A probate sale is one in which a recently deceased person’s home is sold through a process handled in the local probate court. The probate court handles property that is left when someone dies. The estate’s executor will typically find a real estate agent to market the property, as with the usual home sale. However, the sale is overseen by the probate court, and certain rules must be followed.
These sales often occur because the deceased died without a will or intestate. A probate sale might also occur because the deceased wrote in their will that the property should be sold. Or, the estate may have debts that need the cash from the sale of the house to pay them off. In all of these cases, the house is sold in order to convert the asset to cash, which can then be distributed to those who are owed debts or to beneficiaries of the deceased.
Who Assists in a Probate Sale?
Multiple parties will be involved in a probate sale, in addition to any parties within the probate court itself. Typical parties involved in a probate sale include:
- Executors of the estate: These are persons appointed to oversee the estate. They see that debts are paid, and assets are distributed to beneficiaries. If there is a will, they observe the terms of the will. If there is no will, other rules apply;
- Real estate agents: Typically, the executor will seek a real estate agent to list the property in question. While the property will be marketed in the usual way, other rules will apply to the actual sale. These will be discussed further below;
- Appraisers: These are often hired by banks to value a home. This allows the home to be sold for the best possible value.
Are there any Risks or Legal Concerns with Probate Sales?
Probate sale homes are sometimes listed at relatively low prices. Unfortunately, the reason for this is often because the home has not been fixed up to prepare it for sale in the way a seller would normally fix up a home. Since the home is being sold to settle a deceased person’s estate, they will not have prepared the house in anticipation of a sale. Executors will not usually do anything to make the house more marketable and will price the house lower to make it more attractive to buyers. This is due at least partly to the minimal cash available in such a situation (prior to the home sale).
Also, in the absence of the home’s previous owner, there may be no one to disclose any known defects of the house. This is standard in home sales and allows buyers to know what they are taking on. Potential buyers of probate sale homes will want to get a home inspection early to determine any costly issues, even though they may not end up purchasing the home.
Buyers of these homes should be aware of just how different a home sale is when handled through probate court. They will be required to put down a 10% deposit upfront when they offer on the house. Additionally, buyers should know that courts move slowly. It will take more time to buy a home through probate court than buying a home in the regular way.
How is the Sale Handled in the Probate Court Process?
The buyer will make an offer on the probate sale home to the seller, who is most likely the estate executor. As already mentioned, the buyer must pay a 10% deposit, which is paid in addition to the usual down payment placed on a home. The executor may counter the offer and eventually accept, but that does not mean the deal is done. The executor must then petition the probate court to approve the sale.
In some states, even if a buyer has made an offer, the court will still allow other persons interested in the property to show up to the sale confirmation and bid. The house will then be auctioned off. If the original bidder/buyer does not win the auction, they should be entitled to the return of their 10% deposit. However, if their sale goes through, the deposit may not be refundable.
Should You Buy a Probate Sale?
Probate sales are not a good option for everyone. To determine whether you should consider this option, you must decide what is more important – getting a home quickly or getting a good deal. Many probate homes sell for below-market value, but the process can take much longer than a traditional property purchase.
Additionally, you must determine the cost of repairs and renovations when deciding whether to pursue a property in probate. If you can do the work yourself or have the money to hire a professional, probate sales may be a good place to find houses. People who flip houses professionally often use probate sales to find cheaper properties, fix them up, and resell them for a profit.
However, if you don’t have the time and money to repair or renovate a property, probate may not be the best option. A house in probate often includes lots of unknowns. Buyers may know very little about a house when purchasing it through a probate sale. Even with an inspection, you may end up with unseen issues that can cost hundreds or thousands of dollars. Decide whether the benefits outweigh the disadvantages when buying a property through a probate sale.
Why are Homes Sold Through a Probate Court?
Homes are sold through probate when they are owned by someone who has died. A probate court will step in if the person didn’t leave a will to dictate who should have the property or who it was meant to be sold to.
Personal representatives or executors may also sell a house to pay for outstanding debts. If the decedent didn’t have enough cash assets to pay off creditors and taxes, then other assets would be sold to cover the expenses. Most debts don’t go away when a person dies. Instead, the debts follow the estate.
A home must be sold through probate court because the court is in control of the estate until the sale is closed. The court must approve of the sale before the transaction is complete and the buyer takes possession of the property. The court is responsible for making sure the terms of the will are followed. The court also ensures that the estate is handled according to the laws of the state.
Do I Need a Probate Sale Lawyer?
The ins and outs of settling an estate that includes a home in probate court can be complex. There are legal considerations, as well as tax and financial considerations. An experienced estate lawyer can help make the process go more smoothly and help ensure that the probate sale home achieves its maximum value, thereby helping the estate to reach its maximum value.
You may wish to consult with an experienced estate lawyer to provide valuable legal advice if you have any questions or disputes regarding your state’s laws.
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