Inheriting a property after the loss of a loved one can be an incredibly emotional and confusing time. While you may be eager to settle the estate and move forward, selling a house in probate is not like a traditional real estate transaction. The court system is heavily involved, and making assumptions can cost your family time, money, and unnecessary stress.
If you are navigating an inherited property sale, here are the 10 rules you need to know.
1. A Will Does Not Keep You Out of Probate One of the most common misconceptions families have is that a will automatically bypasses the probate court. In reality, a will is essentially an instruction manual for the probate judge. Unless the property was properly funded into a living trust or set up with a transfer-on-death deed, you must go through the formal probate process to transfer or sell the real estate.
2. You Cannot Sell Without “Letters” You might be the only child or the named executor in the will, but you do not have the legal power to sign a listing agreement or sell the home until the judge officially appoints you. The court must issue a document—usually called “Letters of Administration” or “Letters Testamentary”—which grants you the actual authority to act on behalf of the estate.
3. Check the Title Immediately Never assume you know exactly how the decedent owned the property. Often, a property might be held in joint tenancy with someone who passed away years ago, or it might have unexpected liens or loans attached to it. A probate real estate expert will pull the property deed and a preliminary title report on day one to verify ownership and uncover any hidden issues before they derail the sale.
4. Understand Full vs. Limited Authority In many jurisdictions, like California, the court will grant you either Full Authority or Limited Authority to administer the estate. Full authority allows you to list and sell the property much like a normal sale, saving the estate time and money. Limited authority, however, forces the sale through a strict court confirmation process, which requires the buyer to put down a 10% cashier’s check, waive all contingencies, and face an open auction where others can overbid them in court.
5. Are You Bound by the “90% Rule”? (If You Have Limited Authority, you may be.) During probate, the court may order an official Inventory and Appraisal report conducted by a designated Probate Referee, rather than a standard real estate appraiser. If the court granted you limited authority, the law dictates that you cannot sell the property for less than 90% of the probate referee’s appraised value. (This applies state to state. Consult your attorney.)
6. You Can Sell Now, But You Can’t Keep the Cash Yet Just because you successfully sell the house during the probate process doesn’t mean you get to pocket your inheritance that day. The proceeds from the sale must go directly into a restricted estate bank account. The funds are used to pay off creditors, attorneys, and taxes first, and the remaining inheritance is only distributed to the heirs once the judge formally closes the probate, which can take a year or more.
7. Be Aware of Reverse Mortgages If your loved one had a reverse mortgage, the clock is ticking loudly. Reverse mortgage lenders typically provide a strict six-month window for the loan to be repaid after the borrower’s death. Because probate can easily drag on longer than six months, the lender may quickly file a notice of default and initiate foreclosure, threatening the estate’s equity if you do not act urgently.
8. Dealing with Squatters or Uncooperative Heirs Drains Equity If a sibling, caregiver, or squatter is living in the inherited home rent-free and refuses to leave, it complicates the sale and hurts everyone’s inheritance. The estate administrator may be forced to use estate funds to initiate a formal eviction or a partition lawsuit. Ultimately, a judge can deduct the massive legal and eviction costs directly from that uncooperative heir’s share of the inheritance.
9. Communication Prevents Costly Court Battles The vast majority of probate litigation stems from poor communication and unresolved family dynamics. If an heir feels left in the dark, they are far more likely to file formal objections in court. Even a baseless objection from a disgruntled sibling can delay the property sale by months, trigger mandatory court confirmation hearings, and cost the estate thousands in legal fees. Keep all beneficiaries informed to prevent these expensive disputes.
10. General Real Estate Agents Can Cost You Probate sales involve highly specific forms, strict statutory timelines, and complex legal procedures. A standard retail real estate agent who doesn’t understand the nuances of the probate code might accidentally steer you into a limited authority sale, fail to properly notice the heirs, or miss crucial deadlines. Hiring an expert who specializes specifically in probate real estate will ensure your family maximizes the home’s value while avoiding legal nightmares.
Acknowledgement
Executorium would like to thank Bill Gross for contributing this article.
Born in Santa Monica, and raised in Orange County, Bill is a lifetime Californian. He is a Real Estate Investor and Broker, working with eXp Realty of California out of San Ramon. He is the host of Probate Weekly a podcast for CPE Real Estate professionals and associated professionals.