Probate Properties

The probate process

When someone dies owning real property, the estate enters probate in the county where the decedent resided (or where the property is located, for non-residents). Key documents:

• Petition for probate — initial filing, starts the case
• Letters testamentary — if there’s a will, issued to the executor named therein
• Letters of administration — if no will (intestate), issued to the court-appointed administrator
• Inventory — listing of estate assets including the real property
• Creditor claim period — typically 3–9 months during which creditors can assert claims against the estate
• Petition for sale — in court-supervision states, authorizes sale of the real property
• Final accounting and distribution — closes the estate

Typical timeline: 6–24 months from death to closing of probate. Properties can sometimes be sold before probate closes under the executor’s authority.

Independent administration vs. court supervision

The biggest state-by-state difference affecting investors is whether the executor has independent authority or requires court approval for each action:

• Independent administration states (Texas, Alabama, Arkansas, Illinois, Kansas, Missouri, Washington, most Southern states) — the executor can sell the property without court confirmation in most cases. Transactions close quickly; investor negotiates directly with executor. Deed reads “John Smith as Independent Executor of the Estate of Jane Smith.”
• Court-supervised administration states (California, New York, and some others for certain estate types) — the executor negotiates the sale, but the court must confirm it at a hearing. In California, the Confirmation of Sale hearing includes an open overbid auction, where competing buyers can “overbid” the initial contract price in $5,000 minimum increments (CA Probate Code §10311). Investor must attend, be prepared to overbid, and bring certified funds.

Finding probate properties

• County probate court filings — most counties publish probate filings publicly, often with searchable online dockets. Search for recent petitions for probate; note the decedent name and property (often attached as part of the inventory).
• Obituary monitoring — obituaries list survivors and sometimes the decedent’s address. Cross-reference to property records. Service aggregators exist for this specific workflow.
• Genealogy databases — Ancestry, FamilySearch — help locate heirs when direct outreach to executor fails.
• Probate attorney networking — attorneys handling probate often become consistent sources when they trust the investor’s reliability.
• Third-party aggregators — USA-ProbateList, US Probate Services, ProbateMasters, others compile nationwide probate filings into investor-friendly formats.

Timing the outreach

Too early = inappropriate (the family is grieving). Too late = the property is already listed. The sweet spot is typically 60–180 days after death — past the initial grief period, before the family has typically engaged a real estate agent.

Initial outreach should be respectful and informational — not pushy. A brief condolence note plus an offer to discuss options if and when the family is ready. Multi-touch follow-up over 6–12 months, as decisions typically get made on the family’s timeline, not the investor’s.

Negotiating with heirs

Probate deals typically involve multiple decision-makers. All named heirs (or the executor acting on their behalf) must agree:

• Single executor, distant heirs — simplest case. Executor has authority; heirs receive proceeds post-sale. Negotiate with executor only.
• Multiple heirs, no executor — each heir owns a fractional interest as tenant-in-common. Must get agreement from all or buy out individual interests.
• Surviving spouse + children — spousal elective share rules vary by state. Spouse may have superior rights.
• Family disputes — some heirs want to sell, others don’t. Investor can sometimes buy out willing heirs to create pressure on holdouts, or wait for court-ordered partition sale.

Stepped-up basis

Heirs inherit property at its value on the date of death — the “stepped-up basis” under IRC §1014. This is a major tax benefit for the heirs: selling near the stepped-up value creates little or no capital gain. The practical effect is that heirs can often accept lower cash offers than sellers in other situations, because their tax cost is minimal.

This is especially pronounced for long-held family properties. A property purchased for $30,000 in 1975 worth $450,000 today would have massive capital gains tax if the original owner sold. The heir who inherits at the $450,000 stepped-up basis and sells at $425,000 pays capital gains on $0 (actually a $25,000 loss).

Title considerations

• Missing heirs — if an heir cannot be located, title is incomplete. Standard remedy is a court-ordered heirship determination or a waiting period.
• Creditor claims — must be resolved before or during sale. Most states require payment from sale proceeds before distribution to heirs.
• Spousal elective share — in most states, a surviving spouse can elect to take a statutory share regardless of the will. Typically 1/3 to 1/2 of the estate.
• Pretermitted children — children born after the will was written may be entitled to a share even if not mentioned.
• Reverse mortgages — HECM reverse mortgages become due on the borrower’s death. Heirs have 30 days to notify the lender and up to 6–12 months to satisfy the debt (typically via sale) before foreclosure.
• Affidavit of heirship — in some states, small estates can transfer without formal probate using a sworn affidavit. Simplifies small-value transactions.

California court confirmation

California probate sales under court supervision deserve their own discussion because the overbid process is distinctive. Mechanics:

1. Investor signs purchase contract with executor (typically 90% of appraised value)
2. Executor petitions for Court Confirmation of Sale
3. Hearing scheduled 30–45 days later, published competitive bidding notice
4. At hearing, initial contract price is announced. Court opens bidding for overbids in minimum $5,000 increments
5. New high bidder must have certified funds at the hearing; must bid original contract price + 10% of first $10,000 + 5% of anything over $10,000 over contract price as opening overbid
6. Successful bidder becomes the new buyer; original investor receives deposit back

The overbid process is competitive but produces opportunities. Sophisticated California investors specifically target probate overbids, showing up to confirmation hearings with certified funds and outbidding the initial contract.

Common pitfalls

• Executor exceeding authority. An executor who sells without proper authorization (or below court-required threshold) creates a voidable transaction. Confirm the authority document (letters testamentary or administration) before contracting.
• Missing heirs. A deed from only some of the heirs leaves title incomplete. The missing heirs can later claim a share. Always require signatures from all named heirs or a court order.
• Creditor claims eating equity. Estate creditors (medical bills, credit cards, tax liens) are paid before heirs. Undisclosed creditor claims can consume heir expectations and stall sales.
• Spousal elective share surprise. A will leaves property to children, but the surviving spouse elects against the will and takes the statutory share instead. Sale can’t close until the election is resolved.
• Inappropriate timing. Reaching out 2 weeks after a death creates reputation damage and regulatory scrutiny. Wait 60+ days.
• Probate property with existing mortgage. Mortgages survive death. Due-on-sale clauses typically don’t trigger on inheritance (Garn-St. Germain exception), but payments must continue or the lender forecloses.
• Title insurance exclusions. Title policies sometimes exclude claims from unknown heirs, pretermitted children, or creditor claims. Review exclusions carefully.