Probate sale is one of the most moving terms in the real estate market. As a real estate investor or someone willing to enter this industry, it is essential to have a good understanding of the latest trends and concepts of property sales and purchases. A pro and successful real estate investor is someone who can find the best-discounted properties and make valuable investments. Similar to foreclosures, distressed property, and short sales, Probate sales are one viable way that can help investors in making profitable property purchases. However, since probate sale involves a series of legal formalities, there’s more to it than just buying regular properties If you are willing to invest in probate sales, it is important to have a thorough understanding of the process and then proceed.
Probate Sale: What is it?
In simple words, a probate sale refers to the sale of a property after the owner dies without a will or an heir. It is generally administered by a probate court wherein an executor is appointed to manage the entire sale process and get it approved by the court once the property has a legitimate buyer. The purpose of selling the property is to liquidate the assets and use them to clear the outstanding debts, if any, and distribute the rest among the beneficiaries.
Since these properties are up for immediate sale, investors can make substantial profits by buying them at a reasonable market price. However, investing in such properties may be different from other properties as the entire sale process is overseen by the probate court and follows a set of standard probate laws. A probate sale can be a lengthy process which is a key reason why many real estate investors hesitate from investing in probate properties. Once you have agreed to a purchasing amount, it goes to the court for approval and might take a longer time.
Probate Sales: The process
Since probate sales are administered by a probate court, the laws and formalities may vary from one state to another. However, the structure remains the same. A standard probate sale process involves the following steps:
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Appointment of an executor
Once a probate property is identified, the court appoints an executor who is typically the closest relative of the deceased homeowner. This elected person is in charge of the house throughout the selling process.
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Property evaluation and listing
Once the executor is appointed, he/she opts for an appraisal to determine the property’s current market value and thereafter get it listed like any other foreclosed or distressed property in the market for sale. For this, the executors generally hire a real estate agent who can get the property evaluation and listing done easily. It is beneficial to hire a real estate agent as their networks are strong and they can attract good buyers and investors.
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Buying bids
Once the property is listed and made available for sale, the bidding starts with multiple interested buyers submitting their buying offers. It is important to note that if you make a buying bid, you must have 10% of the agreed deal amount as the down payment. The rest is similar to any other sale of real estate property i.e. the executor can sell, reject, or negotiate on the offer made by you.
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Court Approval and Contract Signing
Once the list of buying bids is prepared, the court gives a hearing date on which all the buyers are required to be present and an auctioning is done to finalize the confirmed buyer. As the auction wraps up, the buyer is asked to hand over a cashier’s check for their bid. Later, a legal contract is signed between both parties wherein the ownership of the property is transferred.
Probate Sale & Regular Sale: How do they differ?
A probate sale is somewhat similar to a regular sale of real estate properties barring a few special criteria such as legal involvement or the price of the property. A probate sale is overseen by the court right from the beginning since the property is identified and the final ownership contract is reviewed and approved by the court. Unlike regular property sales, the buyer cannot claim money invested in the repairs or any work done to the property since probate properties are sold in ‘as-in’ conditions. This is a key reason behind properties being minimally priced in case of a probate sale. Since the heir or the beneficiary after the real owner doesn’t intend to keep the ownership of the property, they easily agree to a justifiable amount in exchange for ownership.
Final Note
There are multiple benefits of investing in probate properties such as reduced price and lesser competition. Owing to the long and time-consuming process of a probate sale, most people refrain from buying or investing money in such properties. Also, the court proceedings can sometimes be too long and the buyer has to adhere to the legal formalities before taking ownership. However, being mindful and well-informed can help you be a successful real estate investor and make substantial profits from foreclosures, distressed property, and probate sales.
