5 steps to buying probate real estate in California at court

Most times, when you ask a person living in an apartment if they will ever be able to afford a house in California, they answer, “No way. It’s too expensive.”

But that’s not always true! We say, “Yes. Way.”

Whether you’re looking to buy your first home, or a second during-the-week home to avoid a long commute, you should take a look at probate properties, and specifically at the overbidding process.

Maybe you have no interest in living in the home or condo. Wouldn’t you like to invest in an income property or two that you can rent out for some passive income?

Probate sales are a great way to invest in real estate for the right kind of person. However, it’s not for everyone: You have to have some cash in the bank. You need a knowledgeable probate real estate agent /broker on your team. You should have access to an experienced probate attorney. You may have to be able to handle a “fixer-upper” by your own hands, or by using people who can repair plumbing, broken windows, etc. You need to be patient. You might be outbid, and you need to show constraint, so you don’t blow your budget during what boils down to an auction with someone in the back of the room running the bid up just to make you mad.

All of these will be explained in the 5 Steps below:

Selling and buying homes in probate is much different from selling a home that is unencumbered by state probate laws. The probate process is complex, requires special forms with a myriad of dotted i’s and crossed t’s, and it holds to a rigid court-mandated schedule. This complexity and rigidity can work for you or against you if you are pursuing overbids.

If you are interested in shopping for probate homes, an excellent way to start is to let a probate real estate agent [broker] know that you’re interested. If you would like to buy a home by overbidding the parties who are interested in the same property as you are, you can expect a call from several probate attorneys in Southern California.

Here’s why: Overbids are the best way for heirs (the probate attorney’s clients) to make the most money from the sale of their probate home or property.

So, when heirs are out of state, and they want to sell a property quickly, they may take the first bid. However, when they see there’s more money to be made when over-bidders step in, they look to probate real estate agents and their clients to up the ante. Thus, over bidders are in high demand. As stated above, it’s an excellent way to own real estate… for the right types of people.

A probate real estate agent can help you with this, but they can’t be everywhere at the same time. If you have a local paper available, you might like to subscribe to it for a month or two. Typically, houses open for overbid will be listed there, because, by law, the sale must be listed in a local paper if you’re buying in that delivery area. These days, you can bypass the soggy morning paper and subscribe digitally. You’ll also be able to take in larger geographic areas in this manner.

If you’re also in contact with probate real estate agents, you can ask them to notify you of available properties. They should be glad to take you to see the properties in person, which is better than a photo, if at all possible. Even if the probate process has gotten to the point where you can only get the house through an overbid, it should still be open for viewing. Make an appointment, and investigate the house thoroughly.

When you find something you want, go to the court even if there’s already a bid. The court rules say you have to show up in person to overbid, so the rigidity of the law works in your favor as a buyer. Woody Allen said, “Eighty percent of success is showing up,” which particularly applies to probate overbids.

As you’re choosing among properties remember that these houses are sold “as-is.”

Decide how “handy” you really are.

A probate house may have been in the family for years. Or rented out to weirdo’s. It means that you cannot expect anything from the current owners—not a termite clearance or a plumbing repair. Don’t even expect a fresh coat of paint.

Factor in the sprucing up and repairs that you’ll have to do (or you may hire someone to do it for you). Consider this while you’re thinking about your highest bid—and especially before you get caught up in “winning” at all costs. That’s why it’s good to bring your probate real estate agent with you to the court hearing.

The overbidding process is tricky. If you want to overbid, you must arrive at the court with a cashier’s check in the amount of 10% of the minimum overbid (explained below). Make sure that you double-check your math. The minimum overbid is set by law by a simple equation.

So, the legal minimum-starting overbid begins at 10% of the first $10,000 over the accepted bid. Then you add 5% of the remaining balance of the current accepted offer. To give you an example, say there was a property with an accepted bid of $190,000. To figure out the legal minimum overbid, you would take 10% of the first $10,000 (which equals $1,000) and then take 5% of the remaining $180,000 ($190,000 – $10,000) x .05 = $9,000. Together, that makes $10,000 ($1,000 + $9,000), making the legal minimum overbid on the property $200,000 ($190,000 + $10,000).

You have to bring with you a cashier’s check for an amount equal to 10% deposit of that amount. With a cashier’s check for $20,000 (10% of $200,000), you can bid on the property in question. From that starting point, the judge will determine the minimum incremental bid on the house, and you could find yourself competing with one or more other buyers interested in taking the property off the owner’s hands.

Also, plan on bringing additional cashier checks in varying increments to cover the 10% earnest money deposit. Here’s why: the final price may not be $200,000 just because you brought a cashier’s check for 10% of that amount. That check is like your ante in a poker game. It allows you to play, but doesn’t guarantee you a winning hand or that you’ll take the pot.

Keep in mind that it’s easy to get carried away in an auction setting. Before you arrive, make sure that you know what your “walk away” amount will be. Tell your probate real estate professional what the number is, so they will make sure you keep to your budget. “Know when to fold ‘em and when to walk away,” as the song THE GAMBLER says.

As in gambling, we know another hand will come along, and another probate house will, too. By keeping in contact with your favorite, knowledgeable probate real estate broker and contacting an experienced probate attorney, you will be in an outstanding position to snap up the next probate home on an overbid, within your budget, and usually for much less than on a regular sale.

OVERBIDDING can be a great way of purchasing your first home in California. By studying the probate process with an experienced probate real estate agent, and working with probate attorneys, You. Can. Become. A. Homeowner. Or you might be on your way to being a real estate mogul … in California!

DISCLAIMER: ”This content is meant purely for educational purposes. It contains only general information about real estate and/or legal matters. It is NOT legal advice and should not be treated as such. We recommend consulting a legal or tax professional before acting on any advice, opinion, or point of view described herein.”