HomeBusiness NewsAn investor’s guide to a probate sale

An investor’s guide to a probate sale

Distressed properties under the probate sale category have become a popular investment means for real estate investors. Given the high money-making opportunities in property dealings, investors are always searching for under-priced properties to buy and flip in some cases.

Regardless of the purpose behind buying real estate properties, locating valuable deals in the market is quite strenuous. The rising number of real estate agents and keen buyers has increased the demand for distressed property that was primarily foreclosed or listed under the probate sales category. Unlike in the past, distressed properties are no longer looked down on. Instead, they are one of the most in-demand properties that highly interest real estate investors.

People familiar with the real estate industry are most likely to have come across the term ‘Probate Sale’ and have a basic knowledge of it. For those who are entirely new or lack the basic idea, a probate sale refers to the legal process of selling a property that belonged to the deceased homeowner who has either not left behind a will, has not declared an heir for its asset, or has outstanding debts that can only be satisfied by the sale of the property.

What is Probate?

Probate is a widely used term for all the legalities involved during the sale of a property whose owner has passed away without leaving a will behind. It is how a deceased person’s assets are managed to settle all the dues and transfer the rest to the eligible heir of the estate.

A probate court oversees the entire sale process to ensure that all genuine claimants have their business settled before the property ownership is transferred. Probate sales are often directed for properties whose owners had some sort of debt that requires money for settlement. It is important to note that most properties under probate sales are distressed property that has been left unattended for a while.

Unfolding a probate sale process

Unlike other property deals, probate sales are complex and can be time-consuming. Given the fact that a court oversees the sale process, one should be prepared to keep their patience while not assuming it to be a 100% in-favor deal.

High chances of offers being rejected in the final stages may leave you disappointed. However, it’s always a good idea to attempt buying a probate property as the benefits are abundant.

While the probate sale process and laws differ from one estate to another, there are certain procedures that remain the same throughout. The following are the standard steps in a probate sale that you must know before planning to invest in probate properties.

  • Executor appointment

Once a distressed property is identified whose owner has died without bequeathing its property, the probate court takes charge of it and appoints an executor to sell the property. Typically, the appointed executor is chosen from the closest living relative of the deceased owner. Once an executor is appointed, he/she usually hires a real estate agent to help them with the entire selling process.

  • Appraisal & Listing

Before the property is listed in the market for sale, an appraisal is done to estimate its sale value which needs to be approved by the court. Thereafter, the property is marketed to attract the best buying offers. Property listing is often done by experienced agents who have a strong network in the real estate industry.

  • Buying bids

This is where the role of real estate investors comes in. Interested buyers can make buying bids to the executor that can be accepted, rejected, or countered. Similar to any other property sale, the highest bidding amount is considered and should be followed by the court’s confirmation. A confirmation from the court is expected between 30-45 days and during this time the executor is open to accepting better buying offers.

  • Confirmation & Property Inspection

On the final court hearing date, all interested buyers are expected to attend the session and put forward their buying bids. The property is then sold in an auction format wherein the highest bidder gets the ownership. In case there are no outbids on the initial price, the court confirms the first buying offer. A contract is signed between the executor and the buyer. Contract signing is followed by property inspections to identify structural defaults if any.

Bottom Line

Since the real estate industry is lucrative, exploring new property deals and investment opportunities is always a good idea. A probate sale comes with a long list of advantages including discounted prices and credible deals.

However, the long timeline and uncertainty of a probate sale are what deter most real estate investors from buying a probate distressed property. Risks like uncertainty, long closing period, and irreparable property damages can be minimized by working with experienced real estate agents. They can get you the best deals while maintaining the utmost transparency.

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