What Is a Probate Sale?
A probate sale is a type of sale that occurs when the property owner dies without a will or having identified an heir before their death. In these circumstances, the state will take over the possession of the house and employ the probate court to oversee the entire process of selling the home and distributing the proceeds.
Sometimes, probate sales must occur because the homeowner dies still owing a significant amount of debt. The court will then sell the home to pay off creditors and distribute any additional funds to living family members.
How Does a Probate Sale Work?
The probate sale process and timeline can vary significantly depending on which state the sale is occurring in. No matter where the property is being sold, there are several laws that must be followed throughout the entire ordeal. Because of this, the sales process can be very lengthy—on average taking anywhere between 18 to 36 months. Below we will cover the three main stages of the sales process and highlight what occurs in each stage.
Probate Sale Process
1. Appointment of Executor or Administrator (1-3 months)
The probate process begins with the court appointing an executor (if there is a will) or an administrator (if there is no will) to manage the estate. This can take a few weeks to a few months, depending on the court's schedule and any disputes among heirs.
2. Property Appraisal and Listing (1-3 months)
The next step in a probate sale is for the executor or administrator to appraise the property to determine its market value. After the appraisal, the executor or administrator will list the property for sale, usually with a real estate agent experienced in probate sales.
3. Marketing, Showing and Receiving Offers (1-3 months)
Once the home is listed, it will be marketed extensively and shown to potential buyers until purchase offers are received. This stage's duration can vary based on the property’s appeal, market conditions, and the listing price.
4. Offer Acceptance and Court Confirmation (1-3 months)
Once an offer is accepted, it must be submitted to the probate court for approval. A court hearing is scheduled, which can take several weeks to a few months, depending on the court's calendar. Overbidding may occur during this hearing in some states, such as California.
5. Overbidding Process (if applicable, 1-2 months)
If the probate property allows other buyers to come to court and overbid the initial offer, they can submit higher bids during the court hearing. This process can add additional time, especially if multiple overbids are received.
6. Finalizing the Sale (1-2 months)
After the court confirms the sale, the buyer must complete the purchase process, which includes finalizing financing, conducting inspections, and closing the sale. This stage is similar to a traditional real estate transaction and typically takes 30 to 60 days.
Pros and Cons of Buying a Probate Home
Now that we’ve answered the question: “What is a probate sale?” Hopefully, you have a better idea of the process. The rest of the article will be dedicated to discussing a handful of pros and cons of buying a probate home.
Buying a Probate Home Pros
- Potential Bargain Pricing
- Great Investment Opportunity
Potential Bargain Pricing
The biggest advantage of buying a probate home is the pricing and potential for getting a bargain. Probate properties can typically be purchased for a reduced price, saving you tens of thousands of dollars or more. However, to purchase a house that's in probate and enjoy these savings, you'll need to follow specific rules and procedures.
Great Investment Opportunity
Due to their attractive pricing, probate sales can be a great option for investors. There's a lot of opportunity for probate homes to be resold for a profit, making them a great investment as long as you don't mind the more lengthy sales process of buying a house that's in probate.
Buying a Probate Home Cons
- Lengthy Sales Process
- Additional Fees and Requirements
Lengthy Sales Process
The biggest disadvantage of buying a probate home is the length sales process. It can easily take 6 to 12 months to purchase a house that's in probate, and you'll need to make a 10% deposit up-front. During this time, the court needs to confirm a number of things, including the fact that the estate does not owe any back taxes.
Additional Fees and Requirements
Probate sales have more fees and requirements than traditional home sales. Purchase contracts for probate homes do not allow contingencies, and a non-refundable 10% deposit is required to begin the process of buying a probate home. As the process is so complex, there are typically additional legal and appraisal fees associated with probate houses.
Probate Sale Bottom Line
A probate sale can be a pretty big bargain if you are willing to spend the extra time going through the bureaucratic hurdles. Whether you're considering buying a house under probate or need to sell a house in probate, you'll need to be patient. Also, be sure that you assemble a highly qualified team right away. Working with an experienced realtor or attorney who can guide you through the process is critical.
If you are a realtor and are interested in getting involved with probate sales but don’t have the experience, you may be able to get certified as a Certified Probate Real Estate Specialist. Finally, no matter your role in the process, be sure to double-check your state’s exact requirements and identify any quirks in state laws. It could potentially save you a great deal of time.