What is a probate sale in real estate?

When someone passes away, their assets are often divvied up through a legal process called probate. If the decedent left a will with specific instructions, their assets are divided accordingly. If not, their property is often sold in what is called a probate sale.

Probate sales can be great opportunities to buy properties at a discount, but they can also be overwhelming since they function differently from a regular real estate transaction. In this article, we’ll explain how probate sales work and how to buy a probate property.

What is a probate sale?

A probate sale is the court-supervised process of selling a home after the owner has passed away. The person who oversees the sale and distributes the proceeds to the deceased’s beneficiaries is known as the executor of the estate.

Keep in mind that a probate sale is just one part of a broader probate process, which includes validating a deceased person’s will, settling their outstanding debts, and distributing any remaining assets to beneficiaries. This process is often required even when there’s a will that clearly states how the assets, including the real estate, should be divided.

How do probate home sales work?

During probate, the court will name an executor (often a loved one or someone named in the will) and begin the process of dividing the assets. However, a probate sale is necessary only when the heirs don’t intend to keep the home but want to sell it and divide the proceeds.

Here are the basic steps of the probate sale process:

1. Petition to the court: Submit the death certificate, will, and any other required paperwork to the court to open the probate case.
2. Home appraisal: Commission a professional home appraisal to help determine a competitive home listing price.
3. Listing and showings: List the property for sale and conduct home showings to market the property.
4. Review of offers: Carefully compare offers and choose the best one. Note that some probate sales are held via auction, where the largest bid wins.
5. Sale approval: Gain the approval of all stakeholders (beneficiaries, creditors, etc.) before accepting an offer.
6. Court confirmation: Allow the court to review the final probate sale agreement and finalize the sale.

Probate sale vs. regular home sale: What’s the difference?

Probate properties are marketed the same way regular homes are: A real estate agent typically lists the property on the multiple listing service (MLS) and works with potential buyers to get the property sold.

However, while a traditional real estate sale is done with little government oversight, probate sales must go through a strict court process that takes longer and involves more red tape. For example, it’s not uncommon for a probate sale to take 6 – 12 months or even longer.

In addition, probate properties are sold as is, meaning you buy the home in its current condition and can’t request any repairs or updates as you can in a traditional home sale.

How to buy probate real estate

Considering buying a probate property? Here’s what you’ll need to do:

1. Hire a probate real estate agent

Given the complexity of the probate sale process, it’s important to work with a real estate agent who has experience with these types of sales. Research local probate agents online.

2. Start looking for listings

Shop for probate sale opportunities in public records and online real estate marketplaces. Your real estate agent can also help you find local real estate listings and off-market deals. 

3. Tour the property

Getting a home tour and paying close attention to a property’s condition is especially important, since probate homes are sold as-is.

4. Research comps

Work with your real estate agent to research what similar properties nearby sold for recently (aka “comps”). This can help you determine how much to offer for the home.

5. Make an offer

Once you’ve decided on a house to buy, make an offer.

Keep in mind, however, that even if you have the highest offer, the home may still be required to appear at auction to give others the opportunity to bid on it. Also, you’ll need to offer at least 10% of the sale price as a down payment.

Finally, don’t forget to get a home inspection before buying, since probate homes are sold as is.

Pros and cons of buying through a probate sale

As with any investment, probate properties have their pros and cons:

Pros

• Reduced price: Since probate homes are sold as-is and often have motivated sellers, they can typically be bought at a discount.
• Less competition: Many potential buyers don’t consider probate homes, lowering the buyer competition.
• Good investment opportunity: Even if you don’t intend to use it as a primary residence, a probate home can make a good investment property.

Cons

• Properties are sold as is: Buying a probate home can require taking on more repairs and risk since it’s sold as-is.
• Requires court approval: Unlike a traditional home sale, probate sales must be approved by a court, adding transaction costs and time.
• Longer transaction time: The need to get court and stakeholders’ approvals can cause a probate sale to take 6 – 12 months or longer.

Is buying a probate home the right option for you?

Buying a probate home can be a great opportunity, but it’s not for everyone.

When deciding whether to buy a probate home, consider your budget, buying timeline, and whether you’re willing to do (or pay for) repairs on the home.

FAQ about probate sales

Here are answers to some frequently asked questions regarding probate sales:

Do you have to sell a house after probate?

No, you’re not required to sell a house after probate. For example, the beneficiaries could choose to live in the home or rent it out instead.

How long does a probate sale take?

Probate sale timelines vary, but it often takes 6 – 12 months or longer.

Is it worth buying a property in probate?

Buying a probate property may be worth it for some buyers, particularly those looking for a discount or who don’t have a hard purchase deadline.

Is there a way to avoid probate?

Yes, it’s possible to have your assets bypass the probate process. Some alternatives include setting up a living trust, an irrevocable trust, a transfer-on-death deed, or joint ownership.

Can you sell a house that is in probate?

Yes, it’s possible to sell a house that’s in probate, but it requires going through a probate sale, which is more complex than a traditional real estate transaction.

The bottom line: Probate property can be worth a look

Ultimately, probate properties can be a smart way to buy real estate for less, but they come with unique challenges. Before pursuing one, ensure you understand the process, work with an experienced probate real estate agent, and have a clear sense of your budget and timeline.

If you’ve found a probate home that feels right for you, Rocket Mortgage can help you take the next step. Start your mortgage application today to move closer to making the home yours.