On this page
- On this route, every sale of estate real property is reported to the court and confirmed before title passes, Probate Code section 10308, even when the will authorizes the sale.
- The accepted offer must be at least 90 percent of an appraisal made within the year before the hearing, section 10309.
- At the hearing, the first overbid must beat the accepted offer by 10 percent of the first $10,000 plus 5 percent of the rest, section 10311.
- The court approves the commission, and sections 10160 through 10168 decide how it is split when an overbid wins.
When does a probate sale need court confirmation?
Three situations put the building on this route. The personal representative holds limited authority, which under Probate Code section 10403 does not include selling real property. The estate has no independent administration authority at all. Or a sale was proposed under full authority and someone who received the Notice of Proposed Action objected in writing or served a restraining order, which section 10589 says sends the sale to the court-supervised procedure.
On this route, even a will that directs or authorizes the sale does not avoid confirmation. Section 10308 requires every sale of real property on this route to be reported to and confirmed by the court before title passes, whether it is a private sale or an auction, and whatever the will says. What the will can change is the notice. Under section 10303, where the will directs the sale or gives authority to sell, the property can be sold with or without a published notice of sale, as the personal representative decides.
What happens before the hearing?
Notice of sale. Unless an exception applies, section 10300 allows estate real property to be sold only after a notice of sale has been published under Government Code section 6063a, in a newspaper published in the county where the property is. For a building in Los Angeles County, that means a Los Angeles County paper. Publication has to be finished before the day the notice names as the day on or after which the sale will be made.
The sale window. Under section 10306, a private sale cannot be made before the day stated in the notice of sale, or later than one year after that day.
The petition. Once the estate accepts an offer, the personal representative reports the sale and asks the court to confirm it, using Judicial Council form DE-260, Report of Sale and Petition for Order Confirming Sale of Real Property. Notice of the hearing goes out as Probate Code section 1220 provides, to the people that section names and to the buyers named in the petition, and it is posted as section 1230 provides.
In Los Angeles County, the petition goes to the Superior Court of California, County of Los Angeles, which publishes its probate rules as Chapter 4 of its local rules. The court's probate local rules, its probate pages and its Probate Notes page are where to look for the court's own requirements.
How does the 90 percent rule work?
Probate Code section 10309 bars the court from confirming a private sale for less than 90 percent of the property's appraised value. The appraisal also has to be recent. It must have been made within one year before the confirmation hearing.
| Appraised value | Lowest price the court can confirm |
|---|---|
| $1,500,000 | $1,350,000 |
| $2,400,000 | $2,160,000 |
| $4,000,000 | $3,600,000 |
The rule is a floor, not a price. A building can be appraised at a number the market will not pay, and then the estate has a decision to make with the attorney about how to proceed. It can also be appraised below what buyers will pay, and the listing should be priced from the market, not from the appraisal.
How does overbidding work at the hearing?
The confirmation hearing is where other buyers can make a higher offer. Probate Code section 10311 sets the minimum. A written offer made at the hearing has to be at least 10 percent more on the first $10,000 of the original bid, and 5 percent more on the amount of the original bid above $10,000. The minimum first overbid works out like this:
| Accepted offer returned to court | Required increase | Minimum first overbid |
|---|---|---|
| $1,000,000 | $50,500 | $1,050,500 |
| $2,000,000 | $100,500 | $2,100,500 |
| $3,500,000 | $175,500 | $3,675,500 |
| $6,000,000 | $300,500 | $6,300,500 |
The arithmetic is $1,000 on the first $10,000, plus 5 percent of everything above it. On a $2,000,000 offer, that is $1,000 plus $99,500.
If more than one qualifying offer is made, the court accepts the highest and confirms the sale to that bidder. The court may also, in its discretion, decline the higher offer and order a new sale. When it compares the original bid with a higher offer, it does not count any commission owed to an agent or broker, so an overbid wins on price alone.
What an overbidder has to bring to the courtroom, such as a deposit or proof of funds, is not set by the sections quoted on this page. Ask the estate's attorney what the assigned department expects, and tell every serious buyer who missed out before acceptance that the hearing is posted and open to overbids.
What do the buyer and the estate give up?
The buyer gives up certainty. A signed contract is only the opening bid. The buyer waits through the notice of sale, the petition and the court's calendar, and can still lose the building in the courtroom. In practice, conditional offers are generally not accepted in a confirmed sale, so the buyer does inspections and arranges financing before the hearing, without knowing whether they will own the building.
The estate gives up control over the last step. Once a qualifying overbid is made, the court decides who buys, and the court approves the commission. What the estate gets in return is a price that has been tested in public, in front of a judge, by anyone who wanted to pay more.
For the listing, that means two jobs. Before acceptance, market widely enough that the offer returned to court is already a strong one, so an overbid is a bonus rather than a correction. After acceptance, keep the accepted buyer informed and ready, since a buyer who drops out before the hearing leaves the estate starting over.
How is the commission split when an overbid wins?
The court approves the commission in a confirmed sale, and the rules are in Probate Code sections 10160 through 10168. Three of them deal with an overbid:
- If the agents have no agreement between them, the commission on the original bid is divided equally between the agent holding the listing contract and the other agent, and if the court confirms at a higher bid, the other agent is paid all of the commission on the difference.
- If the original bidder had no agent and the winning overbidder did, that agent's commission cannot exceed half of the difference between the original bid and the winning bid.
- Under section 10163, if the original bidder had no agent and the court confirms at a higher bid made at the hearing by a buyer the listing agent procured under an exclusive listing contract, the court allows that agent's commission on the full confirmed price.
These rules are one reason a listing agreement for a probate building should be reviewed by the estate's attorney before it is signed. Shaya is a real estate agent, not an attorney. The petition, the notices and the hearing are the attorney's work, and the attorney is the one to ask how the court is likely to treat a particular commission term.