Three ways an inherited house gets sold
Find out which one you're in before you do anything else. It changes the timeline more than any other factor.
Step-up basis, in one paragraph
The reason inherited property behaves differently from everything else you sell
Whatever a house was worth on the day the owner died becomes the heir's new cost basis. Mom bought it for $200,000, it's worth $700,000 when she passes, the kids inherit it at $700,000. Sell at $700,000 and the taxable gain is zero. Half a million in appreciation disappears for tax purposes.
That's why heirs so often sell right away, and it's why the date-of-death value needs to be nailed down early. In a trust, the family hires an appraiser, roughly $400 to $700, and it can be done retroactively. In probate, a court-appointed Probate Referee does it and the number is official.
Don't confuse this with property taxes
Step-up handles capital gains, which is federal income tax. It has nothing to do with the property tax bill, which is Prop 19 and a completely separate set of rules. Clients mix these two up constantly. Keep them separate when you explain it, and see the next section.
Prop 19 and what the heirs do with the house
The single biggest factor in whether an inherited house stays in the family or comes to market
Before 2021, a parent could hand a house to a kid and the kid kept the parent's low property tax bill, no questions asked. Rent it out, leave it empty, use it as a beach house, didn't matter. Prop 19 ended that in February 2021.
Now there is exactly one way to keep the low tax bill: at least one of the kids has to move in and make it their own primary residence. Everything else gets reassessed to today's market value.
What the cap actually is
Even when a child moves in, the protection isn't unlimited. The exclusion covers the parent's assessed value plus $1,044,586 for transfers between February 16, 2025 and February 15, 2027. That number gets adjusted every two years. Anything above that line gets added onto the new assessed value.
Most houses in our market land under that line, which means a child who moves in keeps the parents' assessed value outright. At roughly 1.1%, that's about $3,300 a year instead of the $9,350 they'd pay on a fresh $850,000 assessment. Call it six thousand dollars a year, every year, for as long as they live there.
So on the bigger house they still come out way ahead of a full $1,600,000 reassessment, but they don't get away clean.
Two traps that cost families the exclusion
The one-year filing deadline
The child has to file for the homeowners' exemption within one year of the transfer. Miss it and the exclusion is gone even though they moved in and did everything else right. Nobody at the county calls to remind them.
Moving out later undoes it
The protection only lasts as long as at least one eligible child keeps living there. The day it stops being their primary residence, the county reassesses to market value as of that date. A kid who moves in for three years and then rents it out gets the full tax bill anyway.
How to use this on a listing appointment
Ask early what the heirs plan to do with the house. If nobody's moving in, the property tax bill is about to triple and the math on keeping it as a rental usually falls apart. That family is selling, they just may not know it yet. If one of them is moving in, say so plainly: holding it may be worth thousands a year, and telling them that when you could have pushed for the listing is how you get the referral two years from now.
The other half of Prop 19, for your move-up sellers
Prop 19 also lets homeowners 55 or older, severely disabled homeowners, and wildfire victims carry their low assessed value to a new house anywhere in California, up to three times in their life. The old rules capped it at one move, usually within the same county. If you have a 60-year-old sitting on a 1998 tax basis who thinks they can't afford to move, this is the conversation that unsticks them.
Trust sale vs. probate sale
Same house, same market, completely different transaction
What probate fees cost
California sets them by statute: 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000. That gets paid twice, once to the attorney and once to the personal representative. On a $700,000 house that's about $17,000 each, roughly $34,000 total. And it's charged on the gross value, not the equity. A $700,000 house with a $500,000 mortgage still pays fees on $700,000.
The 10% deposit and the overbid
Both of these exist only in limited authority sales. Full authority sales have neither.
Why the deposit is so big
On a court confirmation sale the buyer puts down 10% of the purchase price, not the 1% to 3% earnest money you see on a normal deal. On a $526,000 offer that's $52,600 up front.
The reason is that the judge is approving a sale on behalf of people who can't speak for themselves: heirs, creditors, sometimes minors. The court wants proof the buyer is real before anyone spends months on it. A 10% cashier's check filters out tire-kickers on day one.
