STEP 1. Work with an Experienced Probate Real Estate Agent
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.
Step 2. Be on the Lookout for Overbid Leads
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.”
STEP 3. “As-Is” is AS-IS.
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.
Step 4. Bring a Cashier’s Check for the Proper Amount to the Hearing
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.