Probate Sale: An Investor’s Guide!
Although people usually leave their assets, cash, and investments for the ones they care about when they pass, some die without making a will or clearing off debts that are more than their cash savings. In such cases, their properties are passed on to a probate court. Now, whether you are an active investor in the real estate industry or just aspiring to make some real estate investments, you must have come across a probate sale, for sure. So, if you are interested to invest in probate, you are on the ideal page!
Here in this blog, you’ll get to learn every minute detail about probate – what is it, how it works, its benefits, and finally, whether is it right for you.
What is Probate?
While homeowners usually hire estate planners to organize their assets, some die without leaving a will behind or clearing off unpaid debts. In these cases, the descendant’s property needs to pass through a probate court. The court appoints an estate representative to oversee the sale of a probate property with the primary aim of selling it at the best possible price.
How does Probate Work?
The probate process works just like the foreclosure or estate planning procedure, varying by state. Although the ultimate goal of a probate or distress property sale is to get the best possible price, understanding the process in-depth can help you understand in and out of the probate process.
Below are the steps involved in a probate process.
● Appointing an Estate Representative: Once a property passes on to a probate court, the court appoints an estate representative to handle the sale process from start to finish. The court appoints an estate executor if the deceased homeowner leaves behind a will or an administrator if there’s no will present. The executor or administrator is then given the responsibility to get the decedent’s affairs in order and handle the sale proceedings of the property.
● Partnering with a Real Estate Agency: The estate representative does not oversee the entire probate process alone. He/she partners with a real estate agent or agency to support the process. Hiring a Certified Probate Real Estate Specialist (CPRES) as a real estate agent for the property ensures that everything is proceeding according to the right procedure.
● Determining the Property’s Value: Whether it’s a conventional or probate sale, property appraisals play a key role in the sale proceedings. That’s mainly because appraisals determine the property’s value.
● Marketing the Property: Just like a traditional home sale, probate property is marketed by the hired real estate agent or agency through MLS listings, public signs, etc. However, the real estate agent should update the probate status on the listing from time to time.
● Receiving Offers: Once the property is listed, interested buyers start making offers on the property. However, a potential buyer who bids on the property for the highest price wins. He or she should then hand over a cashier’s check with at least 10% of the offer price. The proposal is sent to the probate judge and the judge then decides whether to allow the sale to move forward.
● Sign the Contract: As soon as the court approves the cashier’s check, the buyer and the estate executor or administrator sign a contract.
● Property Inspection: The buyer may choose to inspect the property after signing the contract. If the inspection reports some flaws or issues in the property, the buyer may retract the purchase without any refund for the deposit.
● Closing: On receiving a positive property inspection report, the buyer can settle the sale closings. Right after 15 days of signing the contract, the property is officially sold.
What are the advantages of buying a probate property?
The best advantage of buying a probate property is its price. A probate property sale proceeds with an offer value much lower than the market price. This allows real estate investors to buy properties cheaply and then resell them for an alluring profit. Since a probate or distress property sale has less competition when compared to a traditional property sale, it allows investors to avoid a longer timeline and court involvement.
Is Investing in Probate Sales Ideal For You?
Although you can make your investment in a probate property a profitable venture, however, you need to take a few careful considerations that are as follows:
● Hire a real estate agent or agency who has years of experience in the probate process.
● Work with a reliable home inspector to avoid expensive fixes.
● Weigh out your investment options carefully before making any commitment.
● Speak to someone who has already invested in a probate property to get the right insights.
A probate sale undoubtedly offers a lucrative property deal, but it also involves plenty of complications and risks. Hence, you should essentially oversee the associated risks before making the final purchase. In addition, you should also learn your state laws associated with probate sales and identify the undisclosed problems with the probate property you have planned to invest in.