A probate sale is the process a court or legal entity goes through to collect and distribute the value of assets left behind after an individual dies. In some cases, a probate sale may not be necessary, especially if the division of assets is straightforward and not challenged by anyone. If there are challenges, or if the deceased did not leave a last will, or if that will is somehow invalid, probate may be the only option.
While many wish to avoid probate sales, in some situations, it is the only way to divide up property fairly. In other cases, it must be done because there are outstanding bills and creditors that must be paid first. Often, a probate sale can help clear up some of those outstanding debts, as well as leave some of the assets for the heirs.
A probate sale typically applies to transactions regarding parcels of real estate. Once the real estate has been identified, a notice of a probate sale will appear in a publication, such as a newspaper. Before a sale can go through, the notice must generally run in the newspaper multiple times, but the exact number depends on the jurisdiction involved. The sale may begin with an initial offer, but may be subject to being outbid at the court hearing.
Once the notice has been published, the hearing can be held where interested parties may bid on the real estate in question. Typically, a potential buyer presents the probate official, known as the referee, with an offer. Others may start the bidding process by bidding a certain amount above that offer. In California, for example, the bid must be at least 5 percent more than that original contract, plus an additional $500 US Dollars. The process ends with the highest bidder being awarded the real estate.
The buyer at a probate sale must bid with no conditions. For example, in a traditional real estate sale, the buyer may have the option of bidding a certain amount, contingent upon getting financing. That cannot happen in a probate sale. The winning bidder, or the owner of the original offer, must put at least 10 percent down at the end of the court hearing. The buyer may forfeit the deposit if he or she cannot provide the additional amount by a certain date.
The proceeds from the probate sale are then divided based on the terms the court has set. This may be an even division among the heirs, or it may be uneven, depending on what the will has called for. Once the money is completely distributed, and all fees have been paid, the process is completed.