Are you interested in buying or selling probate property? Well, look no further! Probate property is a unique opportunity in the real estate market, for both buyers and sellers. Probate listings are typically a byproduct of the process of closing an estate for someone that has passed away. Thus, it requires a special set of knowledge to navigate the process. This guide will reveal how to buy probate property, including special tips to put you ahead of potential competitors. Keep reading to learn:
When is probate property sold?
When an individual passes away, the contents of their estate must pass through the probate process. This is a court process that verifies the person’s estate and oversees the distribution of their estate to heirs and beneficiaries. The assets and property that make up the decedent’s estate, and thus pass through probate, are called probate property.
When discussing probate property that is for sale, it is typically referring to real estate. However, other types of probate property can be sold as well, such as jewelry, vehicles, and collectible items.
Probate property is usually sold when there are not enough liquid assets to pay off debts and creditors of the estate. An executor’s key responsibility is to preserve an estate’s assets, so they usually only sell probate property when they have to, or when they are ordered to do so by the probate court.
For example, let’s say a decedent has a total of $50,000 in credit card debt when they pass away. Before the executor can close the estate and distribute assets and property to the decedent’s heirs, they must pay off this debt through the estate. Here’s where they could encounter a problem: there are physical pieces of property worth well over this amount, but the only liquid assets available are worth $30,000. Here, the executor must sell probate property and use the proceeds to pay the remaining $20,000. Once they have done so, they can close the estate and distribute the remaining property and assets to the rightful heirs.
Who can sell probate property?
Not everyone can be authorized to sell probate property. They can be sold by a select group of individuals and institutions, and must be authorized by their respective probate court.
Here are some examples of who can sell probate property:
The court-appointed executor of the estate (the person who was named in the Will to distribute and close the estate)
A court-appointed administrator of the estate (the person appointed by the court to manage and close the estate when there is no Will)
The probate court itself
Heirs who seek to sell property that they inherited through the probate process
How to buy probate property
So, why would you want to buy probate property? It may feel like an odd concept to buy property from a deceased person, but there are advantages that are compelling. Typically, an executor or administrator needs to sell the property in question as soon as possible. Because they can’t close on the estate until they’ve liquidated assets and paid off debts, time is of the essence. As a result, they often list probate property below market value. This creates an opportunity for buyers to purchase property at a good price.
Probate property is especially appealing to fix-and-flip investors. This is because a probate property is sold as-is, meaning no repairs have been made. The property can offer plenty of potential. You can buy it well below market value, invest funds to fix it up, and then sell it at a competitive price for a profit. It can also be a great project for homeowners who don’t mind fixing up and renovating the home that they live in.
The process of buying probate property varies from state to state. This is because probate laws also vary between states, making the sale process look slightly different across borders.
Probate property being sold directly by the court will be placed for sale through an auction process. The court will typically publish listings on their website. You may be required to submit a bid in advance to attend the auction. If you win, you typically have to pay in cash or by check.
If the property is being sold by the executor, then you’ll work directly with the executor to submit your offer and make negotiations. These properties are typically listed publicly with the help of a real estate agent. The purchase process does not differ too much from the traditional home-buying process. A key difference is that the purchase is contingent upon approval from the probate court, which can take several weeks to go through.
Once you identify a probate property that you’d like to buy, there’s typically two ways to make your purchase. The first is to make your offer to the seller, which hopefully gets accepted. If the seller accepts an offer from a different buyer, you can appear in court to submit a higher bid. You may be competing with several eager buyers, so be prepared to get into a bidding war if you really want the property in question. However, be careful, because if your offer is accepted, you must be able to buy the property under the same terms and conditions set for the original party whose offer was first accepted. You cannot negotiate in hopes of obtaining better terms as you would for a traditional real estate transaction.
Tips for finding & buying probate properties
Because probate property can be sold by different individuals and institutions, your strategy for finding and purchasing probate listings will vary. Here are some tips on where to find probate properties for sale:
Visit your local county probate website to see if they publish property listings. If they don’t, call their office and inquire how you can be informed of properties being sold by the court.
Peruse obituaries in local newspapers. Contact the listed person for the obituary and inquire if there was any property left behind for sale.
Contact local real estate agents to find out about probate listings and any potential off market or pocket listings that aren’t currently public.
Check legal newspapers and journals, which often have probate and estate sections that could announce probate auctions and listings.
Visit public and private websites that publicize auction events, including the websites of auction houses.
Update your estate plan today
Buying and selling probate property creates unique opportunities for both parties. As a seller of probate property, you typically need to sell the property in question quickly. By listing the property under market value, you can expect to receive competitive offers and sell the property as-is within the timeline that you’re working with. If you’re lucky, you may even benefit from a bidding war that drives up the initial listing price.
Buying probate property can also be advantageous. If you’re willing to buy real estate in as-is condition, you’re likely to secure a property for under market value. This is a great opportunity for fix-and-flip investors or homebuyers who want to buy and fix up the house that they live in. However, knowing how to buy probate property requires some savvy know-how. This guide went over the similarities and differences between buying probate property and buying traditional real estate, as well as some helpful tips and tricks.
If you do buy property, be sure to update your estate plan so that it includes your new home and its planned beneficiary. This discussion should also have prompted a conversation on how to preserve your assets and property so that they don’t have to be sold off in the first place. After all, the goal of estate planning is to preserve the value of your estate as much as possible so that it can be passed down to future generations. The most critical step you can take is to protect your assets by setting up an estate plan.
Don’t know how to get started? We’ve got you covered! At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning options today!
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