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Basics of the California Probate Process

Posted On: December 8th, 2019 8:52PM

Dealing with the fallout of a family member’s death is sure to cause a great deal of heartache. Not familiarizing yourself with California Probate laws will add a headache on top of that. Understanding what is required to sell real estate in a probate estate settlement probably won’t relieve the pain left from the loss, but it will certainly relieve some stress. So, to arm yourself with the knowledge necessary for handling the probate process effectively and efficiently, what are some common laws you should be familiar with? This summarized list will help you get started on the right foot with confidence as you begin the probate process.

Once an administrator or executor of an estate has been appointed, they will begin the process of assessing and managing all the assets of the estate, which includes real estate. If they choose to sell some or all of the real property, then there are steps required before listing the property.

The first item of business is to determine if the probate will be a formal or informal process.

A formal process requires every step of the sales transaction to be approved by the court and can be a lengthy process, typically taking more than 6 months in the state of California. It will also require an attorney. (Probate attorneys charge a statutory fee in California based on the value of the estate based on Cal. Probate Code §§ 10810, 10811). They will charge 4% of the first $100k, 3% of the next $100k, 2% of the next $800k, and 1% of the next $9m.

In a formal probate, the executor is required to get an appraisal prior to sale. This appraisal will be the basis for the asking price (and the property will be required to sell for a minimum of 90% of this appraisal estimate). The executor will then petition the court for the sale. After the court hearing, the property can be formally listed (as a probate sale). Once an offer is made, a court confirmation hearing is scheduled. While waiting for the hearing, the sale must be advertised with the offered price in the local newspaper. This alerts other potential buyers who will have the opportunity to bid for the property at the actual court hearing.

At the court hearing, if there are additional buyers, there is a bidding process, which can include the original buyer. The court conducts the bidding—or overbidding— process. (NOTE: The first minimum overbid is a minimum of 105% of the original accepted offer, plus $500. Subsequent bid increases are set by the court, and are typically set at $5000 to $10,000 intervals.) At the end of the hearing, a final buyer is confirmed by the court. The executor can then complete the sale in the normal fashion.

Informal probate is allowed under the Independent Administration of Estates Act (IAEA). This process can be used if the real estate was owned in joint tenancy with someone else, as survivorship community property with his or her spouse, or is in a living trust. While the court is still involved, there are fewer restrictions on the executor and an attorney is not required.

Initially, the executor will file the will and probate forms with the court. Once all is approved, the court issues Letters of Testamentary, which allow the executor to handle all the estate’s assets, from bank accounts to paying bills to selling real estate. During the process, a myriad of forms will need to be completed and filed with the court, but all are available online with instructions.

The executor can then list and sell the house in the typical way with no court interference and no bidding auction.

There are pros and cons to both formal and informal probates and the decision on which to use is dictated by the amount of the estate, how complicated it is, directives from the decedent’s will or living trust, or by choice of the executor.

If you have any questions about finding probate properties, handling the probate process as an executor or administrator, or learning more about California probate, email [email protected].

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Finding Probate Listings In Contra Costa County

Posted On: September 30th, 2019 9:43PM

Understanding the probate process can allow savvy real estate investors and home flippers to position their investments to yield strong returns even in down markets. Probate listings are ideal candidates for home flips in a seller’s market, which makes knowing how to identify these properties an essential skill for anyone interested in broadening their investment portfolio even when the housing market is weak. Furthermore, this process is more complicated than simply entering, “probate,” into Trulia or Zillow, which gives a leg up to the few who are capable of finding these properties before they are listed on the MLS.

So, how can you find probate listings before they go on the market?

This article will cover the process of finding probate listings in my market of Contra Costa County, but this will work for most counties across the nation as well.

Step 1: Collecting Case Numbers

When someone dies, a personal representative, (usually a family member), is assigned either by a will or by the local court to settle the decedent’s, (the person who died), estate. If the decedent owned a home, the personal representative can elect to list the home as a probate as a means of paying off debts of the decedent or pocketing some extra money for themselves. The ‘personal representative’ designation requires public notice so that any interested parties can dispute the claim. This means anyone can find these cases.

