Selling Real Estate Before Foreclosure During Probate

It is an all too common scenario that an estate consists mostly of real estate that is encumbered by a mortgage. Problems can arise in this situation if there is a lack of readily available funds to continue paying mortgage bills. When this happens, the lender will often initiate a foreclosure during probate. Oftentimes, the personal representative will try to sell the real estate before the foreclosure proceedings are completed. This allows the personal representative to pay the debts of the estates. At the same time, it will hopefully allow them to preserve some of the assets for the beneficiaries as well.

Selling Real Estate before Foreclosure during Probate and how the proceeds are dealt with? The following is the order in which they may be applied:

1. First, proceeds should first be applied to cover the expenses of administration that are reasonably related to the property that was sold.
2. Additionally, proceeds may then be applied to the expenses related to the sale of the property.
3. Proceeds will thereafter be used to satisfy the outstanding amounts owed to the lender that is secured by the lien on the property.
4. Lastly, any remaining proceeds shall be distributed to the estate.

It is the responsibility of the personal representative to properly distribute any proceeds that are received by the estate. This money will likely be used to pay other expenses of the estate and, ultimately, will be distributed to the beneficiaries or heirs.

• Probate (noun): The process of proving in court that the will of a person who has died is valid. It involves proving before a competent judicial authority that a document offered for official recognition and registration as the last will and testament of a deceased person is genuine. Not all wills must go through this in California. See our infographic to help you determine if your loved one’s estate must go through probate.

• Estate (noun): An estate includes the things that a person owns. The things left by someone who has died can be distributed based on a Will, Trust, or Intestate laws. Estates have to be administered in the Probate Court if the estate meets certain criteria. See our Infographic on The Probate Process.

If you are ready to start your case, then please give us a call or fill out our Get Help Now form. A comprehensive overview of California Probate is available here. Should you have additional questions about trust litigation, you will find plenty of useful information in our Learning Center.