What is a Trust Sale?

Trust sales are a hidden gem in the real estate market that can be a game-changer for buyers and sellers. Ready to unlock this secret door? Learn the ins and outs of trust sales, from their benefits to the buying process.

Imagine stumbling upon a house listing that promises a sale so fast and streamlined that it’s almost too good to be true. But what if we told you there’s a secret world of real estate that offers an even quicker way to secure your dream property, often at a fair price? 

Defining a Trust Sale

A trust sale is the selling of real estate inherited from a loved one or placed in a trust. It is a legal arrangement that enables the grantor to transfer ownership to another trustee. 

In California, trust sales are attractive because they bypass the probate court system, which can be time-consuming and expensive. This process allows for a smoother and quicker sale, potentially benefiting sellers (usually the trustee) and interested buyers.

The Benefits of a Trust Sale

The advantages of a trust sale go beyond avoiding the hassles of probate court. Here are some of the benefits you might enjoy through a trust sale.

For the Buyer:

• Streamlined sales process: Trust sales generally involve a more transparent chain of titles and fewer potential complications than probate sales, translating to smoother and faster buying experiences.
• Fairer prices: Because trust sales are faster than their probate counterparts, sellers are typically more flexible with prices, especially if speedy sales are a priority.
• Fewer delays: Probate can be unpredictable, resulting in various legal issues. Trust sales are less susceptible to such roadblocks, increasing the likelihood of closing on time.
• More financing options: Unlike some probate sales, trust sales typically allow buyers to utilize traditional financing methods through lenders like banks and private institutions, making the purchase process more accessible.

For the Seller:

• Faster sales: Bypassing probate significantly reduces the timeline for selling the property, which is crucial for beneficiaries needing quick access to funds or who want to avoid the burden of holding onto the property for an extended period.
• Reduced costs: Since trust sales don’t require legal fees, attorney costs, and administrative expenses, they’re typically cheaper and save on estate money.
• Enhanced privacy: Probate court publishes assets in public records, whereas trust sales don’t, benefitting families wishing to keep their financial matters confidential.
• More control: The trust document often outlines the grantor’s wishes for selling the property, including a minimum price or preferred timeline. The trustee has more flexibility in managing the sale within these parameters.

The Trust Sale Process

Trust sales offer a swifter, more private alternative to probate for selling inherited property. But what exactly happens during a trust sale? Here’s a breakdown of the typical process:

1. The trustee initiates the sale. The individual named in the trust document reviews the trust terms regarding selling the property. They obtain an appraisal to determine the property’s market value.
2. The trustee prepares for the sale. The trustee gathers the necessary documents like titles, property disclosures, and trust terms. During this time, they decide whether to make repairs or stage the property to attract buyers.
3. The trustee markets the sale and finds a buyer. Alongside a real estate agent, the trustee lists the property on the market through real estate listing websites, local online marketplaces, social media, yard signs, and print media. The trustee might host an open house for potential buyers.
4. The trustee negotiates a sale. Potential buyers submit their offers. Trustees work to achieve a purchase agreement based on the trust terms. They open escrow and begin the closing process.
5. The trustee closes the sale. Upon closing, the sale proceeds are transferred from escrow to the trustee. The trustee distributes the funds according to the trust’s instructions, which may involve paying off any outstanding debts on the property, dividing the remaining amount among beneficiaries, or following specific investment or distribution plans outlined in the trust.

Considerations for Buyers in a Trust Sale

The steps involved in initiating a trust sale may vary depending on the complexity of the trust and property itself, and the process may sometimes be complicated. Thus, it’s essential to consider some critical factors as a buyer or seller.

Limited Negotiation Power

Unlike a traditional sale, buyers in a trust sale may have less room to negotiate the price or closing terms. Trustees dictate a minimum price or specific property selling timeline.

Negotiating the terms of a trust sale requires a delicate balance between advocating for your interests and respecting the terms. Always aim for negotiations that benefit both parties, clearly communicating your offer and its reason.

Multiple Beneficiaries

Some properties name multiple beneficiaries with varying or opposite interests. While the trustee acts in the best interest of all beneficiaries combined, it can introduce some complexity to the negotiation process, and it can be challenging to satisfy every term.

Fortunately, you can work with a real estate agent who acts as your mediator, facilitating communications and reaching reasonable agreements between all parties.

Reviewing Terms

Trust sale terms can be tricky to understand because of legal jargon, specific conditions, and general unfamiliarity with the process. You can make the trust sale process more straightforward by seeking clarification from the trustee or their attorney or consulting a real estate lawyer.

If you need it, request additional documentation to shed light on the property’s terms or history. Most importantly, do your research and maintain clear and open communication. 

The Bottom Line

Trust sales offer a compelling alternative to traditional probate for sellers and buyers in California. They provide a faster, more streamlined, and often more private way to navigate real estate transactions involving inherited property. 

While buyers may encounter limitations in negotiation and require more upfront research, the potential benefits of a quicker closing, a fair price, and a more comprehensive range of financing options can be significant.