One of the most important aspects of real estate investment is being able to purchase properties at discounted prices. And that’s what made short sales and foreclosed properties so demanding in the real estate industry. But, did you know there’s one more way for investors to earn alluring profits through property investments? It’s the probate sale!
Probate real estate sale is not as similar to normal real estate transaction. Although it allows investors to make substantial profits, it is a complex process. So, if you are new to real estate investing and want to learn more about probate, this blog will be of great help to you. Here, we will cover an overview of probate, how the process exactly works, and most importantly, what are the benefits of investing in probate or distressed property sales.
When a homeowner dies without leaving a will or clearing off debts, the descendant’s property passes on to a probate court. Then the court appoints an estate representative to settle the property with an aim of selling it at the best possible price.
The probate process works almost similar to the foreclosure or estate planning process. It’s important to note that the probate laws may vary from one state to another. While the key aspect of a probate or distress property sale is to get properties at discounted prices, understanding the overall sale procedure in detail can help you understand the in and out of the probate process. Moving on, here are the steps of a probate real estate sale:
- Appointment of a Representative: as already discussed, when a homeowner passes away without an intestate, it is relinquished to the country court. The court then appoints an estate representative to carry out the property sale.
- Hiring a Probate Realtor: The estate representative, be it, an executor or administrator, needs to hire a realtor or real estate company to seek help throughout the probate sale process. A Certified Probate Real Estate Specialist (CPRES) is the right one to approach while dealing with probate real estate.
- Property Appraisal: Determining the property’s value is a crucial step in any real estate sale process. Hence, whether it’s a traditional sale or probate, a property appraisal is a must!
- Property Listing: Once the property is appraised, the next step involves listing the property on property marketing sites. Generally, it is done by real estate agents or hired agencies as they are more knowledgeable and experienced in MLS listings. The only thing to bear in mind is that the probate status on the listing should be updated from time to time.
- Offers From Interested Buyers: Potential buyers start making offers on the property once it’s marketed. While multiple buyers can bid on the property with their lucrative offers, only the one with the highest bid wins. The offer is then passed on to the beneficiaries and legal heirs associated with the property. If no one posts an objection, the proposal is sent to the probate judge for sale approval.
- Signing Contract: If the probate judge approves the sale, the buyer is expected to hand over a cashier’s check with at least 10% of the offer price. Once the cashier’s check is validated, the buyer and the estate executor or administrator are supposed to sign a contract.
- Home Inspection: At this stage, the buyer can request for property inspection, but cannot cancel the deal. If the buyer wishes to back out from the purchase after finding issues in the property, he or she may do so by losing the deposit amount.
- Final Closing: The buyer can settle the property closing after getting a positive property inspection report in hand. The property is officially sold exactly after 15 days of signing the purchase contract.
Now that you have a brief of what is probate and how it works, here are the benefits of a probate sale.
Benefits of Investing in Probate Real Estate
- Discounted Property Prices: The biggest advantage of buying a probate property is that the sale price is often lower than the market price. This allows the investor to resell the property at substantial profits. Apart from that, probate real estate executors look for ways to get the property off their hands as quickly as possible. This is also an important reason for listing probate properties at reduced prices.
- Less Competition in the Market: While short sales and foreclosed properties usually tend to have tough competition, a large number of people are unaware of the existence of probate sales or where to find them. Even if investors get to learn about probate real estate, most of them prefer not to be bothered with the complicated process of a probate sale.
Now that you have read the entire blog, you have learned important aspects of a probate sale. However, when you undergo the actual probate process, ensure to oversee the associated risks before making any final purchase. It’s also essential to be aware of the state probate laws, so keep it in mind!