As you peruse the home listings available today, you may find some that are a ‘probate sale.’ These sales often save you a significant amount of money, but they can take a lot longer to get to the closing table. Find out what they are and what you need to know below.
What is a Probate Sale?
When a homeowner dies without a will or trust, they die intestate. Since they didn’t make known their final wishes, the state must take over the property. The state/court handles the sale to make sure that the proper market value is obtained and that the home is properly marketed.
The Real Estate Agent’s Job
The state will hire a real estate agent just as anyone else would do. The real estate agent will determine a fair value for the home and conduct the same marketing they perform for a standard sale. You will see the home listing in the MLS, but you will see it as a probate sale.
You can view the property just as you would any other home in the MLS. Your real estate agent will work with the listing agent to get you inside the home. If you decide to make a bid, you will work with your real estate agent as well as the listing agent.
The Difference in Bidding
Bidding is when the waiting game begins. First, you make your offer and along with it, you provide a 10% deposit. The representative working with the estate will accept the offer or if they think it’s too low, they may counter offer.
If the representative does accept the bid, the process isn’t over yet. You still have to get court approval. The representative must go through the probate attorney who will bring the offer to the court. The court will set a date for the confirmation of the sale.
It’s still not over if the court accepts the offer, though. The representative and real estate agent must now market the home at the agreed upon price for 30 to 45 days. In other words, the home must go on the market for the price that you offered.
Once the 30 to 45 day period ends (it varies by state), the sale ends up in court for an auction style sale. This means that even though you bid on the home, it’s not yours yet. You and anyone else interested in the auction must come to the court date. If no one else shows, the court will accept your offer and allow you to move forward with the sale. If others do show up and they bid a higher amount on the home, they must provide the 10% deposit that day.
Exercise caution before doing this though, only the original buyer may get his/her deposit back if someone outbids them. Anyone else that puts money down on the home won’t receive their deposit back even if the sale falls through.
Since the state is selling the home, they don’t know anything about it. The listing agent can tell you the basics about the home and any issues he may have noticed, but that’s the furthest thing from an inspection as you can get.
It’s a good idea to get a professional inspection before you make the bid. We know it could be like throwing money out the window, but it protects your interests. Would you rather risk $300 or hundreds of thousands of dollars? If the inspector finds something wrong with the home, such as a cracked foundation or faulty windows, you may want to look elsewhere for your home. Yes, you lose the money on the inspection, but you save the thousands of dollars the repairs might cost.
If you are interested in a probate home, prepare yourself for a long journey and a potential letdown. There’s no guarantee that you can buy the home until you go through the auction process. If you are in a hurry or don’t want to risk losing the home to another bidder, you may want to stick with straightforward sales rather than probate sales.