Probate sale what real estate investors Need to know
Finding and purchasing investment properties at a discount is an important component of being a successful real estate investor. Aside from short sales and foreclosures, there is another option for investors to buy probate real estate. While a probate sale can reward investors with significant gains, it is more complicated than a typical real estate transaction. So, in this blog, we’ll explain what a probate sale is, how does it work and help you decide if it’s a good fit for you.
WHAT IS PROBATE SALE?
When a homeowner dies with considerable debts, a probate sale may occur. If the estate does not have enough cash assets to fulfil creditor claims, the property they possess will be sold to pay off their creditors to the greatest degree possible. Depending on whether the individual left a will, any remaining funds would be allocated to family members or other beneficiaries.
Homes in probate are advertised and sold in the same way that other homes are, with real estate agents listing and showing them to possible buyers. Anyone can make an offer on these homes, although the procedure can be a little more cumbersome.
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HOW DOES PROBATE SALE WORK?
Probate laws and procedures may differ slightly from one state to the next. Regardless of location, however, particular procedures are followed to guarantee that the property is sold at the best possible price. If you’re thinking about buying probate real estate, you should first learn how a probate sale works. The usual probate sale procedure is as follows:
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Appointment of the Executor
When someone dies without leaving a will, their property is handed to the county court. The court then selects an executor to carry out the property sale, who is usually the deceased person’s closest living relative.
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Hiring a real estate agent
The executor of the estate does not conduct the sale alone. He or she hires a real estate agent to support the process. After the executor is appointed, the executor will hire a probate real estate agent to assist in the sale of the property.
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Property appraisal
The executor chooses an appraiser to determine the property’s value. With the assistance of the probate real estate agent, they will be able to establish the list price.
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Listing of real estate
After determining the list price, the probate real estate agent would market the property as if it were any other in order to attract purchasers and secure a good offer. This can be done by placing a listing on the Multiple Listing Service (MLS), putting up “For Sale” signs, or utilizing their professional networks.
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Interested buyers make offers
Interested purchasers can submit bids, which must include at least a 10% down payment. The seller can accept, or reject the offer just like any other sale. The executor may accept the highest price, but the transaction has not yet been finalized. Because the offer is subject to confirmation by the probate court, the executor isn’t obligated to that specific buyer.
The offer must be forward to the probate court, which will decide whether or not to accept the offer during a confirmation hearing. It may take a long time to put this together. During this time, the executor will be compelled to market the property at the new approve price and will continue to entertain new bids in the hopes of obtaining a higher bid for the property.
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Court Information
All interested buyers will be expected to attend the court hearing to confirm the transaction on the schedule date. The house will be auctioned off until only the highest bidder remains. The successful bidder must immediately give over a cashier’s check for their bid, which must equal at least 10% of the overbid price. The property will be sold to the runner-up if this does not happen. However, if no other bidders outbid the first buyer’s offer, the court will accept the first buyer’s offer.
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The signing of a contract
The executor and the buyer will execute a contract, one a buyer has been identified. There will be no contingencies in this deal.
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Property Evaluation
There is a safeguard in place for the buyers. The buyer can request a house inspection but cannot back out of the deal if the property has flaws. If they withdraw their offer, they will forfeit their deposit. The buyer must decide what is best.
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Closing the sale
The buyer will close on the residence a few days after signing the deal. Approximately it takes 15 days.
PROS AND CONS OF PROBATE SALE
| PROS | CONS |
| Probate properties can sometimes sell for reduced prices. | There is usually a long period of time between closure and opening. The probate sale process usually takes longer than normal real estate transitions.
It involves a lot of paperwork. |
| They may be a smart choice for investors trying to save money. | A specialized real estate agent may be required for the process. |
| Less competition | Additional legal fees, appraisal fees, and other costs may be incurred. |
| It’s possible that the property has flaws that aren’t readily apparent.
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| In most cases, no contingencies are allowed throughout the bidding process. |
PROBATE SALES TAKE A LONG TIME
It takes a long time to complete. It entails a significant amount of paper effort. All of the steps in this procedure are quite important. It can take anywhere from 9 months to several years to complete a probate sale. The length of the process will be determine by a variety of factors, including the executor’s location, the number of beneficiaries, and whether or not the beneficiaries get along. If the beneficiaries cause any issues, the process may be slow down for a while.
HOW TO FIND PROBATE LISTING
Probate real estate investing can be a rewarding strategy if you take the correct steps. To succeed, you must not only understand how a probate sale works, but also how to locate probate real estate. Here’s a rundown on how to spot probate real estate deals:
- If your county provides probate records available online, you can search for listings in your area from the comfort of your own home.
- Working with a real estate agent that has handled probate homes in your area is a good idea.
- Request a list of recently filed probate cases from the clerk of your local probate court.
- Attend local networking events to develop ties with probate attorneys.
- Purchase probate real estate leads from companies who sell them.
- Look up information about recently dead people and their beneficiaries in obituaries.
For investors seeking a good deal, probate real estate can be a smart alternative. However, compared to ordinary real estate purchases, a probate sale includes a considerable waiting period and various additional dangers. It’s critical that you think about these risks carefully, especially if you’re a new real estate investor.
If you’re serious about buying a house in probate, make sure you consult with a seasoned probate attorney and go through the whole procedure. They can guide you through the maze of red tape and save you hundreds of dollars on your purchase.