To find these notices in Contra Costa County, simply go to publicnoticeads.com, and select ‘California’ as your state of interest. From there, select Contra Costa County, and search for keyword, ‘probate.’ It will return a list of public notices that begin, “NOTICE OF PETITION TO ADMINISTER THE ESTATE OF…”. Each of these notices will have the name of the decedent, personal representative, and the case number near the top. Unfortunately, they will not include the property address of the decedent if they owned property in Contra Costa County. Write down the case numbers for each on a notepad, and you’re ready for Step 2.

Step 2: Data Scraping the Courthouse

Some counties will post the records of their probate cases online, which can usually be found by typing, “(your county) probate cases,” into a Google search query. Others, like Contra Costa County, will require you to physically go to the local courthouse to pull these files. The Contra Costa County courthouse is located at 725 Court Street, Martinez CA 94553. Bring your notepad to room 210 of this address to find the probate clerk. Request to take a look at the probate files, (if asked why, say it is for research). Use the case numbers on your notepad to locate these files. Once you do, you can look through them to determine whether or not the decedent owned property in Contra Costa County, and the address of that property. It will also include the address and phone number of the personal representative. Write these down, and you have your list of probate leads.

Step 3: Contacting the Personal Representative

You now have the phone number of the representative administering the estate for each case number, but it’s very important to keep in mind that this is often a sensitive time for them. They have likely just lost someone close to them, and the last thing they’re going to respond well to is a buyer hounding them about selling their loved one’s property. At this point, you’re best off contacting a Certified Probate Real Estate Specialist (CPRES) with experience in handling this delicate situation. Typically, CPRES have built in processes for nurturing these leads tactfully and sensitively and deliver a much needed service in the complicated probate process without upsetting anyone involved.

If you are interested in a particular probate property in Contra Costa County, or if you would like someone to handle all 3 steps listed above at no charge, please reach out to me at [email protected].

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What Is Probate?

Posted On: September 30th, 2019 9:35PM

Whether you’re a personal representative in a new probate case, or a real estate investor looking for a new project, understanding the probate process is essential. As a personal representative, you’ll be embarking on what can be an 18-month process to settle the estate of a deceased relative or colleague. While enlisting the help of probate professionals will greatly facilitate the process, understanding it yourself can help to alleviate some of the stresses it will inevitably induce. As an investor, understanding this process will provide insight into identifying and submitting offers on properties in probate, which can often yield much higher returns than traditional home flipping. The outline below will serve to give a better understanding to both of what can be expected when the probate process is initiated in Contra Costa County. Keep in mind, this process can vary somewhat depending on the county of the deceased.

What is Probate?

Probate is the legal process where beneficiaries legally obtain property promised to them in a will and pay off debts of the estate. If no will is present, then the probate process assigns legal ownership to a personal representative, usually to a close relative of the deceased through a law called the “state intestacy law.”

Keep in mind that every state has a different probate law. California utilizes, “The California Probate Code,” for administering the estate of the deceased.

What is Involved in the Probate Process?

Before the property gets legally transferred to the personal representative, you’ll need to go through the entire probate process. The will of the deceased will list an executor; this is the person in charge of putting the estate through probate. If the deceased left a will, that is called “testate.”

If there was no will, then a judge will pick an immediate family member to be the executor of the estate. This is called “intestate.” Usually intestate properties are the homes that have to be sold in probate court.

Generally, probate will go something like this:

1. Find and Begin Working with a Probate Attorney

Contact a probate lawyer who will help you and represent you as the will goes through probate.

Your attorney will do things such as: file documents with the court, help collect any money obtained from life insurance, problem solve on income tax issues, etc. They will also be your general advisor throughout the entire probate process.

2. File a Petition to Start the Probate Process

You’ll then file a petition with the local court office to get the ball rolling. The court office must be local to where the deceased lived. Contra Costa’s Courthouse is located at 725 Court Street, Martinez CA 94553.

You’ll need to let all heirs and beneficiaries listed in the will know that you’re petitioning to begin probate. You’ll provide them the court date of your probate hearing so that they can present objections, if any.

3. Take Inventory of the Estate

Inventory of the estate may include:

Estate planning documents (Will, burial and funeral arrangements, living will, power of attorney, advance medical directive)

Assets (Stocks, bonds, other properties, cars, deeds, life insurance, bank statements, etc.)

Debt

Check with your probate attorney to make sure you collect all proper documentation and that you report it correctly.

4. Notify Known Creditors & Pay Legitimate Claims

Once you’ve taken inventory of the estate, you’ll need to notify those who the deceased owes money to. This is known as “notifying known creditors.”

