you can—provided that everyone has complete information of the risks and benefits and every detail exists in writing!

Contact me with questions

If you have questions about real estate or probate sales, contact me. I have a lot of experience in probate sales, but I am not a certified specialist like Leah. If you’d like to work with someone who has received certification as a specialist, I invite you to check out the website of Leah Nelson.