Just about every home buyer is looking for a good deal on a home purchase. After all, why pay more for a home than necessary? If you can pay less for a property, you’d likely take that opportunity, and there are plenty of deals on the market to be had if you know where to look.
Many buyers look to foreclosures and short sales in an effort to find a deal on a home. While there certainly are discounts in these particular categories, you might also be able to snag a deal on a probate sale.
But what exactly is a probate sale, and what should you know about it before making an offer?
What is a Probate Sale?
When a homeowner passes away without having a will in place that bequeaths the property to an heir, the home can be sold in a probate sale. With nobody entrusted to the house on behalf of the late homeowner, the property is then taken over by the state. In this case, the home’s sale is then dealt with by an estate representative who will have the responsibility of selling the home in order to distribute the proceeds of the sale to family members.
The court will ensure that the property is marketed appropriately and fetches the highest possible price. As such, the court requires that specific steps are taken to ensure a successful sale.
A probate sale can translate into a good bargain for buyers because they’re typically priced below market value in order to sell in a reasonable amount of time. That said, the process can be pretty complicated and lengthy since the court has to be involved and approve the sale of the home.
Considerations to Make Before Buying a Home in a Probate Sale
The biggest consideration that buyers should make before purchasing a property in a probate sale is the fact that these homes are usually sold in “as is” condition. That means no improvements or updates will have been made before the property is put up on the market. Since the homeowner has already passed away, the estate typically doesn’t have any interest in repairing or updating the property, mainly because there is simply no time or money available to make that happen.
Many homes sold in this situation may be in good condition, but many others aren’t. But buyers still have the opportunity to have a home inspection done in order to find out if there are any significant underlying issues with the property aside from just some cosmetic issues. It’s always in the best interests of buyers to have a home inspection contingency included in an offer, including those involving probate sales.
Buyers should also be aware that even though they may be getting a discount on the final sale price of the home, they will have to come up with a sizable amount of money upfront. In addition to a hefty down payment, a deposit of 10% of the sale price of the home needs to accompany an offer. However, this deposit can be rolled into the down payment if the offer is accepted by the estate and a deal is made.
Once the offer is accepted, the court will have to approve the sale before it actually goes through, which can take a long time. You’ll first need to wait for your actual court date to be scheduled, after which more time will be needed for the court to sift through the paperwork and make the decision on whether or not to approve the probate sale.
In the meantime, the home can still stay open on the market for other potential buyers to put in a bid and trump your offer, which is the case in California. The property will continue to be marketed with the new accepted price, plus 5% and another $500 added on top of it. The property will be sold in an auction-style scenario in court with the opening bid being this newly raised probate price.
This can be very stressful for the buyer who initially put in the offer and had it accepted by the estate representative. Having said that, the initial buyer can still submit a counteroffer in order to outbid any other buyers who have come into the picture and placed their own bids.
The Bottom Line
Buyers can certainly get a great deal on a probate sale because these homes are typically listed lower than their fair market value. But buyers should also be aware that these discounts don’t come without their own set of hurdles, including a drawn-out court process.
If you’re looking for a clean-cut deal that doesn’t require you to wait around for weeks, a probate sale might not be the ideal route for you to take. On the other hand, if you’ve got time and flexibility on your side, then you just might find a great deal with a probate sale. Just make sure that you work with a good real estate agent who is knowledgeable about these types of real estate transactions.