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February 24, 2022

Probate Sale Primer for SF Home Buyers

Exterior of fixer in Noe Valley

If you’re a house buyer in San Francisco, you’ll eventually find a property you like that’s being sold through probate. These sales happen because there’s a death in a family and a will that needs to be resolved. A probate interprets the instructions of the deceased, and there is an executor appointed that handles affairs for the trustee.

When homes are being sold through probate without court confirmation, the process is fairly straightforward (with a few exceptions). However, when court confirmation is required, things get more complicated—and competitive. For example, the total fixer at 320 Day in Noe Valley (see photo, courtesy Compass) ratified for $1,410,500, but the winning buyers overbid aggressively at the court date. Final sale price? $1,970,000.

Before you decide to pursue a property—especially a fixer—being sold through probate, it’s important to understand what’s involved:

There will be a court date to approve the sale. A court date will be set to confirm a contract accepted by the trustee. The date is typically set about one- to two months from the time of offer acceptance (and contingency removal by the buyer).

You’ll need a cashier’s check with your offer. A cashier’s check made out to the trustee for ten percent of the offer price is required along with the contract and proof of funds. If your offer is accepted, that check is put into an escrow account or estate account managed by the escrow company. The money sits there until the court date.

The buyer typically pays the transfer tax. Most probate listing agents/sellers request that the buyer pay the San Francisco transfer tax, which is $6.80 per thousand dollars for homes under $1M, and $7.50 per thousand for properties above $1M.

You need to remove all contingencies prior to setting a court confirmation date. You can write your offer with contingencies; however, you have to remove those contingencies in order for the listing agent to schedule the court confirmation. Any money spent on inspections or appraisals is at risk if your sale doesn’t go through, and you also have to be very confident in your financing, as it’s likely you won’t have time to get full loan approval before the court confirmation.

Your contract will be subject to overbidding This is why your sale may not go through. The bidding price is set by adding five percent + $500 to the accepted offer price. Another buyer has to make a minimum bid at that price. That buyer also has to have a cashier’s check on hand for the ten percent deposit of his or her offer price. And bidders can’t have contingencies in their contracts. As a bidder, you have to decide what your range will be in terms of a price offered. Some buyers arrive with a few cashier’s checks in various amounts. You can engage in bidding, as well, and also would need cashier’s checks to do so.

The highest bidder gets the house. Let’s put it this way: If the minimum overbid is high enough, it will be a deterrent to other prospective buyers. Consider submitting an offer that will end up setting a first overbid that doesn’t look like a screaming deal.


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