The CREM Group has represented probate, conservatorship, and trust properties in California for many moons. And we sometimes forget that not everyone knows how probate transactions work. That’s a blind spot, for sure. How often do people find themselves dealing with their family’s estate going into probate? Once or twice.
On the other hand, some investors discover they can pick up a probated home for a lot less money than a “regular” home for sale and resell it for a profit. Equally, families looking for a residence that might be a lower price than a traditional home might look in the probate listings. Let’s discuss some of the main differences between probate and “regular” home sales and purchases.
HOW PROBATE WORKS
We have told you about probate sales in past posts, but briefly, in California, whenever anyone dies with or without a will, probate is required. We have also indicated that having a revocable living trust, can avoid probate. If the estate (with the home as its most significant asset) goes into probate, the court process for handling the probate sale takes effect. A probate transaction can take a year or longer. Because you can save tens of thousands of dollars on purchasing a probate home, it is sometimes very worthwhile if you know what you’re doing. But it’s complicated. Let us help by listing a few common mistakes.
COMMON MISTAKES
1. BEING IMPATIENT
Everything takes time on a probate purchase.
In the case of Limited Authority (vs. Full Authority), court confirmation of the sale is required. If it’s a court confirmation, the process will take longer than a traditional real estate transaction. Also, the court will insist that the property is marketed correctly and completely. That takes time. If you’re in a rush, you can miss dots and crosses of your I’s and T’s. It’s stressful, and it will often lead to failure.
2. ACCEPTING ASKING PRICES WITHOUT DOUBLE-CHECKING
The buyer would like to think that the court’s appraisal is accurate mainly because the property is supposed to sell at 90% of the Court Referee’s appraised value. What if they’re wrong? They sometimes are, and their price isn’t necessarily the same as the Fair Market Value. Under or overvalued is equally a problem because if it’s off by too much, the transaction can be challenged. Time passes. You’re still waiting.
3. PASSING ON THE HOME INSPECTION
Prospective buyers in a hurry to buy or trying to save money sometimes attempt to avoid this step/expense. That’s not a good idea. If there’s something wrong with the home, it’s better to find out before you buy it because afterward it’s too late. This missing step in too many probate sales transactions is why probate purchases are considered risky. But they don’t have to be. We recommend investigating and inspecting to avoid any surprises.
4. NOT KNOWING THAT PROBATE HOMES CAN CONTINUE TO BE MARKETED
This is a tough one. If you’ve bid on the property, the court may require the home be listed for sale in the estate’s best interest. It invites new (higher) bidders but if you were selling, you’d appreciate this. Best to take it in stride.
5. FAILING TO PREPARE FOR THE AUCTION AT THE COURT HEARING
The auction-style bidding for the home, like for a painting or a well-built cow or something, surprises and confounds many first-time probate home buyers. Because of that, they are not prepared with the correct check amount, and they don’t have enough money to buy at a higher price. This may happen because someone overbids the original price.
We have also seen that a newbie probate buyer has made their check payable to the wrong entity. Lots of little things can go wrong. It pays to sweat the small stuff.
The best preparation of all? Be prepared for the unexpected. If you realize that there could very well be no room to negotiate on the terms of the sale, you will be able to let it go and continue on to the next one. If the court takes over, they control the increments for overbids, they run the auction, and they set the terms. Be pleasantly surprised if your offer is accepted without an overbid or an auction.
WHY BUYING PROBATE HOMES IS STILL A GOOD IDEA
- You may be able to save money on a home for yourself or get a good deal on a house to resell.
- Probate homes might be thought of as neglected homes. That’s true sometimes, but not always.
- People with the money to own a home often live in excellent neighborhoods, especially in Southern California. And buying a property here for less than the market is a great strategy.
- With every mistake comes learning. With learning comes savvy. And with savvy comes success. Jumping into the probate and trust home or commercial property markets can yield great investments and excellent values for your first home or for your promising real estate empire.
Please check our listings. You might be pleasantly surprised, and we at The CREM Group would be glad to help you through your first or your fiftieth probate or trust home transaction.
As long-time probate real estate agents and as attorneys working in and around all kinds of properties in Los Angeles and Orange Counties, we at The CREM Group have made sure we support our clients so they know the alternatives to buying, selling, or renting probate, trust, and conservatorship homes and commercial properties in California.
– – – – –
As always, contact us by email here if you have any questions about real estate, probate real estate, conservatorship, or trust real estate properties, especially in Los Angeles and Orange Counties in California.
Mark Cianciulli, Esq. [email protected]
DISCLAIMER: This content is meant purely for educational purposes. It contains only general information about real estate 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 material, opinion, or perspective described herein.
#CommonProbateMistakes #HomeInspection #ProbateRealEstate #ProbateIsAGoodIdea #LearnByDoing #BuildingARealEstateEmpire