When someone passes away, they leave behind an estate consisting of their accumulated assets like cash, investments, and real estate. The legal process by which these assets are distributed or sold among heirs is known as probate. If you’re in the market to purchase a home, you might encounter probate sales, which can offer unique opportunities to acquire a property. 

However, understanding what probate in real estate is can help you find fantastic investment opportunities generating significant returns. 

In this blog, we’ll explore everything you need to know about probate in real estate – what it is, how it works, and how you can invest in probate properties. 

What is a probate sale?  

Typically, the person that dies leaves a will specifying how their possessions should be handled. However, there are instances where the terms of the will are unclear, or the individual passes away without a will, leaving their family to determine the distribution of assets. Those are cases where the courts may become involved. In real estate, a probate sale refers to the sale of a home under the oversight of the probate court. 

Is it worth an opportunity? 

Probate sales are indeed a unique opportunity in the real estate market, though you still need to be as informed as possible to make wise decisions. Here’s what you need to know: 

Advantages 

• Lower Prices: the properties in probate sales are often priced below market value. 
• Exclusive Opportunities: people commonly can’t access these sales through traditional real estate channels.  
• Less Competition: Less buyers means less competition and more chances to get your deal. 

Disadvantages 

• Slower Process: Probate purchases commonly take longer to complete than other types of sales. 
• Property Condition: Probate homes may require repairs or are not in the best condition 
• Complex Transactions: Additional regulations can make the buying process more difficult. 

How to get started 

The first step is locating properties available through probate sales. Tip: be patient, consistent and set yourself with enough time for your search: probate properties can be challenging as they are often kept out conventional listing channels. 

Where can you look? 

• REIQ Portal: our data portal will save you time as you enjoy the cleanest and most accurate data to close deals more effectively, faster and easier. Customize your search choosing the type of list, filter your favorites and get ahead of the game with properties no one knows about yet! 
• Check local sources such as obituaries and public records for recently deceased people who owned property in your desired areas. 
• Look through community publications for notices regarding creditors or estate administration petitions that may indicate upcoming property sales. 

Steps to follow 

We learnt that probate listings may not always be easily accessible, so make sure you cover all the resources to find the property that suits your interests and your budget.  

Once you find it, make sure to use discretion and empathy when communicating with family members in these situations: reaching out to potential sellers is always a sensitive matter; especially with family members that lost a loved one recently, so it is crucial to approach them with respect and tact.  

Before making another step, conduct thorough inspections: probate sales are typically sold as-is, a comprehensive home inspection is vital. 

When the deal is in progress, be prepared for time delays as probate proceedings can stretch over several months, so patience is crucial. 

Prepare for a potentially lengthy probate process, which may involve collaborating with the estate executor, legal professionals, or the court to negotiate offers. 

Note that probate real estate is usually sold in its current condition. Given potential challenges associated with the previous owner’s circumstances, conducting a thorough home inspection is crucial to anticipate unforeseen expenses. 

Understanding the intricacies of probate sales and taking necessary precautions enables informed decision-making in real estate ventures. 

Determining Property Value 

Before committing to an offer, it’s essential to assess the property’s value. 

Run your comps: evaluating recent sales data helps in determining a fair offer for the property. Test our Evaluation CMA tool to select the properties you want to compare and generate reports tailored to your needs, allowing you to quickly make informed decisions when closing a deal. 

What else do I need to know? 

Sometimes, the executor of an estate may need to sell property as part of the probate process. This could involve liquidating the home to settle debts or fairly distributing assets among heirs, especially if there’s no will left by the deceased. The executor or administrator has the authority to sell the property, either through a public auction or private sale, as permitted by state law.  

Investing in probate real estate can be attractive, particularly if you’re willing to wait several months for closure. Depending on the effectiveness of its marketing, the property might sell below its actual value.  

If you’re new to buying probate property, it’s important to know that procuring probate properties can differ significantly from acquiring seller-owned ones. For instance, you might need to provide a larger earnest money deposit, and your purchase offer may require approval from the probate court. Additionally, other parties could have the opportunity to outbid you, even after the estate executor or administrator accepts your private offer. State laws and practices vary in this regard. 

And if I’m the one selling probate properties? 

To sell a probate property, you may need approval from the court. The same happens when buying, once authorized to proceed, selling a probate property typically involves additional steps compared to a standard real estate sale. For instance, you might have to:  

1. Start the probate process by filing the deceased individual’s will and a probate petition with the appropriate local probate court where the deceased resided. 

2. The court examines the petition, and if everything meets the requirements, it formally appoints the executor, or administrator in the absence of a will. As the appointed executor or administrator, you assume responsibility for managing the estate, including any real estate assets, throughout the probate process. 

3. Additionally, you must inform all heirs and beneficiaries named in the will about the initiation of probate proceedings. Provide them with the date of the probate hearing, allowing them the opportunity to raise objections, if necessary. 

4. Conduct a comprehensive inventory of the estate’s assets, including real estate holdings. This often necessitates obtaining property appraisals to ascertain the value of real estate assets as of the date of death. Additionally, gather essential documents, including: 

• Estate planning documents: will, burial and funeral arrangements, living will, power of attorney, and advance medical directive 
• Assets: stocks, bonds, other properties, vehicles, deeds, life insurance policies, bank statements, etc. 
• Outstanding debts 

Note that the specific inventory requirements and documents vary by state. Refer to your state laws to ensure you gather all necessary documentation and report it accurately. 

5.  Notify known creditors of the deceased and settle any valid claims. This may involve selling real estate assets to generate funds. Once legitimate creditors (such as credit card companies) are identified, their claims will be settled using funds from the estate. Additionally, estate funds will be utilized to settle other debts, such as personal loans. 

6. Manage the filing of income tax returns for the deceased, including payment of any inheritance taxes owed. 

7. Upon settlement of all debts and creditors, petition the court to formally transfer all assets, including real estate, to the designated beneficiaries as stipulated in the will. In the absence of a will, assets will be distributed according to state intestacy laws. 

8. Engage an independent appraiser to ascertain the property’s market value (a task typically undertaken by the buyer). 

9. Ensure the property sells for no less than a certain percentage of the appraised value to gain probate court approval for the sale. 

10. Advertise the sale in a local newspaper for a specified number of consecutive weeks. 

Did you know?  

Through our Deal of the Day you can advertise your property and be contacted by motivated investors ready to negotiate a deal with you! Submit your deal here 

Once you find your buyer, if the court permits you to select your preferred one, the sale process may be relatively straightforward. However, if the court mandates auctioning the property to the highest bidder, it will involve more steps and necessitate court approval. 

Navigating probate can be a lengthy process, regardless of whether you intend to sell the property. The intricacies of the process, coupled with the specificity of the laws involved, can be overwhelming, especially considering their variation from one state to another. Your most beneficial course of action is to enlist the support of seasoned professionals who can provide expert guidance throughout the entire probate procedure. 

Are you ready to take the next step in the home buying journey? Sign in to our portal and start deal finding! 

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice