The CREM Group has been representing 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 many times in their lives 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 talk about some of the main differences between probate and “regular” home sales and purchases.
HOW PROBATE WORKS
We have talked 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 by having a revocable living trust, probate can be avoided. If the estate (and the home is usually the biggest asset) goes into probate, then 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 worth the effort if you know what you’re doing. But it’s complicated. Let us help by listing a few common mistakes.
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 for a traditional real estate transaction. Also, the court will insist that the property is marketed properly and completely. That takes time.
ACCEPTING ASKING PRICES
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 the price isn’t necessarily the same as the Fair Market Value. There might be some discussion on this to avoid you overpaying for a home because it was misvalued.
PASSING ON THE HOME INSPECTION
Prospective buyers in a hurry to buy or in an attempt to save money sometimes try to avoid this step/expense. 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 researching and inspecting to avoid any surprises.
NOT KNOWING THAT PROBATE HOMES CAN CONTINUE TO BE MARKETED
This is a tough one. If you’ve made a bid on the property, the court may require that the home still be listed in the best interest of the estate. It invites new (higher) bidders, yes, but if you were selling, you’d appreciate this. Best to take it in stride.
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 haven’t enough money to buy at a higher price occurring because someone overbids the original price, or they sometimes may not have made out their check to the estate. Lots of little things can go wrong. And finally, there’s no room to negotiate on the terms of the sale. The court controls the increments for overbids, runs the auction, and sets the terms. It sounds daunting, but you may save thousands.
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.
We would also suggest that probate homes might be thought of as neglected homes. Far from the truth! The people that have the money to own a home often live in excellent neighborhoods… especially in Southern California. And what a great idea to buy a property here for less than market. Please check our listings. You might be pleasantly surprised, and we at the CREM Group would be glad to help you.
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 in 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.
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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.
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.
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COVID-19 Safety. As all of us at the CREM Group market and sell our inventory of probate, trust, and conservatorship homes for our clients, we adhere to the COVID-19 regulations set by the California Association of Realtors.