Where the money goes
The trick experienced overbidders use
You don't know your final bid until the bidding stops, so you can't know the exact 10% in advance. Bidders bring several cashier's checks in different amounts, say one for $50,000 plus a few $10,000s and $5,000s, and combine them to hit 10% of whatever they end up winning at. The simpler version is one check for 10% of your absolute maximum. Overshooting is fine. The extra gets credited or refunded through escrow.
How an overbid actually plays out
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Day 0
The offer gets accepted
The personal representative signs. It feels like a normal deal. It isn't. Nothing is final until a judge says so.
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Week 1
The petition gets filed
The attorney files a Report of Sale and Petition for Order Confirming Sale. The court sets a hearing, typically 30 to 45 days out.
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Weeks 1 to 6
The sale gets advertised
The hearing is public and the sale is published. This is on purpose. The court wants other bidders to show up. The judge's job is to get the estate the best price, not to protect your buyer's deal.
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Hearing day
The judge opens the floor
Anyone in the room can overbid. All they need is a cashier's check for 10% of what they intend to bid.
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Hearing day
The first overbid has a required minimum
Set by statute, and big enough on purpose. It stops someone from taking the house for $500 more and forces the first challenger to commit real money. The math is below.
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Hearing day
It turns into a live auction
After the first overbid the judge sets the increments, usually $1,000 to $5,000 at a time, out loud in open court, until nobody bids higher.
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Hearing day
The judge confirms the sale
Winner hands over the check. The original buyer gets their deposit back and goes home with nothing. Escrow closes 15 to 30 days later.
What this means for you and your buyer
Your buyer has to be in the room
Miss the hearing and they can lose the house for $2,800 more without ever getting a chance to respond. Send them in with a written maximum and enough cashier's checks to cover it.
Your commission is on the line too
If your buyer gets outbid, the buyer's agent generally gets paid nothing. Inspections, the offer, six weeks of waiting, all of it gone. The court sets the commission and it follows whoever wins.
Sit in on one before your first probate deal
Hearings are public and anyone can attend. It costs an afternoon and the whole process stops being theoretical.
Most hearings have no overbidders
The property was already marketed and the accepted offer is usually close to market. This is a real risk, not a likely outcome. A buyer who hears about it in week six will walk and blame you. A buyer who hears about it on day one will either accept it or opt out early, and both of those are fine.
One more thing about contingencies
Court confirmation sales usually come with none. No loan contingency, no appraisal contingency, often no inspection contingency. The house sells as-is. That means all inspections happen before the offer, on the buyer's dime, with no guarantee they'll end up owning it. Financing is allowed, but the buyer can't walk if the loan falls apart, so they need to be verifiably qualified or paying cash.
What probate requires that a trust doesn't
Every one of these is a step the trustee simply skips
- Petition for Probate filed with the Superior Court in the county where they lived
- Notice published in a local newspaper of general circulation
- Written notice mailed to every heir and beneficiary
- A hearing, then Letters Testamentary or Letters of Administration issued
- A bond, unless the will waives it or all heirs agree to waive it
- Probate Referee appraisal, filed with the court as an Inventory and Appraisal
- A four-month window for creditors to file claims against the estate
- Notice of Proposed Action (full authority) or a confirmation hearing (limited authority)
- Final accounting and a court order before a single dollar reaches the heirs
When probate can be skipped
Thresholds for deaths on or after April 1, 2025. This is newer than most agents realize.
Why this matters to you
If the house is worth $700,000 and it was their primary residence, the family may be looking at a petition rather than a year of probate. Most people, and plenty of agents, don't know this changed. Mention it and you're the most useful person they've talked to.
The $750,000 petition, step by step
Probate Code 13151. No will required. It works the same either way.
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Day 40
Wait 40 days after the death
Nothing can be filed before that. If there's a will it still has to be lodged with the court within 30 days of death, whether or not anyone uses it.
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Before filing
Get the probate referee appraisal
A county-approved referee completes an Inventory and Appraisal showing the home is at or under $750,000. Their fee is 0.1% of value, with a $75 floor and a $10,000 ceiling.
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Filing
File the petition
Form DE-310, Petition to Determine Succession to Real Property, in the Superior Court of the county where they lived. Filing fee runs roughly $435 to $465.
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Within 5 business days
Notify every heir named in the petition
AB 2016 added this. The clock runs from the filing date, not the death. Miss it and the petition can be thrown out.
