Updated May 10th, 2019
Many potential homebuyers and investors are on the prowl for killer deals. You know — the ones where you make money when you purchase the house? Those mouthwatering deals usually come at a cost, though, which is why when you see one labeled “Short Sale” or “Probate Sale” your real estate agent will tell you to run in the opposite direction.
Want to hear more about these great deals and what it’s going to cost you to get them? Read on, my friend.
Why is a home sold through probate court?
Probate sales happen when an individual passes away with no will (also known as intestate), has outstanding debts, or when the will left by the individual indicates explicitly, their estate is to be distributed with cash. In these cases, the executor of the estate, as assigned by the probate court, oversees the sale of the property.
What is the process of a probate sale?
The probate sale process is usually more involved than your typical home sale. That’s because a probate court oversees probate sales and there are specific protocols that need to be followed for a deal to go through.
The first step in a probate sale is to obtain permission from the court to list the house as probate. While the executor of the estate can technically list the home before getting the court’s approval, many don’t recommend that they do so until the probate process has officially begun.
Hiring an Agent
Once approval has been given through the court, the executor of the estate must find a real estate agent to represent the property and facilitate the sale. Because probate sales are so different from other home sales, it is imperative that the executor hires an agent that knows the market very well, and has quite a lot of experience in probate sales. Fill out the zip code form below to find a Clever Real Estate agent in your area!
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Marketing the Property in Probate
Although there are exceptions to every rule, you advertise for most probate sales the same you do for any other property for sale. The listing agent shows the home and completes a CMA which they use along with the appraisal to set the price. The agent lists the house on the MLS and puts up signs are in the yard the same as any other listing.
Although you market the probate property the same way any other property might be, the listing agent is required to disclose that it is a probate sale within the listing description. This alerts the other agents and potential buyers to the conditions of buying the property.
Making an Offer
When someone makes an offer on a probate listing, they must also put down a 10% deposit. The executor of the estate then has the option of approving or denying the offer. Once the executor of the estate accepts the offer, the probate judge has the final say. The judge can still decline the offer if they have reason to believe it is not high enough.
Once the buyer submits an offer and the executor accepts it, they will have their attorney set a court date to petition the court for approval. There are usually between 30 and 45 days from the time the offer is submitted until the court date. During that time the house will continue to be marketed, although the house price will be raised to reflect the accepted offer. Others may still submit an offer on the property during this time.
Getting Court Confirmation
Once the court date arrives, all parties who got their offers accepted must show up to court. The court proceeds in auction format, where buyers may continue outbid each other until one buyer outbids them all.
The buyer then presents the court with the winning bid amount in the form of a cashier’s check.
It’s wise to bring a check with 10 percent of your maximum bid amount if you hope to buy the property, otherwise, the property will default to the runner-up.
After you make a deposit, you have a right to ask for an inspection. An inspection is worth every penny in a probate sale. You’ll want to know as much about the house that you can. If the house requires more repairs than the home is worth, you may wish to back out of the sale. At this point, if you decide to back out, you will lose your deposit.
Probate sales are more involved than regular home sales, but if you work them right, you could end up with a steal of a deal. There are a couple of things you want to remember, though, if you expect to come out on top.
Get An Agent Well-Versed in Probate Sales
A knowledgeable agent is your key to a smooth probate sale. Without an agent that has experience with probate sales, you risk a longer process, not having any buyers, and court fines.
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When working with probate sales the wait time is similar to short sales—so it’s best to go in there expecting it. Be patient and cool-headed, and the process will run much better for you.
Sunk costs for buyers
Because the original owner of the house is no longer around to disclose the bad roof, grease fire of 1990, or the rat infestation, there may be some unexpected costs for the buyer. Prepare for this in advance, and even have some money set aside for surprise repairs. You should also be aware that you could lose all of your money—that’s just part of the risk. This is why an inspection is so crucial to the process, so you can back out before purchasing the property. Buying a probate listing is a lot like the lottery in that sense: You can win or lose big, so prepare for both.
Need an expert agent to handle your probate listing? Clever has you covered— and for a nice low rate! Call us today at 1-833-2-CLEVER or fill out our online form to get started.