The 90 Rule for Selling Real Estate

I recently met with Mac, a frantic man whose mother had just passed away. She’d meticulously prepared a codicil to her trust, attempting to leave her beachfront property to him specifically. Unfortunately, the codicil was misplaced during a recent move, and now, the trust dictates equal shares to all her grandchildren – meaning Mac loses a property worth over $1.2 million. These situations, while heartbreaking, are far more common than people realize, especially when dealing with last-minute estate plan changes. It underscores the vital importance of understanding the rules around selling property as an executor or trustee, and avoiding costly mistakes.

What Happens When an Executor Needs to Sell a House Quickly?

As an estate planning attorney and CPA with over 35 years of experience here in Moreno Valley, I frequently advise executors and trustees facing the task of liquidating real estate. They’re often under immense pressure to sell quickly, whether to cover estate debts, distribute assets, or simply finalize the probate or trust administration. A common question I get is, “Can I just accept any offer to get the house sold?” The answer is… it’s complicated. California law requires fiduciaries (like executors and trustees) to act prudently and in the best interests of the beneficiaries. Simply accepting the first offer, even if it’s below market value, isn’t always enough to shield you from potential liability.

Is There a “90% Rule” and What Does it Mean?

You’ve likely heard of the “90% rule,” but it’s often misunderstood. It’s not a hard-and-fast legal rule codified in the Probate Code. Instead, it’s a guideline developed through case law (specifically, Estate of Moore) to help determine whether a sale price is “reasonably adequate” under the circumstances. Essentially, if a sale price is 90% or more of the fair market value (FMV), it creates a presumption of reasonableness. However, that’s just a presumption – a beneficiary can still challenge the sale if they present evidence suggesting the price was too low.

Here’s where my CPA background comes into play. Establishing that FMV is crucial. A simple online estimate (Zestimate, Redfin, etc.) won’t cut it. A qualified appraisal, or better yet, a market analysis prepared by a local real estate agent who specializes in probate properties, is essential. As a CPA, I understand the nuances of valuation and can help identify potential issues, such as deferred maintenance or unique property features that might affect the appraisal. This can significantly impact the step-up in basis – a major tax benefit for the beneficiaries – and influence capital gains calculations.

What if the Offer is Below 90%?

If an offer falls below the 90% threshold, the executor or trustee faces a higher burden of justification. They must demonstrate that the circumstances warranted accepting a lower price. This might include:

Strong Label: Urgent need for funds to pay estate debts or taxes.
Strong Label: A quick sale was necessary to avoid foreclosure or property deterioration.
Strong Label: The property was difficult to sell due to unique characteristics or location.
Strong Label: Numerous offers were received, and this was the best available under the timeline.

Documenting these reasons thoroughly is critical. Keep copies of all appraisals, offers, communication with potential buyers, and explanations for accepting a lower price. Failing to do so can expose you to personal liability.

Full vs. Limited Authority – How Does This Affect Selling?

The authority granted to an executor significantly impacts the sale process. With Full Authority, an executor can sell real estate without a court hearing. With Limited Authority, the sale MUST be confirmed by the judge in an open court ‘overbid’ process, which adds significant time and expense. This overbid process can be particularly problematic in a hot market, as it essentially allows anyone to outbid the accepted offer, potentially leaving the estate with less money than anticipated.

What About Executor/Trustee Fees?

Remember, California law sets a mandatory Statutory Fee Schedule based on the gross value of the estate (not the net equity). For example, the fee is 4% of the first $100k, 3% of the next $100k, and 2% of the next $800k. This is a right, not a salary, and is taxable income. These fees, while legally mandated, can quickly erode the estate’s assets, further emphasizing the need to maximize the sale price of any real estate.

How Long Does Probate Take, and How Does a Quick Sale Help?

A probate case cannot be closed in less than roughly 7 to 9 months due to mandatory notice periods (15 days for initial hearing + 4 months for creditors), but most California probates in 2026 take 12 to 18 months due to court congestion. A swift and well-documented property sale can significantly expedite the process, allowing beneficiaries to receive their inheritance sooner.

What determines whether a California probate estate closes smoothly or turns into litigation?

The path through California probate is rarely a straight line; it requires precise adherence to statutory deadlines, accurate asset characterization, and strict fiduciary compliance. Without a clear roadmap, what begins as a standard administrative proceeding can quickly dissolve into a costly battle over interpretation, valuation, and beneficiary rights.

• Executor Authority: Secure letters testamentary if a will exists.
• Administrator Authority: Obtain letters of administration if there is no will.
• Who is Involved: Clarify roles using who is involved in probate.

Ultimately, the difference between a routine distribution and a protracted legal battle often comes down to preparation. By anticipating the demands of the Probate Code and addressing potential friction points with beneficiaries and creditors upfront, fiduciaries can navigate the system with greater confidence and lower liability.

Verified Authority on California Probate Administration

• Executor Powers (The IAEA): California Probate Code § 10400 (Independent Administration)
  The Independent Administration of Estates Act (IAEA) is the engine of a modern probate. It allows personal representatives with “Full Authority” to sell real estate and pay bills without constant court approval. Without IAEA authority, every major action requires a separate court petition and order.
• Statutory Executor Fees: California Probate Code § 10800 (Compensation)
  Executor fees in California are not arbitrary. They are calculated on the gross value of the probate estate: 4% of the first $100k, 3% of the next $100k, 2% of the next $800k, and 1% of the next $9 million. This often surprises heirs when the estate has high asset value but high debt (low equity).
• Creditor Claim Deadlines: California Probate Code § 9100 (Statute of Limitations)
  The primary benefit of formal probate is the “clean break” from debts. Creditors generally have four months from the issuance of Letters to file a formal claim. If they miss this deadline, the debt is usually legally unenforceable against the estate or the heirs.
• Probate Value Threshold ($208,850): California Probate Code § 13100 (Small Estate Limit)
  Effective April 1, 2025, estates valued under $208,850 may qualify for summary procedures (like a Small Estate Affidavit) instead of formal probate. Note that this limit is adjusted for inflation every three years.
• Mandatory Publication: California Probate Code § 8120 (Notice to Creditors)
  Before the court can appoint an executor, a Notice of Petition to Administer Estate must be published in a newspaper of general circulation in the city where the decedent resided. This publication serves as constructive notice to unknown creditors and potential heirs.
• The Probate Referee: California Probate Code § 8900 (Appraisal)
  You cannot simply guess the value of the estate’s assets. The court appoints a neutral Probate Referee to appraise all non-cash assets (real estate, stocks, business interests). Their appraisal is required before the estate can be distributed or closed.