You may have heard that some of the best deals in real estate happen when you buy a probate property. While the truthfulness of that statement remains to be seen, probate properties aren’t something you can just search for the way you would a regular listing.
How do you find and buy probate properties? We’ll take you from finding a probate property to finalizing the purchase in this Clever guide.
Finding a Probate Property
Probate properties are properties of deceased individuals being sold by a court-appointed representative to resolve outstanding debts and to disperse the money among the heirs. These properties sell at discount rates, but the process of buying the homes could take as short as six months, but as long as several years before it changes hands.
Contact Local Agents
The key to finding a property that is selling via probate is to find a real estate agent who knows about probate listings. Make sure they handle probate properties before you work with them. Let them know your budget and what you’re looking for, and if they know what they’re doing, they’ll be able to help you.
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Contact Local Probate Court
Rather than trying to locate a real estate agent with experience in probate properties, you could go to your local probate court to find them. When you get there, ask to speak with the court clerk or the individual assigned to the probate court. To make sure you get the right list, ask for the last six months’ worth of probate cases.
After receiving the probate cases, identify the ones that remain open by checking the court’s online docket or by asking someone who works at the court office. Once you recognize the open estates, make sure you ask for the inventory for each property. The inventory is drawn up by the executor of the property and then gets filed with the court.
If you find any properties that you would like to view, contact the executor or the attorney for the estate by using the contact information on the docket sheet. Make sure you talk to either the executor or the attorney directly to understand more about the property. You want to know if there have been any offers made, how the executor is handling the sale, and if the court has approved an asking price. If one has been approved and the executor is motivated to sell, they may negotiate with you directly.
Review Local Newspapers
A great way to find probate listings is to search your local newspapers. Check out obituaries, notices to creditors, and notices of petition to administer an estate to be probated. If you locate any properties that look promising, go to your local probate court and request an inventory. From there, be sure to follow-up with the executor or attorney of the estate to hear more details and make an offer, if applicable.
Find Local Home Auctions
Often, probate sales that involve homes with a lot of property, such as farms, get sold through public auctions. You can usually find adverts for these auctions typically show up in the newspaper.
Although these properties start out at below fair market value, many bidders show up at auctions and raise the price to fair market value or even above. For this reason, it’s not recommended to go to an auction if you plan on buying a house for a steal.
Buying a Probate Property
Once you have located the probate property you like, it’s time to go through the buying process, which is a bit more complicated than you’d think.
Probate sales are a lot like short sales because of the timing. It can take quite a while when the court is involved with all the approvals and court dates. The best thing you can do is prepare for delays.
Make an Offer
Making an offer on a probate listing is not the same as a regular real estate listing. You can make an offer at any time, but a 10% deposit is due when the offer is accepted. That’s not to say that the executor will always receive your offer, however. They could counteroffer, and you would need to cough up the new 10% if you match it.
Request an Inspection
Once your offer is accepted, you’ll want to request an inspection of the property. Some properties sell as-is, which means that you agree to pay the amount despite the state of the house. Even if it is selling as-is, you’ll want to walk through the property before close. If it’s in pretty bad shape and will cost more than it’s worth to fix-up, you may want to cut your losses (the 10% deposit) and back out of the sale.
Finalizing the Purchase
If you’ve made it this far, you’re in the home stretch!
Even after your offer is accepted, there is typically a 30 to 45 day wait time between the time the offer is accepted and the court date for the judge to approve the offer. During that time, the executor of the estate can still take offers from interested parties. If you don’t end up with the winning offer, you can usually get your deposit back. Keep in mind, however, that if you back out of the sale after you offer an amount, you don’t get your deposit back.
To purchase the property, you, along with any other interested buyers, must attend the court hearing. During the court proceedings, the property will be auctioned off to the highest bidder. If there are no other bidders, the court may confirm your offer.
The Bidding Process
If there are others showing interest in purchasing the property, the price of the property will be raised in increments by the court until a winner is declared. This is called overbidding. Everyone has the right to continue to bid those that outbid them until the house sells.
The only way to overbid your competitors is to present the court is to present the court with a cashier’s check made out to the estate with an amount that is 10% of the overbid price. That means if you want really want the property, decide on your top amount and come prepared with a cashier’s check for 10 percent of that amount. If the overbidder neglects to bring a cashier’s check with the right amount of money, the sale will not be confirmed.
When the bidder becomes the purchaser, they must prove that they have financing to purchase the property and then sign the paperwork with the estate. From that point, the funds’ transfer to the estate and the buyer is named the new owner of the estate.
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