How to Buy a House in Probate?

If the owner of a property recently passed away, then the house is likely in probate.

This is the court system that reviews wills and allocates assets. As a buyer, you are unable to make an offer on the house during this time because the asset needs to be distributed amongst the beneficiaries.

This can be frustrating for both potential buyers and the family members of the recently deceased. They might want to move on from the property as part of the grieving process. 

Learn more about buying a house in probate and what the process entails. This can make you more informed as you wait to buy your dream home.

What is Probate Court and How Does it Impact a Property?

When a person dies, their will is sent to the probate court. The court will verify that the will is valid and appoint an executor to distribute the assets to various friends and family members left behind.

The executor will first pay any debts the deceased person left behind and then work with the beneficiaries to make sure they receive their allocated portion of the estate. 

Probate is necessary to ensure a will is executed fairly. During this time, affected parties can contest the will if they feel like the assets are unfairly distributed or if the deceased person created the will under duress.

Assets are also sent to the probate court if someone passes away without a will, which means they died intestate. In this case, the court appoints an administrator to review the debts and credits of the deceased and pass any remaining assets on to relevant parties. 

The probate process can take anywhere from a few weeks to a few months, depending on the nature of the will. The number of beneficiaries, the credits and debts, and whether or not the will is contested can affect the probate timeline. The process usually takes even longer if the deceased did not have a will. 

If a property is part of a will or is listed as one of the assets of the deceased, it cannot be sold during probate. Once the probate process is over, whoever takes control of the house will be authorized to sell it if they choose.

Steps Involved in Buying a Property After Probate

If you are interested in a particular property now that the owner has passed away, you can 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.

The Executor Determines Whether the House Needs to be Sold

The primary residence is the biggest financial asset of most Americans. An estimated 62% of Americans own their homes with an average of $174,000 in equity. Comparatively, the average retirement fund had 76,000 in it as of 2021.

When an executor takes over an estate, they will determine whether the house can stay with the beneficiaries, or whether it should be sold so the funds can be used to pay off debt. 

A house is more likely to be sold during the probate process 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 best option to pay back these creditors. 

Even if a house is completely paid off and the deceased doesn’t have much debt, the executor may decide that selling the property is the best option if the assets are going to be divided evenly across multiple beneficiaries. For example, if an estate is supposed to be divided evenly between five children, it might be better to sell the house and divide the proceeds.

Naturally, the beneficiaries will have a say in what happens to the house during this process. If the house has sentimental value, they might decide to hold on to the property and use other funds to pay off their loved one’s debt.

The Beneficiary Decides to Sell the House

If a single beneficiary 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 stipulates otherwise.

At this time, the new owner might choose to live in the house as a primary residence or could rent it out as an investment property. If they want to sell the property, then it will go through the standard home sale process.

Buyers Petition The Court to Purchase the House

If the executor decides that the best course of action is to sell the house, potential buyers can submit bids to the probate court. This is how you can buy a probate property before the process is complete.

The court will authorize a real estate agent to represent the property and set a listing price through either a home appraisal or comparative market analysis (CMA) by the Realtor. Potential bids are reviewed by the court to determine which one should be accepted, if any.

Buying a probate property can be time-consuming because all of these actions need to happen through scheduled court appointments. If the courts in your area move slowly, it could take several weeks to review bids. 

States also have specific laws that govern how much you can bid on a probate property. In California, for example, you cannot exceed the accepted big by 5% plus $500.

The Buyer Takes Ownership of the Probate Property 

Once the court accepts the bid and any objections from beneficiaries are cleared, the probate sale can go through. The real estate agents from both parties will draw up closing documents And the title will be transferred from the deceased to the new owner. 

Once you have completed this process and the probate sale is over, you are the full owner of the property. You do not need to go through any courts or beneficiaries to make adjustments to your home and can sell it when you are ready.

Financial Considerations of Probate Real Estate

The main thing you need to know about buying a probate property from a financial standpoint is that you must make a cash offer. It is hard to secure financing through conventional mortgages to purchase probate properties. Most courts will only accept cash offers submitted through cashier’s checks. 

