Thinking about jumping into the world of distressed properties for your clients? You know it is an exciting journey! Without further sugarcoating let’s be clear. It can be a bit of a maze if you are new.
If the owner of a property recently passed away then the property is likely in probate. This kind of distressed property needs to pass through the probate process before it is inherited by their heirs.
You can be a seasoned real estate pro looking to diversify or a newbie hoping to seal the first deal with your client. Understanding the probate property market can open up some interesting doors.
So let’s dive into the world of probate properties together. We promise that by the end of this, you’ll have a solid grasp of what it takes to navigate this fascinating niche in the real estate market.
What is probate property?
A probate property is real estate left by a person who passed away. Further, it is any property left by this individual that has to pass through the probate court process.
This is real estate along with the assets that will eventually be distributed by a will including assets that were left by a person who died without a will. These are generally found in probate property lists.
Why should you invest in a probate property?
Probate properties often sell for less than the actual value like other types of properties involving the courts, including tax delinquent and foreclosure properties. In some cases, the court of the family wants to transfer ownership without the hassle of making repairs or preparing the property to sell.
Anytime you buy a property for less than the actual value, the potential to make a profit goes up. Once your client acquires the property they can manage the property as per their choice.
Steps Involved in Buying a Property after Probate
You might be interested in a particular property now that the owner has passed away. So you need to wait for the house to clear the probate process.
Here are a few steps that need to be completed before you can make an offer and eventually close on the sale.
Executor Determines If the House Needs To Be Sold
Whether the property should be sold so the funds can be used to pay off the debt or stay with the beneficiaries the executor will determine if they take over a probate property.
A distressed property is more likely to be sold during the probate process. This happens if it has a mortgage that the beneficiaries cannot pay off. If the homeowner has student loans or other forms of debt selling the house might be the choice to pay back these creditors.
Beneficiary Decides to Sell the House
If any single heir takes control of the house they can decide to sell it as soon as the probate process is over. They are the total owner of the property unless the will specify otherwise.
The new owner might choose to live in the house as their main residence. They can also rent it out as an investment property.
If they want to sell property then it will go through the basic home sale process.
Buyers Appeal to the Court to Buy the House
If the beneficiary or the heir decides that the best course of action is to sell the house potential buyers can submit their bids to the probate court.
The court will authorize a real estate agent. They will represent the property and set a listing cost through either a home appraisal or comparative market analysis. Potential bids will be reviewed by the court to determine which one should be accepted if there will be any.
The Ownership of the Probate Property Taken by Buyer
Once the court accepts the bid and all the objections from the heirs are cleared the probate sale can go through. The real estate of the opposite party and you as the real estate agent will draw up closing documents. The title will be transferred from the deceased to the new owner.
After completing this process and the conclusion of the probate sale, you will be the full owner of the property. You would not need to go through any courts or beneficiaries to make adjustments.
Potential Challenges of Buying a Probate Property
When a house hits the market because of probate or following the distribution of a will could be a good opportunity for possible buyers. But being a real estate agent you need to be aware your client of the risks which they need to overcome.
Beneficiaries Are Allowed to Raise Concerns about the Sale
One of the major factors that can slow down the process of the probate house selling is that family members and heirs of the property are allowed to comment on the sale.
They can object to the listing of the house sharing their input on potential bids. This can delay the process in other ways.
Even if a property in probate is moving forward and an unsatisfied beneficiary can take steps to stop the deal.
Debtors Have a Year to File a Claim
The executor of the will has one year to settle the dead person’s estate. During this time any creditors can come forward with debts they are owed. One of the biggest challenges of buying probate property is that it takes too much time for the selling process to go through.
You can expect to wait at least a year before you get this piece of real estate. It can potentially be longer if the beneficiaries object to the sale.
Buying a probate property could be a good option if you have patience and a specific dream home that you want.
You Might Not Get a Detailed Seller’s Disclosure
When a person sells a house they legally need to disclose any known problem with the property. Buyers will analyze the seller’s disclosure to ensure complete clarity in the home sale process.
If the seller knows that there is termite damage or foundation issue they will need to disclose the problems in this form to worn buyer. They might not be ready to take on these issues.
This poses a challenge for probate properties. Because the owner is no longer living they cannot review any issues with the house.
Probate Sales are Listed As-Is
Another challenge that will come with buying a probate property is that you are purchasing an as-is home. This means you cannot appeal for any repairs or remodeling as part of your negotiations.
If the home needs significant repairs or the inspector discovers a series of problems the court will not address or solve them.
It is still possible to purchase real estate needing repairs. You just need to be aware of what your client is buying. Have an idea of how much it will cost to remediate the issue. You can back out from the sale if the repairs are too much for you to handle financially.
You May Encounter Complicated Legal Processes
The real estate process is complex enough and can confusing for many potential buyers. But buying a house becomes more complicated when there is a probate sale.
On top of the complicated real estate market, the court is full of legal terminology and processes that are not familiar to most people.
You also need to consider working with a lawyer representing your interest. Other than understanding the probate sale they will also represent you in the court.
You might not be able to get away from work to attend the hearings your lawyer will be there for you.
Potential benefits of buying a probate property
Even though this type of distressed property deal takes longer and requires patience they still offer a solid investment. For probate properties motivated sellers often want to sell quickly and easily.
A shorter chain and quicker completion
A probate property seller can often move quite quickly to complete once a grant of probate has been received. They will generally have had various months to clear the property.
There will be no onward purchase so the chain may be short which can also help completion take place promptly.
Flexibility on dates
The retailor is also likely to be flexible as to completion dates. They are unlikely to be occupying the property and will not have a related transaction to tie in.
Potential for access between exchange and completion
An executor may be prepared to give a buyer access to the property between exchange and completion. This also includes being subject to undertakings to carry out work. This is an advantage with an unoccupied probate property.
Potential Buyers of Probate Houses
Probate property sales can offer unique opportunities for potential buyers in the real estate market. Explore different potential buyers for this type of distressed property:
- Investors
- First time homebuyers
- House flippers
- Developers
- Family members or heirs
- Buy and hold investors
- House Hunters Looking for Unique Properties
- Rental Property Managers
Conclusion
Probate property lists can attract a diverse range of potential buyers in the real estate market. Investors or first-time homebuyers, and even family members or heirs can all find value in acquiring properties through probate sales.
It can be for investment purposes or finding an affordable home probate sales offer unique opportunities.
This process can benefit buyers and contribute to the revitalization of communities. If you’re interested in purchasing a property exploring a probate sale might be a worthwhile avenue to consider.