Once you have identified legitimate creditors (such as credit card companies), you will pay out their claims with money from the estate.

You’ll also use the estate to pay other debts such as personal loans.

5. Manage Income Tax Returns

You’ll also need to file income tax returns for the deceased. This includes paying any inheritance taxes due.

6. Assets Are Legally Transferred to Beneficiaries

After all bills and creditors are paid, you’ll petition the court to legally transfer all assets to beneficiaries of the estate.

How Long Does Probate Take?

The length of probate depends on the estate and the will. The presence of a will can make probate a shorter and easier process because everything has already been planned and assets have been assigned to beneficiaries.

In California, the probate process can take anywhere from 6 months to 2 years.

What is an Intestate Probate Sale?

If the estate is intestate or does not have a will, usually that estate will have to go through the formal probate process. This means that the court controls the entire sale and bidding process for the home.

What Happens in an Intestate Probate Home Sale in California?

The executor gets a house inspection done and then will need to find a top real estate agent to work with. The attorney may make suggestions of agents to work with, but it’s up to the executor to pick a skilled agent who will list, market, show, and ultimately sell the home.

It’s recommended you work with a real estate agent who has a Certified Probate Real Estate Specialist (CPRES) certification, which is helpful because they’ll be much more knowledgeable about court regulated probate home sales. Look for this certification on an agent’s profile or ask your probate attorney to hire a real estate agent with this certification for a more experienced probate agent.

After the real estate agent lists the home, he’ll market the home. California requires that the sale be published in a local newspaper in which some, or all, of the property is located. The newspaper must publish no less than once a week, at least three times over a period of no less than 10 days before the sale. The third publication must be at least five days after the first publication.

Once you accept an offer on the home, there will be a waiting period of about one month to a month and a half. This waiting period is the time it takes for your attorney to secure a court date to finalize the sale.

California has a complex bidding process for probate homes. Once you accept an offer, other buyers can step forward and outbid the current buyer. Buyers must offer the accepted offer plus 10% of the first $10,000 plus 5% of the balance. Further incremental bidding is established by the presiding judicial officer at the hearing.

Testate Probate Real Estate Sales

If a will is present, then you can petition the court to sell the home yourself, outside of probate court. In California, this is called an “informal” probate process because it isn’t highly court regulated like an intestate sale is.

In fact, selling a probate property without court involvement is often easier and less expensive because you won’t have to pay court fees, you can go through a traditional home sale process, and you’ll have much more control over everything.

When in Doubt, Ask the Experts for Help

Probate can be a long and draining process, even if you’re not selling the property. It’s confusing and laws are very particular, and they vary from state to state. For more information on probate sales in California, if you’re curious about upcoming probate listings in Contra Costa County, Alameda County, or San Joaquin County, or if you’d like to enlist the help of a CPRES real estate agent, contact me at [email protected]. I can provide all the information you need regarding probate and probate properties, or provide you with a comparative market analysis free of charge.

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How to Flip Probate Properties

Posted On: September 30th, 2019 9:23PM

If you’re a real estate investor or home flipper, you’re probably aware of what to look for in a property that has high potential for a low acceptance offer and high return on investment. Fixer uppers are an obvious candidate for home flips, but given the abundance of home flipping shows and documentaries littering popular streaming services, it’s no surprise this means of investment has become main stream and is saturating the competitive market, making life more difficult for would be flippers.

However, there’s still hope for investors looking to get involved in home flipping. An often-overlooked opportunity for those aspiring to break into home flipping as a viable investment project need look no further than probate sales. The probate process is long and complicated, which can scare off investors. Those who are willing to learn this process and time their investments well can reap the benefits in a market where others shy away.

Is a Probate Purchase a Good Investment?

The probate process typically lasts between 9 and 18 months. Despite this shortcoming from an investor standpoint, many probates have characteristics that make them ideal for high returns. If you’re working with a Certified Probate Real Estate Specialist, or if you know how to find probate properties in your county, you are in a good position to capitalize on these listings. There are several reasons probates can be good investment properties, particularly if you are working with a probate realtor:

  • Probates are Often Distressed Properties

Probates are usually older homes that have received little to no upkeep over the years as a result of the long inhabitance of their prior occupants. They are usually sold for cash, ‘as is,’ because of this, and are frequently marketed as ‘fixer uppers’ or ‘contractor specials.’

