People usually leave their assets behind to their loved ones when they pass. Only some of them die without making a will. In cases where a homeowner dies with huge debts or without a signed will, their properties need to undergo the probate sale process. If you are reading this article then probably you are an estate executor handling a probate case or a real estate investor, planning to buy a probate property in near future. Whatever the reason is, you will need to understand the probate process in-depth.
Probate Sale: Overview
While most homeowners opt for estate planning to keep their properties in line, a few of them pass without leaving a legal will behind. There are even some who die with huge debts in their names. In such cases, the deceased homeowner’s property undergoes a legal process named probate. Once a property enters the process, a probate court supervises the sale of the asset with the aim of selling it at the best possible price.
How Does a Probate Process Work and How is It Different From a Traditional Sale?
Although the probate process varies from state to state, the goal remains the same – sale of the property for the best possible value. Knowing the exact steps of a probate process can be useful for all real estate investors.
Here’s how a probate process works.
Step #1: Appointment of an Estate Executor
When a homeowner dies without leaving a will behind, the court appoints an estate executor to oversee the sale of the decedent’s property. The executor is considered the estate representative who is held responsible for taking care of the probate property sale process from start to finish.
Step #2: Outsource a Real Estate Agency
Since real estate sale is usually a lengthy process, it’s impossible for the estate executor to conduct the probate property sale alone. The executor outsources a real estate agency or a licensed real estate agent to support the process. Although real estate agents have extensive knowledge of different types of estate sales, it’s better to hire one who has prior experience in probate sales. A Certified Probate Real Estate Specialist (CPRES) agent is the best person to approach when it comes to the fast and proper processing of a probate sale.
Step #3: Obtain Appraisal
The next important step in a probate process is determining the property value. The process of obtaining an appraisal for a probate property is exactly similar to that of a traditional property sale process. The costs for property appraisals completely depend on the location.
Step #4: Property Listing
Hired real estate agents list the probate property on listing sites. They then advertise the property using public signs, newspaper ads, MLS listings, etc. However, they need to post the ongoing probate status of the property with the ads.
Step #5: Receive Offers
Potential buyers who are interested in purchasing the probate property make an offer at this stage. Once an offer is received, the deceased heirs and property beneficiaries are notified. If they approve the sale, the proposal is sent to the probate judge who then decides whether to allow the proceedings of the sale further.
Step #6: Make a Deposit
All the potential buyers are requested to submit their bids in court. The highest bidder is the winner who then needs to deposit a cashier’s check worth 10% of the winning bid amount to the court. Failing to which, the next highest bidder wins the property.
Step #7: Contract Sign
Once the probate court accepts the cashier’s check, the buyer needs to sign the purchase contract. Even the estate executor needs to sign his/her paperwork.
Step #8: Property Inspection
This is a crucial step for the buyer. Inspecting the property allows the buyer to identify issues with roofing, heating, pest, and plumbing. If the inspection report turns out to be negative, the buyer can choose to retract the purchase without any reimbursement of the deposit.
Step #9: Closing
On obtaining a positive property inspection report, the buyer can expect the closing to be settled within 15 business days following the contract signing.
Should You Opt for Probate Sale?
Most real estate buyers opt for probate or flipping houses in Texas. The main reason behind it is that these real estate sales allow investors to obtain lucrative deals. As these properties are sold at lesser prices than market values, they help investors earn huge profits. However, it also imposes great risks, especially if you are a newbie in real estate investments or have little knowledge about probate. So, always be mindful while investing in probate properties!
Now that you have read the entire article, you know how a probate sale is different from other real estate sales, how the process works, and if you should opt for it. If you are determined to buy a probate property, ensure to take the necessary precautions before making a commitment or signing a contract.