Homes in probate are marketed and sold just like traditional properties, typically with real estate agents listing them and showing them to potential buyers. Anyone is free to make an offer on these homes, but the process can be a bit more complicated.
How Probate Sales Work
The probate process can vary from state to state, but the court will typically appoint an estate representative, called an “executor” when there is a will or an “administrator” when there’s no will. This individual is charged with settling the estate and guiding it through probate. Part of this process involves identifying legitimate creditors of the deceased. The executor will then be charged with selling estate property if it must be liquidated to pay creditors. The court will typically order an appraisal to set a listing price. The executor must petition the court for permission to sell the home when at least one buyer has put in an offer. The deceased’s heirs and the estate’s beneficiaries will be notified, and the sale can move forward with court permission if no one files an objection. All interested buyers must typically appear in court to submit their bids if more than one offer is received. The highest bid wins, and the winner must hand over a cashier’s check for at least 10% of the offer price to the estate’s executor or administrator.
Reasons to Buy a Home Through Probate
The major advantage of buying a home in probate is that they typically sell for less than other homes in the area. A probate sale might offer the best deal if your goal is to scoop up a home at a significant discount, either for yourself or as an investment property.
Reasons to Not Buy a Home Through Probate
These properties also have a lot of drawbacks. It typically takes a long time to assume ownership. It could be more than a year before you’re able to close on the home, if your offer is even accepted, due to legal waiting periods, disputes among the deceased’s family members, unsettled debts and liens, and other factors. There’s no way to request repairs or seller credits to make repairs yourself, because there’s no real “seller” in place. The home might also have defects that aren’t disclosed, or even known, at the outset. These issues could potentially put you out of compliance with your city’s building codes, deed restrictions, or your homeowner’s association if they’re not fixed. Your lender won’t agree to proceed with your mortgage if a probate home doesn’t appraise for the full value of your offer. You’ll have to make up the difference between the appraised value and your offer, out of pocket, in order to move forward with your purchase. You’ll also be on the hook for going through with the purchase if your financing falls through and you’re unable to get approved for another mortgage. At the very least, you’ll most likely lose your earnest money if that happens. The IRS automatically places a lien against a decedent’s assets until it can be determined whether the estate will owe estate taxes. It can’t be sold until it’s established that the estate doesn’t owe this federal tax and the lien is released, which can delay the closing process considerably. Finally, buying a house in probate can require using the services of an attorney, as well as a real estate agent who specializes in probate sales. These sales require unique contracts and documents that aren’t common in other types of real estate transactions, so this specialized knowledge can be helpful.
The Bottom Line
Probate sales can be a good option if you’re looking for a bargain, but they also come with a number of added risks and fees when compared to traditional home sales. Enlist an experienced probate attorney or real estate agent to guide you if you’re considering buying a house that’s in the probate process. You should also be prepared for a lengthy waiting period before you can close on the home.
