Probate is a legal process that allocates the assets of an individual who has recently passed away. Probate can include paying remaining debts, identifying legal heirs, and distributing the deceased’s belongings to their beneficiaries. In California, the probate process can sometimes involve an overbid, meaning that interested parties have the opportunity to bid on a probate property. An overbid is designed to ensure the probate property for sale is sold for fair market value and that the proceeds are distributed to the appropriate parties.
If you’re interested in purchasing California probate real estate and want to be competitive during an overbid, it’s important to understand how the process unfolds. In this guide, we’ll walk you through how overbids work during probate in California, including common reasons for overbidding and how to calculate a competitive offer, all so you can secure the property you’ve got your eye on.
Understanding the overbid process
To calculate the overbid amount during the probate process, interested buyers must add 10% of the first $10,000 of the original price plus at least 5% of the remaining amount. So, if the initial asking price for a property were $1,000,000, the minimum overbid amount would be $1,050,950.
Understanding the overbid process is essential if you’re hoping to bid on California probate real estate. By being aware of the common reasons for overbidding and how to calculate the overbid amount, you can be better prepared to submit a competitive offer.
Strategies for being more competitive
From there, as with any real estate investment, you’ll want pre-approved financing so your offer can go through without a hitch. Not only that, but pre-approval demonstrates you’re serious about investing and have the means to do so. You may also consider increasing your down payment or deposit amount to demonstrate your commitment to purchasing the property and make your offer more appealing to the seller or estate executor.
A shorter escrow period or waived contingencies can be appealing to estate executors who want to close the sale quickly as well. However, with shortening your escrow period, you’ll want to be sure you’ll still have enough time to do your due diligence before closing. For contingencies, consider waiving the inspection or home sale contingencies if you want to make your offer stand out. Finally, you may want to consider submitting a letter with your bid that highlights your interest in the property and explains why you’re the best candidate for the purchase.
Tips for navigating an overbid
You’ll want to be prepared for multiple rounds of overbidding, too. The overbid process can be a lengthy one, and it’s not uncommon for there to be a few rounds before a final offer is accepted. Be ready to increase your offer if necessary, and work closely with your lender and real estate team to ensure you’re not bidding beyond your budget.
Then, of course, though it can be tempting to continue bidding on a property you love, it’s necessary to know when to walk away. Always make your budget and the property’s actual value your top priorities when considering whether to continue bidding or look elsewhere.