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About Probate Sale
Whether you are a first-time homebuyer or a seasoned real estate investor, when you are looking to buy a new home, you would expect to buy the property at the lowest price possible.
There are various ways you can buy properties below the market price such as foreclosures or short sales. However, there is one more option that you help you buy property at a lower than market price called a probate sale.
In this post, we will understand what is a probate sale in detail.
What Is A Probate Sale?
First, let’s discuss how real estate probate sales happen. When someone dies without a will, in the legal world it is called a dying intestate.
Any wealth or property left behind by the deceased goes through a legal process called probate. Probate proceedings are governed by a legal system administered by probate courts, which control the process accustomed by each state.
If the deceased owns real estate (also known as real property), it should be sold for the best possible price to increase the value of the property.
How Does A Probate Sale Work?
It is not uncommon for a homeowner to die in debt under their name. You must appoint an executor to properly administer the estate if you have a will.
These obligations may include distributing assets to beneficiaries, paying creditors, or selling the deceased’s home in the case of a probate real estate sale. In the absence of a will, the court will usually decide the sale itself or appoint a manager to decide the sale.
However, a real estate agent could be part of this transaction to show your property and coordinate sales.
Since the probate property is usually sold “as is”. This means that buyers may not be able to negotiate the price of the property if any repairs are required before the purchase.
This type of “take or leave” approach is not suitable for all buyers, but the advantage of buying such real estate is that you are more likely to achieve a sales price below market value.
Remember that making an offer is often the first of many steps in a real estate probate purchase. If the house is being sold by an administrator, the court may approve your offer before proceeding with the sale process.
In a probate real estate sale, the buyers may require to come up with additional cash upfront. According to the NAR, apart from your down payment, you may need at least a 10% additional upfront payment ready to go.
However, that extra money can be added to your down payment at closing. Circumstances may be different when the property is sold by the court instead of an executor of a will.
In this case, it could be set up as an auction where the highest bidder must pay in cash or check upfront.
The Benefits Of Buying Property Through A Probate Sale?
There are several reasons why sophisticated real estate investors and buyers are drawn to buying properties from real estate probate sales.
These types of sales are more complex than conventional sales, so the real estate prices can be low.
Even in a tight housing market, selling real estate through these types of sales can provide investment opportunities not available through traditional real estate channels.
These reasons are just a few of the potential benefits of buying real estate through a probate sale that can help investors save money in the long run.
The Drawbacks Of Buying Property Through A Probate Sale?
Probate sales may come with possible risks. Each state has very specific rules for this type of sale, which can be difficult for inexperienced property buyers.
It is important to work with an experienced estate agent and realtor in this situation as failure to follow the legal rules will result in the cancellation of the sale and the buyer may have to forfeit the deposit.
It is also important to note that there can be delays whenever the courts or the family of the deceased are involved.
Also before going for a real estate probate sale, a thorough home inspection is essential before buying the property because the current deceased who was the previous owner cannot report any problems with the home as part of the sale offer.
Conclusion
It is important to consider the risks and consider your level of knowledge and real estate terminology if you are a potential real estate investor considering purchasing real estate through a probate real estate sale.
In the state where the property is listed, assemble a highly qualified team, including attorneys and real estate agents experienced in buying and selling these types of properties and home inspectors who can identify unknown problems with the property.
It is also important to understand that you need to be aware of the cash and risk of loss to comply with the specifics of state law and pay your down payment.