  • Motivated Sellers

While going through the grieving process, dealing with the maintenance and expense of the property is more than likely the last thing on the minds of the heirs. Now that they finally have the keys, heirs very often decide to sell sooner rather than later.

They may have had plans to clean out the property and renovate it, hire a neighbor to mow the lawn, or drive down on weekends themselves to clean out the gutters. They may not have been prepared for maintenance costs or the difficulty of trying to screen tenants and rent the home remotely.

Spouses that survived the decedent may not be able to afford to maintain such a large home.

In all of these cases, the heirs will more than likely want to sell the home quickly, and therefore would be more willing to sell under market value.

  • Long Closing Process Scares Away Other Flipper Prospects

As stated before, probate closings can take a long time. Generally, flippers are looking to renovate and sell properties as quickly as possible so they have additional capital for their next project. This makes probate properties appear unsatisfactory as investments, (read on to see why this isn’t necessarily true).

  • Probate Realtors get discounts for handyman work

Probate Realtors are a beacon of referrals for all relevant attorneys, contractors, or other vendors involved in a probate sale. Because of this, they often have formed relationships with these vendors in their county, provide a lot of additional business to them, and consequently, may receive discounts from them for any referred work.

Is it a Good Idea to Flip a Probate?

Because a probate purchase can take several months to over a year, it isn’t necessarily a good prospect for a home flipper. However, this isn’t always the case. In fact, under certain market conditions, this can even be a benefit. In a buyer’s market for example, home prices are generally lower. This means that a probate purchase can be made at a relatively low price, the sale can take months to close, and the renovation can take months more. This means for a low offer price, by the time the property is ready to be flipped, the market can become more favorable for the seller. This makes probates the perfect property to consider for flippers during bear markets. Furthermore, rentals tend to thrive when the market is down, so even if market conditions haven’t changed much by the time it’s ready to flip, it can be rented out until conditions do change. This can provide a hefty sum of additional capital for flippers taking advantage of these sales and give them a leg up over traditional flippers who simply wait for the market to become favorable for sellers again. With market conditions currently indicating a possible change from a seller’s market to a buyer’s market in the near future, now could be the perfect time to begin looking into these properties for flips a year or two down the line.

How Do I Calculate the Return of a Probate Flip?

The 70% rule for home flipping can be weighted against the California probate bidding process can help buyers get insight into what they should expect for a return on their investment. Of course, finding probate properties before an offer is accepted is ideal, but California Probate Code requires that accepted offers be given the opportunity to be outbid in court. This means the properties must be sufficiently advertised for a set period of time determined by the court, then auctioned off.

The California Probate Bidding Process

After the real estate agent lists the home, he’ll market the home. California requires that the sale be published in a local newspaper in which some, or all, of the property is located. The newspaper must publish no less than once a week, at least three times over a period of no less than 10 days before the sale. The third publication must be at least five days after the first publication.

California has a complex bidding process for probate homes. Once you accept an offer, other buyers can step forward and outbid the current buyer. Buyers must offer the accepted offer plus 10% of the first $10,000 plus 5% of the balance. Further incremental bidding is established by the presiding judicial officer at the hearing.

The 70% Rule

Generally speaking, home flippers are encouraged to abide by the ‘70% rule’ when searching for good investment properties. The 70 percent rule states that an investor should pay 70 percent of the ARV (After Renovation Value) of a property minus the repairs needed. The ARV is the after repaired value and is what a home is worth after it is fully repaired.

If a home’s ARV is $150,000 and it needs $25,000 in repairs, then the 70 percent rule states an investor should pay $80,000 for the home.  $150,000 x 70% = 105,000 – $25,000 = $80,000.

Here's How to Calculate What You Should Pay:

  1. Contract a Certified Probate Real Estate Specialist to represent you
  2. Ask them to generate a CMA (Comparative Market Analysis) to estimate the value of the property after renovations have been made
  3. Ask your agent to contact the listing agent and request walkthrough the property with a contractor to get an estimate of the repairs needed
  4. Use this to determine an offer price that meets the requirements of the 70% rule. If you aren’t the initial accepted offer, use the California probate bidding process to calculate the first overbid and consequent overbids and figure out at what price the sale no longer conforms to the 70% rule to set your stopping point

 For any questions regarding current probate listings or prospects in Contra Costa County, Alameda County, and San Joaquin County, contact me at [email protected].

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