The 90 Rule for Selling Real Estate

I recently had a client, David, whose mother passed away leaving a beautiful beach house in Carlsbad. He was the sole executor, and eager to sell quickly to settle the estate. He had a buyer lined up, offering a fair market price, but at the last minute, his cousin challenged the sale, claiming David hadn’t waited long enough to get the “best” price. David was panicked – he’d already factored the proceeds into estate distributions and didn’t want to delay things further. He was facing the very real possibility of a costly and time-consuming probate dispute. The situation ultimately cost him over $8,000 in legal fees just to defend the decision.

What is the “90% Rule” and Why Does It Matter?

David’s predicament is surprisingly common. Executors often feel pressure to maximize the value of estate assets, but there’s a legal safety net known as the “90% Rule.” It’s a guideline, not a strict law, that can protect you from accusations of mismanagement when selling property during probate. As an estate planning attorney and CPA with over 35 years of experience, I’ve seen this issue arise repeatedly, and understanding it is crucial for any executor facing a real estate sale.

How Does the 90% Rule Work in Practice?

The rule essentially states that if you receive an offer for at least 90% of the appraised fair market value of a property, you’re generally considered to have acted reasonably, even if you don’t solicit further bids. This is particularly important given that, 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. The key is documentation. You need a credible, independent appraisal before accepting any offers. Don’t rely on Zillow or Redfin estimates – those aren’t sufficient for probate purposes. A qualified appraiser will provide a written report detailing how they arrived at the value.

What Happens if You Don’t Follow the 90% Rule?

If you accept an offer significantly below fair market value, or fail to obtain an appraisal, you open yourself up to potential liability. Heirs can petition the court to remove you as executor, forcing you to account for any perceived losses. They can also sue you for breach of fiduciary duty, demanding reimbursement for the difference between the sale price and what they believe the property could have fetched. This can be a protracted and expensive legal battle, as David unfortunately discovered. Furthermore, remember that the probate referee charges a statutory fee of 0.1% of the assets appraised, so getting that appraisal done first is vital.

The CPA Advantage: Stepping Up Basis and Capital Gains

As a CPA as well as an attorney, I also advise clients on the tax implications of estate sales. A critical aspect often overlooked is the “step-up in basis.” When an asset like real estate is inherited, its tax basis is adjusted to the fair market value at the time of the decedent’s death. This means the heir only pays capital gains tax on any appreciation after that date. Proper valuation during probate is essential to maximize this benefit and minimize future tax liabilities. Ignoring the valuation aspects can be a costly mistake down the road.

What if the Appraisal is Lower Than Expected?

Sometimes, the appraisal comes back lower than anticipated. In this situation, you have a few options. You can negotiate with the potential buyer, reduce the price to match the appraisal, or seek a second opinion from another appraiser. It’s important to act in good faith and document your efforts to obtain the best possible price.

How Long Do I Have to Sell the Property?

There’s no set timeframe for selling probate real estate, but delaying the sale unnecessarily can be detrimental. Remember, creditors have a strict window to file claims—typically 4 months after Letters are issued. And a probate case cannot be closed in less than roughly 7 to 9 months due to mandatory notice periods, but most California probates in 2026 take 12 to 18 months due to court congestion. A timely sale can help expedite the probate process and distribute assets to beneficiaries more quickly.

• Get an Appraisal First: A qualified appraisal is your primary defense.
• Document Everything: Keep records of all offers, communications, and appraisal reports.
• Consider the 90% Rule: Aim for at least 90% of the appraised value.
• Consult with Professionals: An attorney and CPA can provide valuable guidance.

What separates an efficient California probate process from a drawn-out conflict over authority and assets?

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.

To initiate the case correctly, you must connect the filing steps through how to file for probate, confirm the location using jurisdiction and venue issues, and ensure no interested parties are missed by strictly following probate notice requirements rules.

California probate is most manageable when authority is documented early, assets are classified correctly, and procedure is followed consistently from petition through closing. When the process is approached with realistic expectations about notice, claims, accounting, and dispute risk, the estate is more likely to move toward closure without avoidable conflict or delay.

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.