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15 days before
Serve the Notice of Hearing
Form DE-120, out to all the same people at least 15 days ahead of the court date.
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Hearing
The judge signs the order
Form DE-315, Order Determining Succession. This is the document that says who owns the house now.
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After
Record it with the county
The order gets recorded with a Preliminary Change of Ownership Report, plus the assessor's change-of-ownership form within 150 days. Title is now in the heirs' names and the house can be listed.
Start to finish this usually runs three to five months instead of twelve to eighteen, and costs a filing fee, a referee fee, and a few thousand in attorney time instead of tens of thousands in statutory fees.
Three things that disqualify it
Gross value, not equity. The mortgage does not get subtracted. A $900,000 house with a $400,000 loan does not qualify, even though the family only nets $500,000. In our market this is the number one disqualifier.
It has to be the primary residence. A rental or a second home doesn't get the $750,000 path. Other real property has its own much smaller affidavit limit.
Heirs take on the unsecured debts. Anyone who receives the house this way is personally on the hook for the decedent's unsecured debt, up to the value of what they received. Full probate gives you a hard four-month creditor cutoff; this shortcut does not. If the parent had real credit card or medical debt, full probate may genuinely be the safer route, and that's a conversation for their attorney.
Two faster paths worth asking about first
A surviving spouse usually skips all of this with a Spousal Property Petition (DE-221). No dollar limit at all, and it's quicker. If a husband or wife survived, ask about this before anything else.
Joint tenancy or a Transfer on Death deed means no court at all. An Affidavit of Death of Joint Tenant gets recorded and title clears. Check how the property was vested before assuming anyone needs a judge.
Disclosures and forms
Trustees and personal representatives get an exemption, and it's narrower than they think
If the trustee or representative never lived in the house, they're generally exempt from the TDS and the SPQ. Buyers' agents will push back on this. The exemption covers not knowing, not not telling. A daughter who grew up in the house and is now the trustee knows plenty, and hiding behind a form is how sellers get sued after closing.
Still required either way: lead-based paint on anything pre-1978, smoke and carbon monoxide detectors, water heater strapping, Megan's Law, and every material fact they know about. Assume you still owe the Natural Hazard Disclosure unless escrow tells you in writing that this sale is exempt.
Seven things that kill these deals
Every one of them is findable before you take the listing
It's an irrevocable trust
There may be no step-up at all, which means a surprise tax bill big enough to make the family cancel the sale. Send them to a CPA before you spend a dollar on marketing.
Mom is alive but not competent
The successor trustee can't just decide they're in charge. Most trusts require one or two doctors' letters declaring incapacity first. Skip that step and the sale isn't valid.
A parent put a kid on title years ago
That half was a gift, and gifts carry the original basis. Mom's half steps up, the son's half doesn't, and he owes tax on decades of appreciation. Common, and nobody sees it coming.
Co-trustees who don't speak
Every document needs every signature. Two siblings as co-trustees, one of them overseas, is a problem you solve at listing, not at day 22 of escrow.
No Certification of Trust
Title and escrow will not close without it, and it's the most common source of delay on a trust sale. Ask for it the same day you take the listing.
Limited authority nobody flagged
You market it like a normal listing, get a great offer, then explain to the buyer that a stranger can take the house at a hearing. Read the Letters first.
An heir who thinks they're in charge
Legally the trustee or representative decides. Practically, a brother who thinks the price is low can torpedo the deal at week four. Get everyone in a room before you list.
Five questions on the first call
These five answers tell you what kind of transaction you're walking into
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Is the house in a trust, or is it going through probate?
If they don't know, ask whether a lawyer has filed anything with the court. That answers it.
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Can you send me the Certification of Trust, or the Letters?
One document tells you who signs and whether they can sell. Everything else waits on it.
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If it's probate, do the Letters say full authority or limited?
This decides whether you're running a normal listing or a courtroom sale. It's printed right on them.
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Has anyone done a date-of-death appraisal?
If not, get one moving now. It sets their tax basis, and it can still be done retroactively.
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Who are all the heirs, and is everyone on the same page about selling?
The quiet sibling is the one who blows up the deal. Find out who they are before the market does.