A Comprehensive Guide To Probate Property Investments
Regardless of whether you are an active real estate investor or are willing to begin your investment career, you must’ve come across properties and house in probate marketed for sale. These properties are lucrative deals as they are usually priced below the market rates and have minimal risks involved.
However, many are still hesitant to invest in probate real estate properties. Despite being a bankable deal, probate sales are often complex and time-taking compared to traditional property sales, making buyers rethink their investment decisions. All real estate investments are risky and involve a certain degree of uncertainty.
So, if you are willing to dig deeper into the market of high-paying investments, exploring probate properties is a must! The key to being a successful real estate investor is to locate and invest in properties available at a discount. Besides foreclosures and short sales, probate properties offer buyers opportunities to make substantial profits.
In this blog, you’ll be walked through the meaning of probate sale, the process, the pros & cons, and some expert tips on making the best of your probate property investments. Once you’re done reading, you can decide better whether or not to invest in probate properties.
Probate Sale: An Overview
What Is Probate Real Estate?
A probate sale refers to the legal process of selling a property whose owner has passed away without leaving a will behind. Probate involves selling and distributing a deceased person’s assets under a probate court’s scrutiny.
What Is The Purpose Of Probate?
The proceeds from the sale of a probate house are used for paying off creditors, and any surplus amount is then transferred to the executor, who is the closest living aid of the deceased.
When Is Probate Required?
Typically, before anyone dies, they leave a will stating how their possessions are to be distributed between their beneficiaries.
Interested buyers are free to bid; however, the buying and ownership transfer process may take a while.
Probate Sale: What Does The Process Involve?
Probate laws differ from one state to another depending on multiple factors. However, standard procedures are universally followed to ensure that the house in probate is well-marketed and sold at the best price.
If you plan to invest in probate properties, you must understand the process well. Here’s a quick run through the standard probate sale process.
Nomination of the executor
Once a probate property is identified, the court must nominate a property representative to oversee the sale process. Generally, the closest living relative of the deceased is selected and appointed as the executor. The executor is responsible for handling the property sale.
Hiring a real estate agent
After appointing an executor, they can hire a probate real estate agent to help find interested buyers. Real estate agents network in the market, and they can help the executor connect with potential buyers for the property.
Appraisal & Listing
A property appraisal determines its estimated value per the present market rates. It is a thorough evaluation process that helps the executor and real estate agent establish the list price of the probate house. After a list price is fixed, the agent will begin marketing the property across varied platforms and attract buying offers. Along with listing, the probate real estate agent will also run the property lead through its connections to fetch the best possible leads.
Buying offers & Confirmation
As soon as the probate property is listed, the buying offers start coming in. Much like any other property sale, the executor can accept, reject, or counter the offer. However, it is essential to note that even if the executor agrees with a request, the sale is still being determined. Since the probate sale is subject to the court’s approval, the court confirmation may take 30-45 days, during which the executor can accept new and better buying bids.
Closing & Inspections
On the day of court confirmation, all interested buyers must attend the session before the contract signing. Typically, the house’s final sale in probate is made following an auction where the last bidder gets ownership. All investors in the room get a final chance to bid. The property is sold to the first buyer if there are no outbids on the initial amount.
Once the buyer is finalized, a closing contract is signed between the executor and the buyer. Buyers can also request a property inspection; however, the deposit amount may not be refunded.
NOTE – During the auction, the highest bidder is expected to immediately hand over a cashier’s cheque of at least 10%.
What Makes Probate Sales Different?
For instance, in probate sales, the properties are sold in ‘as in’ condition contrary to the regular property sales. This implies that the probate property might have no contingencies, be distressed, and require serious repairs.
The buying process
is another key distinguishing factor between probate sales and other regular property sales. Unlike traditional real estate sales, a probate property sale is a complex and time-consuming process involving multiple parties.
Also, court confirmation plays a significant role in selling probate properties. One cannot claim ownership of the property unless an official contract is signed between both parties in the presence of the judiciary.
Are Probate Property Investments Worth It?
For investors looking for lucrative real estate deals at discounted prices, probate real estate investments can be a good option. Although the probate sale process has its share of challenges, it can be a bankable opportunity.
1. Does a will avoid probate?
2. How long do you have to file probate after death? How long does an executor have to sell a house?
3. Do all heirs have to agree to sell a property? Also, can a beneficiary stop the sale of a property?
4. Can you live in a house during probate?
5. Can a property be transferred without probate?