How Overbids Can Lead To Court Intervention During Estate Administration

In real estate, it is often said that the deal is never done until the deed has been recorded and the money has changed hands. Signing an offer or a purchase and sale agreement is by no means the end of the transaction when it comes to selling a home. This is especially true for personal representatives selling real estate as part of a trust administration. Even when a buyer is found and a price is agreed upon, litigation can still arise in the form of an overbid at the confirmation hearing.

What Is an Overbid?

An overbid is an offer by a prospective purchaser of real estate owned by an estate that is higher than the previous offer accepted by the personal representative. After obtaining the initial offer, the personal representative presents this bid to the court for approval. This is known as a confirmation hearing. At this hearing, another purchaser can come forward and attempt to purchase the real estate for a higher price.

How Much Higher Does the Overbid Have to Be Than the Original Bid?

In order to be accepted by the court, the overbid must be higher than the original bid. The overbid must follow the three parts of the following formula:

  • The amount of the original bid on the property
  • A minimum of 10 percent of the first $10,000 of the original bid
  • A minimum of 5 percent of the amount of the original bid that is over $10,000

If there is more than one purchaser willing to make an overbid, the court will determine the minimum amount of increase that is required over and above the first overbid. This determination is made at the time of the confirmation hearing.

Unfortunately for the personal representatives of estates, battles over the purchase price are not the only possible issue that could give rise to court hearings and estate litigation. Our article, “Six Types of Real Estate Issues Arising from Estate Administration in California,” provides a helpful overview of possible problems that can arise. To learn more about legal battles over estates, we encourage you to order our free guide, Winning the Inheritance Battle: The Ultimate Guide to California Trust and Probate Litigation.

Scott Grossman

Scott Grossman

Attorney

The Grossman Law Firm, APC · 525 B Street, Suite 1500, San Diego, CA 92101 · (951) 523-8307