Can an Executor or Administrator of an estate with Full Authority under the Independent Administration of Estates Act (“IAEA”) Sell a Probate Home without a Realtor or represent the estate without hiring an attorney?
In general, the short answer is, yes. When a party to a probate court action represents themselves, in the example illustrated in this post, it would be the executor of the estate, in Pro Se which is Latin for “in one’s own behalf.”
If people are fighting or disputing over the estate, an estate representative acting Pro Se may not work. It is likely that someone will object, and the court may not approve.
While judicial probate forms are fill-in-the-blank and available online, knowing how to “dot” all the I’s and cross all the T’s is something else. Filing forms with the court that has errors will be kicked back or rejected by the court. Of course, they can be corrected and resubmitted, yet it takes more time and creates delays in getting a court date and moving the estate forward. Most counties in the State of California provide an online self-help section. This is true in Santa Clara County where the local rules of court must also be followed.
Regardless of who files the court documents, the probate process must be followed to the letter of the laws, no matter what, or who is representing the estate.
Some executors and administrators want to represent the estate without an attorney to save money.
Sell a Probate Home | How much does probate cost?
Probate can be costly in the state of California. Attorneys typically charge a “statutory fee” which is based on the gross value of the probate estate, pursuant to California Probate Code § 10800 and 10810.
Attorneys do not have to follow the statutory fee schedule. They can charge a flat fee or an hourly rate. In most cases, attorneys benefit more by following the statutory fee schedule.
Over the years we have received calls from estate representatives who started out representing an estate Pro Se and discovered through the process that completing the forms and following the local court rules was not as easy as it seemed. We are not attorneys and cannot and do not give legal advice. However, we do work with trusted local Santa Clara County attorneys we are happy to recommend, and we often do make such recommendations.
Sell a Probate Home | FSBO
Recently we received a call from an Executor who filed for probate Pro Se. All went extremely well.
They are at the point of “selling the deceased person’s home”. The executor is selling the home to themself “by owner” without a real estate agent.
There are only two people that have a right to the estate and who will inherit, the executor and the executor’s sibling.
The executor prepared a Notice of Proposed Action memorializing the terms of the sale. The sibling does not object. The executor later learned that they did not need to prepare the Notice of Proposed Action because the sibling waived the notice. However, there was no harm in sending the Notice.
The executor’s plan is to pay the sibling cash for half of the value of the home and just continue to pay the deceased person’s mortgage.
According to the executor, they spoke with the mortgage lender and were told as long as the person continuing to make the mortgage payments is a relative with a right to the estate, it will be okay. They were assured they “are not assuming the loan.” They were also not taking out a new mortgage loan.
Role of the Title Company | Chain of Title
The executor was at the point of needing to understand “how” to transact the sale of the probate home to themselves. They did not want to pay title insurance.
The estate representative had spoken with an attorney who agreed to paper the transaction for a flat fee. They did not want to pay the legal fees because it was just paperwork, and it was too much money to pay for just doing the paperwork.
That thought process is a classic example of people not understanding all that goes on behind the curtain, or the risk and liability attorneys, real estate agents, and other licensed professionals take on in their business. They only see the end product, sign here.
The executor also spoke with a title company that agreed to complete the transaction provided the executor was able to provide them with the necessary documents. The executor did not want to pay title insurance. They did not see a need for it. It was just paperwork.
Title companies are licensed entities regulated by the Department of Insurance. As such, they have guidelines to follow. We have yet to know of a title company that will waive the requirement of title insurance on the sale and transfer of real property. How can a title company insure the title or better stated, why would a title company effectively provide free title insurance?
If it is so easy and all that an attorney or real estate broker would be doing is “paperwork” then why does the executor not do it themselves just as they did when filing the probate documents with the court? It is all about knowing how to do something and how to do that something correctly.
If a person knows what they are doing, they could do it themselves. For example, if it were me, I know how to do it, and could do it myself.
However, providing this stand-alone service is not in our wheelhouse. The risk and liability of providing the service the executor wanted are just more than what we are willing to take on. Even if they were willing to pay for facilitating the transfer, it would still require the use of a title company and the need for the estate to pay for title insurance.
The Title Transfer Process
We explained our real estate process and the title and escrow process of how things are done when we are hired by an executor or a successor trustee of a family trust to list a home for sale.
It starts with reviewing who holds the title to the property.
When we take a listing, be it a probate or trust estate, we open escrow with our trusted title company. The title company pulls a preliminary title report and determines who holds the title to the property. We advise the title company that the owner of the property is deceased, and if it is a probate or trust estate.
The title company then advises us on what they need in order to reflect the chain of title from the deceased person to the probate or trust estate. Once the documents are provided to the title company, the preliminary title report is updated to reflect the new owner. The new owner would either be the executor of the estate or the successor trustee of a trust. The estate representative is the person with the authority to represent the estate and transact the sale of real property.
There is also a list of exceptions and exclusions listed on the updated title report which lists the additional documents the title company needs in order to finalize the sale and close escrow. There is more to transferring title on a probate home than simply filling out a deed and recording it.
Selling a Probate Home Off Market
In 20+ years we have sold one home off-market. It was a rare exception and situation, and it was done at the out-of-state seller’s request. We had a listing agreement, and the original intention was to list the home on the MLS.
In this situation with the executor, it would not technically be an off-market sale, in the traditional sense of what an off-market sale typically means in real estate.
It makes sense for the executor to pay the title insurance and have the title company transact the sale, provided the title company agrees to manage it, and the executor can provide them with all of the documents they need to meet the title attorney’s underwriting requirements.
Even if the title company agrees to manage the “sale and transfer” of the property to the executor, we are still left wondering how the payoff will be managed with the mortgage lender or if the lender will turn a blind eye as long as someone is still making the payments.
Keep in mind, in this case, the executor’s plan is to pay the sibling cash for their share of the value of the home and keep paying on the existing mortgage in the name of the deceased person.
Mortgage lenders require borrowers to have insurance on the property they lend on. The insurance company will be notified of the transfer from the deceased person to the executor as an individual.
The county assessor will be notified of the transfer as well. The property tax basis may be subject to the stepped-up basis. In other words, the fair market value of the property as of the date the property is transferred.
This situation is a first for us. What the executor wants to do, in our professional opinion, would be best managed by an attorney well-versed in these matters. Even though we know how to do it, it leans heavily legal in nature.
Disclaimer: Nothing in this post is to be construed or taken as legal or tax advice. This is for general informational purposes only. Always consult with an appropriate tax and/or legal professional.
Certified Probate Real Estate Specialist
As Certified Probate Real Estate Specialists, we focus on what we know and know well. That is listing probate homes and listing trust real property for sale. If you are an Administrator or Executor with or without Full Authority under the Independent Administration of Estates Act (“IAEA”) and need to sell trust real property or sell a probate home, call Kathleen Daniels for help.