Having the ability to pay in cash means you can submit your bid as soon as the court is ready to review offers. The court won’t wait for you to secure financing and potentially have to restart the process because your mortgage didn’t go through. 

If you can make a cash offer, buying a probate property could be a good option for your home purchase or real estate investment needs. These properties are often competitively priced so they will receive buyers immediately.

Buying a probate property could enable you to get a house in a hot or expensive market. The main drawback is that you will need to continue to pay your current housing costs throughout the probate process until the purchase is complete.

Potential Challenges of Buying a Probate Property

While a house hitting the market because of probate or following the distribution of a will could be a good opportunity for potential buyers, these home purchases come with risks.

Here are a few potential challenges you may face if you want to make an offer on one of these properties. Being aware of the risks can empower you to overcome them.

Beneficiaries Are Allowed to Object to the Sale

Another factor that can slow down the process of buying a probate property is that family members and beneficiaries are allowed to comment on the sale.

Beneficiaries can object to the listing of the house, share their input on potential bids, and potentially delay the process in other ways. Even if a home sale in probate is moving forward, an unhappy 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 resolve the deceased’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 so long for the sale to go through.

You can expect to wait at least a year before you acquire this piece of real estate and potentially longer if the beneficiaries object to the sale.

Buying a probate property could be a good option if you are patient and have a specific dream home that you want. It could also be a good option for real estate investors who purchase and resale properties frequently.

You Might Not Get a Detailed Seller’s Disclosure

When a person sells a house, they are legally required to disclose any known issues with the property. Buyers will review the seller’s disclosure to ensure complete transparency in the home sale process.

For example, if the seller knows that there is termite damage or foundation issues, they will disclose the problems in this form to worn buyers who 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. If the beneficiaries aren’t familiar with the house, they might be aware of any issues that the deceased knew about. 

If you are interested in a probate property, make sure you schedule a home inspection and go over the property in great detail. While you can look for potential expenses and warning signs, like an aging roof, there might be unseen issues that you don’t catch until the inspection.

Carefully reviewing the probate property can help you catch any problems and budget for their repair.

Probate Sales are Listed As-Is

Another challenge that comes with buying a probate property is that you are purchasing an as-is home. This means you cannot request any repairs or upgrades as part of your negotiations. if the home needs significant repairs or the inspector discovers serious issues, the court will not address them. 

It is still possible to purchase real estate that needs repairs, you just need to be aware of what you are buying and have an idea of how much it will cost to remediate the issues. If the repairs are too much for you to handle financially, you might want to back out of the probate sale.

You May Encounter Complicated Legal Processes

The real estate process is complicated enough and can overwhelm many potential buyers, but buying a house becomes infinitely more complicated when there’s a probate sale. On top of complicated real estate jargon, the court is full of legal terminology and processes that aren’t familiar to most people.

Along with hiring a real estate agent to help with buying probate property, consider working with a lawyer who can represent your interests. Not only will they understand the probate sale process, but they can also represent you in court. If you are not able to get away from work to attend the hearings, your lawyer will be there for you.

Once you go through your first probate sale, you can move forward with other investments with more confidence. Talk to your realtor about how to find probate properties so you can purchase affordably priced homes. This could be a good option to break into a desired area without overpaying in a hot market.

Work With an Experienced Real Estate Agent on a Probate Sale

Purchasing real estate through a probate sale is a time-consuming process. Not only are emotions running high following the death of a loved one, but the courts also have stopgap measures in place to ensure everything is handled fairly.

One of the best ways to handle the probate real estate process is to hire an experienced realtor. These professionals can help you overcome legal hurdles and explain different parts of the probate court. They can increase the chances that you purchase your probate property without any issues.

To find a Realtor, turn to FastExpert. You can review agent profiles and find the best local real estate agents in your area. Try FastExpert today and move forward with your probate sale with confidence.