What are Probate Home Sales? Why Would You Want to Buy Them!

There is one thing you can do to become a house flipper and be successful at it. You must find properties that are good and worth flipping. That’s all there is to it.

It is important to have a strong network when looking for houses to flip, and you should look real hard to make sure that you can find houses below market value that will provide you with excellent properties. There are a few unconventional means that these methods might help to pay off.

Through hard work and networking, you could find an excellent property through a short sale or even by going through wholesalers.

Another method you could try is foreclosure auctions. These homes have already been foreclosed on, and they could be gotten for a steal. However, there are fewer and fewer foreclosure auctions in most areas.

Why Probate Properties May Be The Best Deals In Real Estate

It is also possible to purchase some properties as a REO property if no one has bid on it. If the homeowners are suffering or going through a divorce, they are usually trying sell the property in a hurry, which could allow you to get an excellent deal on the property.

However, most real estate investors stay away from these types of properties because they don’t think to purchase or research them, but this is an excellent way to get property that is set below market value.

As an experienced buyer or investor of real estate properties, you’ve likely come across probate sales. Probate sale properties can represent excellent value. Many times they can be priced significantly lower than comparable properties.

That’s good news.

The bad news is that there are certain risks associated with buying a property through probate. These risks are not necessarily a part of a normal real estate transaction. In addition, probate sales may take longer than traditional deals.

Some real estate buyers pass on all probate sales, preferring to find deals on traditional transactions. Because of the extra steps involved and the time it takes to complete a probate transaction, some real estate agents won’t even take the time to show probate deals to their clients.

Here’s the inside scoop on probate transactions.

Finding Probate Properties

When researching properties, it is usually not apparent that a property is a probate property without going deeper into your research. One of the best ways to find probate properties is using obituaries. They can be found in local newspapers. Sometimes it will show that they have no living relatives. Another way to find probate properties is to check out the local courts and going through different property records to see if anyone in the obituaries owned properties.

Sometimes, there are offices in different areas that provide information and provide services that deals with wills and testaments. These are excellent ways to find out about any probate properties in the immediate area. Luckily, wills are considered public documents, and therefore, they can be accessed by anyone. Some companies sell information that lead to probate properties, but if none of these pan out, local real estate brokers could help, because they usually have access to this sort of information.

How properties wind up in probate court

Properties are sold through probate when the owner of the property dies without leaving a will or specifically bequeathing that property. In this case, the state takes over the administration and sale of the property.

The court’s mandate is to ensure the property is sold at a price high enough to benefit the estate the most. In probate, it’s possible the property may be sold at a lower price than in a traditional transaction. This is a major reason buyers like probate court.

To ensure the property is sold at the best possible price, there are very specific processes and procedures to follow during the sale process.

The exact steps, process, and procedures vary significantly from state to state. The services of an agent versed in the details of probate court can really come in handy because not all real estate agents are experts in probate law.

How a probate sale is marketed

Probate properties are marketed the same way as traditionally listed properties. The lawyer or representative of the estate will hire an agent, formalize the listing agreement and ensure the property is shown.

Usually, the price of the property is based on the listing agent’s suggestions, but this price can also be influenced by an independent appraisal ordered by the court overseeing the transaction.

When it’s time to make the offer

Any interested buyer can make an offer at any point in the process. In a probate sale, no offers will be entertained unless accompanied by a deposit of ten percent. The person representing the estate can accept the offer as is or put forth a counter-offer.

Here’s where things get a bit tricky. This is why some buyers choose to stay away from probate properties. The offer itself is subject to confirmation by the overseeing court. This means there is no commitment between the seller and potential buyer.

The estate representative submits a petition to the overseeing probate court asking that the sale be confirmed and a date is chosen for the sale to receive the court’s confirmation.

Wait and wait some more

When the sale date has been set, all parties must enter into a 30 to 45 day waiting period. During this period, the court mandates that the newly accepted price must be the one at which the property is marketed.

For instance, in California, the court raises the accepted offer by 5% and adds an additional $500. This then becomes the new price. The property must be marketed at the new price.

Time for court

To confirm the sale, the court requires the potential buyer and any other interested parties to attend a probate court session. Then the property is sold at auction with the first bid consisting of the original accepted offer plus 5% and the additional $500 increase (California example).

During the auction, bidders bid in $5,000 increments. If there are no additional bidders, the first potential buyer buys the property at offer they first made.
If a bidder different from the original buyer wins the auction, they must immediately give a 10% deposit.

Money back deposit or not

The 10% deposit that was required to accompany the original offer is not going to be refundable if the final confirmed buyer is someone other than the original buyer. This is an additional probate court risk.

Disclosures can be an issue

In a probate court sale, the seller has already died. There is no firsthand information about leaky roofs, non-permitted work, upcoming neighborhood changes or any number of issues.

Inspection results can make a big difference

Anyone considering a probate sale must have the property inspected. Even though this is an out of pocket expense, and your offer may not be accepted by the court, it still pays to inspect the property. That relatively minor expense can make the difference between a successful transaction and one you wished you’d never seen.

It pays to be aware of the nuances of probate sales. They can bring you great properties at terrific values, but only if you’re willing to take on the additional risks.  Contact Doug Hopkins today to get started toward your future.

A Brief Understanding of Legal Probate Assets

The  Difference Between Probate and Non-Probate Assets

Those in the process of estate planning need to understand how probate assets differ from non-probate assets.

But first you need to understand what probate is. It is a court process that determines property distribution after someone dies. A probate court distributes certain assets to a dead person’s heirs. These assets are considered probate assets. Other assets, though, get distributed outside the courts. These assets are considered non-probate assets.

Probate is a process that consists of the following steps:

  1. Filing a will
  2. Appointing an administrator or what is called an executor
  3. Collecting relevant assets
  4. Paying bills and taxes
  5. Distributing assets to heirs
  6. Filing what is called a final account

Probate can be a long and expensive process. Because of this, sometimes people avoid it by only having non-probate assets.

What Are Probate Assets?

Probate assets are those that only you own. These assets can include:

  • Titled property that is only in your name or held in what is called “a tenant in common”
  • Personal property, which can include vehicles, furniture and jewelry
  • Banking accounts that are only in your name
  • Interests in entities such as corporations, partnerships and limited liability companies
  • Life insurance policies and brokerage accounts in which either your or your estate are listed as the beneficiary

What Are Non-Probate Assets?

Non-probate assets are those such as:

  • Joint tenancy property or property that is held between a husband and a wife
  • Banking and brokerage accounts that have joint tenancy ownership or beneficiaries that are listed as either “payable on death” or “transfer on death”
  • Property held within the framework of a trust
  • Life insurance policies and brokerage accounts whose beneficiary is someone other than you
  • Retirement accounts

Planning Your Estate

You need to determine if your assets are probate assets or non-probate assets when you are planning your estate, as your will does not determine the distribution of non-probate assets. This means that you need to know who exactly owns your assets and make certain that any jointly owned assets get distributed according to your wishes. You also need to review who are your beneficiaries.

You may want to contact an attorney to help guide you through all this.