Updated: October 11, 2022
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Probate property is any asset that must go through the probate court. While it may include sellable jewelry, vehicles, collectibles, stocks and other assets, the term typically refers to real estate.
Buying a probate property may be a good option for individuals looking to save money. However, there are certain risks interested buyers need to watch for. It’s also important to know the steps involved, how to use a mortgage for financing the purchase and where to find probate properties for sale.
Probate Properties: What You Need to Know
Before buying a probate property, it’s essential to understand what it is and how the process works. Here are some facts and statistics that may help you make a well-informed purchasing decision.
Generally, 90% of probate properties sell within 12 months. The National Association of Realtors (NAR) reports an estimated 6–7% success rate for regular property sales within the same period.1
Buying probate property can take a long time. A probate sale typically takes six–12 months to complete. Regular property sales tend to end in around 70 days only.2
Laws governing the probate process and probate property sales vary per state. The Uniform Law Commission came up with the Uniform Probate Code (UPC) to provide general provisions, definitions and guidelines. Currently, 18 states have adopted the UPC in full and in part.3
Probate refers to the legal process wherein a deceased individual’s will is carried out. Some inheritors may sell probate properties because they don’t want to live in them. Others may do it to turn a shared inheritance into cash that can easily be distributed.
If the property owner died intestate (without a will), the probate court appoints an administrator. The assets will be put up for sale to either pay off the debts of the deceased or leave money to their legal heirs.
Probate properties can be good leads to interested home buyers. However, it’s important to understand what it is and how it works before buying one.
Probate property can refer to any asset left by a deceased that has to go through a probate court, but it’s often used to refer to real estate.
Typically, probate properties are priced lower than their market values, making them attractive options to home buyers looking to save money. However, the process of purchasing probate properties can be complicated and may vary per state.
Probate properties are typically sold to cover the deceased owner’s debts. In some cases, inheritors sell their shared inheritance since cash is easier to distribute.
The probate process may vary from state to state, but it typically involves an estate representative responsible for settling the estate. This may include a probate sale. If the deceased set up a will, their chosen executor is the estate representative. If the property owner died intestate, the court will appoint an administrator.
Probate properties are good options for interested home buyers as they tend to be priced lower than their market value. However, the process differs from regular property sales. Probate properties are also sold as-is, meaning the buyer accepts the property’s current condition without guarantees or warranties.
First step
A probate sale starts with the estate representative. Since they manage the estate, they’ll have to petition the court to seek permission to sell a probate property. The estate representative, who may work with a real estate agent, will have to market the property to find the best possible price.
Listing price
In most cases, the probate court orders an appraisal to set the property listing price. Since probate properties are sold as-is, they’re often priced lower than the market value.
Bidding process
A probate sale requires interested buyers to go through a bidding process. To participate, they must have a down payment. While the amount may vary, the typical minimum down payment is 10%.
The executor reviews the offers. They can negotiate with the buyers or decide to accept an offer. The executor and all interested parties must attend the confirmation hearing. This is when the property is sold at auction. The starting price is the offer the executor has accepted.
Finalizing the sale
If no other buyer bids for the property, the initial buyer who made the accepted offer wins the auction. However, if there are other bidders, the new winner will have to pay up the required down payment on the spot. After the hearing, the executor and the winning buyer will sign a contract and finalize the sale.
The reduced prices make probate properties appealing to many interested home buyers and investors. However, a probate sale may not always be ideal.
Potential buyers must consider various factors, such as the benefits and drawbacks of probate properties. It’s also important to take careful precautions before purchasing from a probate sale.
Before buying a property from a probate sale, consider the pros and cons first. Determine if a probate property is right for you.
Buy a probate property only if you think you’ll benefit. If the risks are too much for your situation, consider not pushing through with the purchase.
The table below enumerates some potential benefits and risks of buying a probate property to help you make an informed decision.
There are multiple steps involved in a probate sale, which can be challenging for many potential buyers. That said, familiarizing yourself with the different terms and stakeholders, knowing where to look for probate sales, understanding how you can bid and finance the property purchase, and working with an attorney can help make it a rewarding experience.
As you research probate property sales, you may stumble upon unfamiliar terms. So, one of the first things interested home buyers need to do is to ensure that they have adequate knowledge. Knowing the terms, roles and stakeholders related to the process can help make an informed decision.
Below are some of the most important terms you need to know.
