The 90 Rule for Selling Real Estate

Dax lost his mother unexpectedly last month. She owned a beautiful home in Temecula wine country, but her estate is complicated – a second marriage, blended family, and a poorly drafted trust from 20 years ago. He’s desperate to sell the house quickly to cover mounting bills, but his siblings are demanding a higher price than the current market supports. If he doesn’t get the house sold soon, he risks losing it to foreclosure, costing the estate tens of thousands of dollars.

As an estate planning attorney and CPA with over 35 years of experience, I often encounter situations like Dax’s. He’s caught between the emotional desire to maximize value and the practical need for a swift, certain sale. The “90% Rule” is a concept I frequently discuss with executors facing this dilemma, particularly when dealing with real property within probate or trust administration.

The 90% Rule isn’t a law, and it’s not found in the Probate Code. It’s a guideline, a practical benchmark for evaluating offers on real estate when an executor or trustee is under pressure to sell. It suggests that if an offer represents at least 90% of the fair market value, it should be seriously considered – even if a slightly higher price might be achievable with more time and effort.

Why 90%? It’s about balancing opportunity cost. Every day the property sits on the market, costs accrue: mortgage payments, property taxes, insurance, utilities, landscaping, and potential repairs. These expenses erode the estate’s value. Moreover, a property that sits for too long can become “stale” in buyers’ minds, requiring a price reduction to attract renewed interest. The 90% Rule acknowledges that a quick, certain sale, even at a slight discount, can often net more for the estate than chasing a hypothetical top dollar.

However, applying the 90% Rule isn’t always straightforward. Determining “fair market value” is crucial. A recent appraisal is ideal. As a CPA, I emphasize that a proper appraisal considers not just comparable sales, but also the potential step-up in basis the beneficiaries will receive, impacting their capital gains tax liability when they eventually sell. A seemingly lower sale price might actually result in a larger net distribution to the heirs due to this tax benefit.

• What if we get multiple offers around 85%? Consider accepting the cleanest offer—cash, quick close, fewest contingencies. The certainty outweighs a small price difference.
• Does the 90% Rule apply to all assets? No. It’s most relevant to real property due to the ongoing carrying costs. For stocks or bonds, a quicker sale at a slight discount is often preferable.
• Can beneficiaries overrule my decision to accept a 90% offer? Yes, but you have a duty to explain the rationale – the costs of delay and the potential impact on the overall estate value. Document this communication carefully.

The decision to accept an offer isn’t solely based on a percentage. Factors like the condition of the property, the local market conditions, and the urgency of the sale all play a role. If the property needs significant repairs, accepting a lower offer from a cash buyer who will purchase it “as is” may be the best course of action. If the market is hot and multiple offers are expected, waiting for a better one might be justified.

What About Executor Authority When Selling?

One of the biggest hurdles in selling property quickly is navigating the legal requirements. In California, as of April 1, 2025, formal probate is generally required if the gross value of the estate exceeds $208,850 (Probate Code § 13100). However, this calculation excludes assets held in trust, joint tenancy, or those with beneficiary designations (POD/TOD). When selling through probate, the authority granted to the executor matters. 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 scare away potential buyers.

How are Executor Fees Calculated for the Sale?

It’s essential to understand that the executor isn’t working for free. 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. A quick sale minimizes the period over which these fees accrue, benefiting the estate.

What Happens if Creditors Come After the Sale?

Even after the property is sold, the estate isn’t necessarily free and clear. Creditors have a strict window to file claims—typically 4 months after Letters are issued (Probate Code § 9100). If a creditor fails to file within this window (and proper notice was given), their debt is generally extinguished forever. A prompt sale helps ensure that creditors are paid within this timeframe, avoiding potential litigation.

What About Appraising the Property?

Unlike private appraisals, California requires the use of a court-appointed Probate Referee to value non-cash assets (like real estate and stocks). The Referee charges a statutory fee of 0.1% of the assets appraised. This adds another cost to the process, but is a necessary step for proper accounting.

Ultimately, the 90% Rule is a tool to help executors and trustees make informed decisions. It’s not a rigid formula, but a reminder to consider the broader context – the costs of delay, the beneficiaries’ needs, and the overall goal of efficiently administering the estate. 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.

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.

• Appearances: Prepare for the court hearing in probate.
• Steps: Follow strict probate procedure requirements.
• Organization: Maintain managing a probate case logs.

A stable probate administration outcome usually follows from clarity, consistency, and readiness for court review, especially when multiple stakeholders and competing interpretations are involved. When documentation supports enforcement and timelines are respected, families are less likely to face preventable escalation.

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.