What Is A Probate Property? Problems Buying Probate House

What Is A Probate Property? Problems Buying Probate House

What Is A Probate Property?

Probate property refers to assets owned by a deceased person that must go through the probate process. Probate is the legal process of administering a deceased person’s estate, which includes validating their will (if they had one), identifying heirs and beneficiaries, paying any outstanding debts, and distributing the remaining assets according to the will or state laws.

Examples of probate property that would need to go through probate court include:

• Real estate, houses, land, or other real property solely owned by the deceased person. Jointly owned property may avoid probate depending on the type of joint ownership.
• Bank accounts, investments, retirement accounts, and other financial assets in the deceased’s name alone. Accounts with named beneficiaries can bypass probate.
• Vehicles titled only in the deceased’s name.
• Personal possessions like jewelry, art, furniture, etc. if not specified in a will.
• Intellectual property rights held by the deceased.

The probate process ensures the property is distributed properly and legally after someone dies. The property must be appraised and may need to be sold to pay any debts before distribution to heirs.

Problems Buying Probate House

Here are some of the main problems that can arise when buying a probate house;

1. One major issue is that the probate process itself can cause significant delays in closing the sale. It may take months or even over a year for the executor to obtain probate and get authority to sell the property. This can leave buyers in limbo.
2. Another problem is that probate houses are often sold “as is.” The estate won’t make repairs or fix issues, so buyers take on more risk. There could be undisclosed problems like a bad roof, faulty wiring, mold, etc.
3. Likewise, the executor selling the home may not have full knowledge of its condition, maintenance history, or other issues. They can’t disclose what they don’t know. This information gap puts buyers at a disadvantage.
4. There may also be competing bids or legal challenges from heirs contesting the will. This can tie up the sale in court and lead to uncertainty for buyers over whether their offer will be accepted.
5. Finally, financing can be trickier for probate purchases. Not all lenders will provide mortgages on properties before probate is granted, and special approvals may be required.

Can You Live In A House During Probate?

It is generally possible to continue living in a house that is going through probate, as long as you have the right to be there. For example, if you were already living in the home when the owner died, you can usually remain there during probate.

The executor or estate representative typically cannot force you to move out unless there is a valid reason, like plans to sell the home.

However, you may be expected to pay rent to the estate while living there, especially if you were not previously on the title or lease. Any rental agreements made with the deceased may transfer to the executor during probate. The executor can collect rent on behalf of the estate.

If the will or trust specifies the house must be sold or given to an heir, the executor has the power to require you to vacate, with reasonable notice. They cannot simply change the locks and force you out without going through proper eviction procedures.

Maintaining the home, paying utilities, insurance, and taxes should continue during probate to avoid complications. Any repairs or maintenance issues should be addressed as well.

In most cases, beneficiaries of the home or trusted family members are allowed to remain in the house throughout the probate process.

However, it depends on the specific circumstances and laws in each state. Consulting a probate attorney is advisable if there are any disputes.

Are Probate Sales Cash Only?

Probate properties are typically sold “as-is” in a cash sale, meaning the estate will not make repairs or take contingencies. The estate needs the cash to pay off debts and distribute to heirs. Financing may not be available since title is still held by the deceased.

Buyers will likely need to put down a deposit around 10% of the purchase price when making an offer. This deposit is given directly to the estate, not held in escrow. If the buyer backs out, they may lose this deposit money.

The probate court will need to confirm the sale before closing, which adds time to the process. In California this usually takes 4-6 weeks. The estate cannot accept or reject offers until court confirmation.

Closing costs and real estate commissions for probates are typically higher than normal sales. Costs range from 7-10% of sale price. The estate pays realtor fees up to 4% and may charge the buyer extra fees.

Probate properties can be a way to buy real estate below market value if heirs want a quick sale. But the buyer takes on more risk and needs to have funds readily available. Consult professionals before buying.

How To Buy A Probate Property

Here are some tips for buying a probate property:

• Get pre-approved for financing. While probate sales are often cash, you can still try to use financing if the estate approves. Shop lenders to find the best rates and terms.
• Hire a real estate agent who specializes in probates. They can guide you through the unique process and paperwork. Make sure they have experience dealing directly with estates.
• Be prepared to act quickly. Estates want to liquidate assets rapidly. Have your financing ready and make your strongest offer upfront.
• Expect a higher purchase price. Admin fees and delays mean estates often overprice initially. Research comps thoroughly to make an informed offer.
• Conduct inspections before closing. Probates are sold “as-is” so inspect thoroughly for repairs needed. factor these costs into your offer.
• Read the probate sales package carefully. It will contain all terms and disclosures from the estate on the sale. Know what you’re getting into.
• Work directly with the estate administrator. They have authority to negotiate and accept offers on behalf of the deceased owner.
• Get representation. Consult a real estate attorney to review the purchase contract and represent you in the transaction.
• Be ready to pay a 10% deposit. This is released directly to the estate upon acceptance of an offer, not into escrow.
• Plan for a longer timeline. Court confirmation can take 4-6 weeks after your offer is accepted. Factor this into your plans.

The Pros and Cons of Buying a Home in Probate

Here is a summary of some of the main pros and cons of buying a home in probate:

Pros of Buying a Home in Probate:

• Probate properties may be sold below market value since the executor is motivated to sell quickly. This allows buyers to purchase the home for less.
• There is often less competition from other buyers since probate sales are less widely advertised compared to traditional home sales.
• Buyers may be able to negotiate repairs or upgrades by making them contingencies of the sale. This provides leverage not always available with regular sellers.
• Probate homes can be a way for buyers to purchase desirable properties in popular neighborhoods that don’t come up for sale frequently.

Cons of Buying a Home in Probate:

• The probate process can cause lengthy delays in closing, leaving the buyer in limbo for months.
• Probate homes are sold “as is.” The estate won’t make any repairs, so buyers take on more unseen risk.
• The executor may not know details about the home’s condition that a seller would typically disclose. This information gap puts buyers at a disadvantage.
• Financing can be trickier. Not all lenders will provide mortgages before probate is granted, and special approvals may be required.
• Competition from other buyers could arise at any time, even after an initial accepted offer.

So probate sales provide opportunity for buyers but also come with risks and uncertainties to weigh carefully.