What You Will Learn in This Article (Reading Time – 5 Minutes):
- What a probate sale is
- How a probate sale is handled
- Pros and cons of a probate sale
Most real estate buyers are familiar with the typical approach to buying a home: making an offer on a home listed by an agent representing the homeowner. There are plenty of other ways to buy real estate, however, if you have the patience and dedication. Aside from short sales and foreclosures, savvy real estate investors know that the best deals are often found in probate court.
What is a Probate Sale?
A home is referred to a probate sale when it is sold in probate court after someone dies interstate (or without a will that bequeaths the home to someone else). An estate sale, on the other hand, occurs when the owner dies and those who inherited it list it for sale. Probate sales are different from standard real estate transactions.
When someone dies interstate, the state of California takes over to administer the estate and sale of property. The court will want to ensure the real estate is marketed properly and sold at the best price. This means many procedures and steps are required that differ from other real estate transactions.
In general, probate sales always have the following terms:
- No repairs, including termite damage repair
- 30-day escrow
- Home is sold as-is
- No offer contingencies
- Seller pays title insurance and escrow fees
How a Probate Sale Works
In a probate sale, an estate attorney or representative hires a Realtor to list and sell the home. The home will be marketed like any other with a list price based on the listing agent’s recommendations in addition to a court-ordered independent appraisal.
If you are interested in buying a home in probate, you can make an offer at any time but the offer must have a 10% deposit. The representative of the estate can then accept or counter your offer.
Just as a short sale requires a bank’s approval before a contract can be finalized, an offer on a home in probate must get confirmation from the court. The representative of the estate or the probate attorney will petition the court to confirm the sale with a future sale date chosen by the court.
After a sale date is determined, both parties must wait for at least 30-45 days. During this waiting period, the court will require that the property be advertised and marketed with the accepted sales price of the home. Under California probate law, the court will take the accepted sales price on the home, add 5% plus $500, and market the home at the higher price to ensure it is being sold for the highest price possible.
For a probate sale to be confirmed in California, the new buyer and any other interested parties must go to probate court to confirm the sale. The property will be sold auction-style with the opening bid at the accepted offer price plus the 5% + $500 increase. If no one shows up to bid on the house, the first buyer will get the home for the original offer price. If other potential buyers arrive, they can bid on the home with increments of $5,000.
Downsides of a Probate Sale
While buying a home in probate can be a great deal, there are a few hurdles you should be aware of. One of the biggest downsides to consider is the 10% deposit, which is not refundable unless you are not the final court-confirmed buyer of the home. This means you can’t get the deposit back if the home inspection turns up something unpleasant or you can’t get financing, for example.
Keep in mind the owner of the home has passed away which means there will probably be no one who can disclose any problems with the home. This can increase the risk of buying a probate home.
For many home buyers, the lengthy process of a probate sale is a major drawback. If you want to buy a home through probate, be prepared for a wait of several months. If you have the patience and you want to get a good deal, this can work to your advantage.
Is a Probate Sale the Right Idea?
Want a bargain? Probate sales offer the best chance of getting a great deal on real estate in California. The lengthy process and rules can be intimidating, but a Realtor experienced with probate sales can guide you through the process. Buying through probate offers a few distinct advantages to consider:
- Beneficiaries (usually the children or grandchildren of the deceased) typically do not live in the home and have no strong emotional attachment. This usually translates to a lower price.
- Home expenses like maintenance, property taxes, and insurance must be paid until the home is sold. This can create an incentive for heirs to sell the home as fast as possible.
- The intimidating and unfamiliar probate court process turns away many potential buyers from the start. Even buyers who show up to probate court in an attempt to overbid the first offer often arrive unprepared without the 10% deposit in hand or expecting to be able to negotiate terms. Dramatically reduced competition can lead to a great deal for you.
Considering a Probate Sale?
Finding probate sales can be tricky as they usually aren’t advertised as such. An experienced Long Beach real estate agent can help you locate probate sales in the area, whether you want to make the first offer or you want to try overbidding in court to get a deal, while navigating potential complications throughout the transaction.
If you’re a bargain hunter with plenty of patience and flexibility, a probate sale in Long Beach may be a great choice. At Evergreen Properties and Investments, we look forward to the opportunity to assist you with every step, from locating probate sales and navigating the probate court process to better understanding your real estate investment goals and strategy. Contact us today to learn more about how a qualified Long Beach Realtor can help you make the most of buying through probate.
From the Author: My name is Dan Barcelon and I believe that Real Estate can be one of the most valuable assets you’ll ever own. I’m dedicated to educating and guiding my clients on how to manage and leverage their homes to create an Evergreen legacy for themselves and their family. I primarily consult both home buyers and home sellers on reaching their personal and financial goals through Real Estate in the following cities of Southern California: Long Beach, Carson, Cerritos, Signal Hill, Torrance, Lakewood, Cypress, Downey, Bellflower, Norwalk, Wilmington, La Palma, and Artesia.
If you’d like to discuss if buying, selling, or investing in real estate is right for you at this time, feel free to reach out. You can call/text me at 562-270-5812, or you can e-mail me at danb@EPIrealestate.biz.