Whether you are an active or amateur investor in the real estate market, you must have come across probate sales for sure. But, are you wondering what is a probate sale, how it works, or whether should you invest in it? If yes, you are in the right place as here in this blog, we will cover answers to all these probate-related questions. So, read till the end to decide if you should proceed to buy a probate property or not.
What Are Probate Sales?
Probate is a legal process of handling the cash, assets, and investments of a deceased person. But what about those people who die either without leaving a will or clearing off debts that are more than their cash savings? In such cases, the court gets involved. It appoints an estate representativ to settle the estate property left behind by the deceased and guide it throughout the probate process.
While an estate executor is appointed when a deceased homeowner leaves behind a will, an administrator is appointed when there’s no will. The estate representative appointed to handle the probate process is in charge of identifying legitimate heirs, beneficiaries, and creditors of the deceased.
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Once the property is sold, the executor or administrator is responsible for distributing the sale proceeds to the legal heirs after paying off unpaid taxes and debts.
How Does The Probate Process Work?
The first and most important step of selling a probate property is to list it, market it and show it to potential buyers. A probate or distress property sale is listed just like a traditional property. However, before that the court orders to get the property appraised for setting the right listing price. At this stage, estate attorneys or executors usually hire a licensed real estate agent or agency. That’s mainly because licensed and experienced real estate agents know in and out of probate sales and thus, they can make the sale proceedings easy and smooth.
Once a potential buyer shows interest in buying the property and makes an offer, the estate executor or administrator should petition the court for permission to sell the house. Then the legal heirs and beneficiaries are notified about the offer. If nobody files an objection to the offer, the court may permit the sale proceedings to move forward.
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In the next step, all interested buyers are asked to appear in court and submit their bids. The one who bids the highest is the winner. The winner is then required to hand over a cashier’s check with at least 10% of the offer price to the estate executor or administrator. Once the buyer makes a downpayment, the court approves the probate sale. It might then take almost 30 days to settle the proceedings and close the deal. The buyer may withdraw the offer at any time during the probate process, but won’t get a refund of the downpayment amount.
Should You Invest in a Probate Property?
Probate sales usually involve risks and complications as they are quite different from traditional real estate transactions. Thus, it’s essential to make an informed decision when it comes to purchasing a probate property.
If you are interested to buy a probate property, you should first determine whether you want to acquire a property quickly or crack a lucrative deal. Although a probate or distress property sale sets an offer value much below the market price, the process may take longer than a traditional estate sale.
The next important thing to consider while deciding to purchase a probate property is the cost of repairs and innovations. If you can do the renovation on your own or have adequate money to hire professionals, purchasing a probate property may be a good option for you. However, if you have limited time and money to renovate the property, it may not be the ideal choice for you to invest in probate property.
Now that you know what a probate sale is, how it works, and whether should you invest in it, let’s delve into the merits of purchasing a probate property.
Pros Of Purchasing a Probate Property
- Probate properties are usually priced lower than the market value.
- Probate sales give excellent opportunities to make substantial profits.
- Only a few investors show interest in buying a probate estate, thus the competition to buy the property is less.
Bottom Line
Although a probate sale offers a lucrative property deal, still you should always consider overseeing the complications and risks associated with it before making any commitment. It’s also important to understand the state laws and identify the undisclosed problems with the probate property you choose to invest in. The best way to deal with a probate property is by hiring a licensed, reputed, and experienced real estate agency. Given the risks and complications of probate real estate investment, hiring a licensed agent is a smart decision!