Terms | What It Means |
|---|---|
Will | A will, commonly referred to as a Last Will and Testament, is the legal document dictating the wishes of the deceased regarding the disposition of their assets. |
Estate | This refers to the deceased’s property, including all assets and possessions. |
Intestate | A person who died intestate is someone who didn’t have a will at the time of death. |
Estate Representatives | This refers to the person in charge of managing the distribution of assets. |
Executor | This is the person the deceased property owner has chosen to carry out their will. In cases wherein a will is present, the executor is the estate representative. |
Administrator | If the property owner dies intestate, the probate court will appoint an administrator to serve as the estate representative. |
Probate | This is the legal process to administer a deceased person’s estate. |
Probate Court | The court in charge of handling probate-related matters, including wills and probate sales, is called the probate court. |
Probate Property | Probate property is anything owned by the deceased individual that needs to go through the probate court. |
As-Is | Probate properties are sold as-is. This means that the buyer receives the property in its current condition. Unlike in general real estate transactions, buyers can’t demand repairs before closing the sale. |
Finding the right probate property to buy starts with knowing where to look. Generally, there are four ways to find probate properties for sale. To get the best deals, consider checking out listed real estate from different sources and compare features and prices.
When looking for a property, consider the following options. These are the best ways to find a probate property that fits your needs and situation.
Once you have decided on a property, your next step is to make an offer. Typically, probate properties are priced lower than their market value. Participating in a bidding war requires you to prepare an offer. You should also prepare a down payment or deposit.
Through their listing agent, the estate representative receives offers on probate properties for sale. Typically, an offer needs to be in writing. The estate representative decides whether to accept, counter or reject an offer.
If your offer is accepted, the estate representative will file a court-approved petition. This may take days or weeks, depending on the probate court.
Unlike regular property sales, probate sales require the accepted buyer to put down a deposit. Typically, you’ll need to prepare 10% of the amount you offered. This deposit may be nonrefundable.
After the estate representative accepts your offer, the probate court will set a confirmation hearing to finalize the sale. However, this doesn’t ensure that you’ll get the property.
Other interested parties may try to outbid you for the property. This process is known as overbidding and is often done like an auction. If your initial offer wasn’t accepted, you could also join the overbidding to try to secure the property.
Judges will raise the property price in increments based on your state probate law. You’ll have to win a round by matching the price.
Depending on the property, you may have limited competition. However, some participants may outbid you during the probate court hearing. Here are some tips that may help you get the property you want without overpaying.
Buying a probate property can be challenging as it requires you to participate in court hearings. While it may cost you some extra money, having an attorney can help you understand the legalities. A lawyer can also help conduct a title search and prepare the necessary paperwork. They can review the terms of purchase agreements and other related documents. Additionally, an attorney can provide tax advice to help you avoid potential tax issues.
When choosing a lawyer, consider checking if they have handled similar cases. Reading reviews from previous clients may also help you find the right attorney.
If you successfully secure the probate property you’re interested in, the next thing you need to do is finalize your purchase. If you have an agent or lawyer, you can ask for guidance on how to complete the process. It typically involves submitting certain documents and finding the best way to finance the property.
If you get the property through the overbid process, you may have the remaining deposit due. Make sure you settle this payment so that your total deposit is 10% of the purchase price.
The probate judge will inform you of the amount you owe the seller. They may also give you time to get a cashier’s check from the bank.
The probate court may ask you to submit specific paperwork. For instance, you may need to show proof that you can pay the final purchase price of the property. Should you not be able to have a financing source, you may lose your deposit and the deal may fall through.
This means you’ll have to secure a financing source before signing the sales contract. Depending on your situation, you can get a conventional home loan. Depending on the property type and location, you may also consider a USDA home loan.
Once everything is in order, you can sign a sales contract with the estate representative. Typically, the contract is prepared by the estate representative. In some cases, it’s provided by the probate judge and the signing will be done before both parties leave the courthouse.
Signing the contract means there will no longer be bids accepted. However, the sale will be subject to regular probate proceedings. This could take some time. After the waiting period set by the court, the property will be yours. The whole ordeal can take around six–12 months.
Buying from a probate sale can be a good real estate investment if you find the right property. That’s why it’s essential to conduct research. Learn about the different terms and steps involved in the process. Knowing these aspects will give you an idea of what to expect and ensure you’re prepared.
Below are some things you need to keep in mind if you’re set on buying a probate property.
You need to be prepared for a long process
Purchasing probate property isn’t the same as buying regular property. The sale process includes court hearings and overbidding. Thus, it may take a while for you to complete your purchase. Typically, a probate sale closes within six–12 months.
Deposits may be nonrefundable
If your offer gets accepted, you’ll have to pay a deposit that may be nonrefundable. This is usually 10% of your total price offer. However, this doesn’t ensure that you’re getting the property as there will still be an overbid process.
Probate properties have no warranty
Buying from a probate sale comes with risks. The property is sold as-is. That means there will be no guarantees and warranties. Buyers can’t also demand repairs from the seller.
You may be outbid during the final auction
The probate court will conduct an overbid process wherein other interested buyers can bid against you. Additionally, there will be a probate court proceeding even after you sign the contract agreement. You may lose your deposit if you fail to provide the necessary documents, such as proof of financing.
A probate sale involves a more complicated process that can be overwhelming to inexperienced buyers. MoneyGeek asked industry experts to share insights to help you navigate the process.
The process involved in purchasing a probate property can be overwhelming, especially for first-time buyers. The following resources can help you understand probate sales and how it works.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
