Probate refers to the general process of administering a deceased person’s estate (including all real estate, securities, and other property). It is automatically triggered when someone dies and involves a review and validation process before a competent probate court.
If the deceased person (or decedent) left a will, the heirs and beneficiaries identified in the document will rightfully inherit the property.
In cases where there is no will (intestate), the decedent’s assets automatically become the property of the state. The state will take charge of selling the property via the probate court. This also applies to instances when the decedent has no heirs.
How does the probate process work?
- The executor of the estate is appointed. This individual is typically named in the deceased person’s will, but if the property owner died without leaving a will, the court will appoint an executor.
- The decedent’s property is identified and inventoried. The executor will be tasked to find, secure, and manage all assets left behind by the decedent.
The executor decides whether to transfer the property to an heir or to sell. This decision depends on specific instructions indicated in the will, as well as any outstanding debt left unsettled by the decedent.
- The property is appraised. If the property will be sold, the executor must determine the appropriate, market-based listing price for the property with the help of a professional real estate appraiser or local probate real estate agent.
- The property is put on the market. In cooperation with a real estate agent, the executor will sell the property on the local housing market.
- The sale must be approved by the heirs. When a purchase deal is made, the heirs of the estate will be notified of the impending sale. Heirs have 15 days to object to the transaction. If all heirs approve, a court date will be set to make the sale official.
Why do some people want to avoid the probate process?
In most cases, property owners prefer or are advised to avoid the probate process because of the following significant inconveniences:
- The process is time-consuming. Selling real estate through probate court can take anywhere from three months to multiple years to complete.
- Probate costs a lot of money. Beneficiaries could lose significant portions of their inheritance just to pay off attorney and court fees. Federal taxes can also reduce the final amount of beneficiaries’ inheritance.
- Most documents require original signatures from all parties concerned. This is a huge inconvenience, especially if beneficiaries, the executor, and the probate attorney do not live or work near each other — or worse, if some parties live in another city or state. Faxed or emailed signatures are not considered valid for probate purposes.
- The probate process assumes that all beneficiaries agree with the terms of the will. Conflicts can arise between beneficiaries, especially when inheritance is not evenly distributed.
How property owners can avoid probate
Setting up a revocable living trust (RLT) allows property owners to spare their future heirs from the probate process and its associated inconveniences.
A living trust is a signed and notarized document that declares the rightful transfer of property to designated recipients after the owner’s death. It takes effect faster and more directly than a will, because probate court is not involved.
Setting up a trust does not require the services of a lawyer, so it is one less expense to worry about. A trust also protects your privacy better. Unlike transfer by probate court, the properties and the transfer of ownership do not become public record.
Who benefits from probate real estate properties?
While owners would rather avoid probate, property buyers and investors find notable benefits in probate properties.
The probate real estate market is often a good place to find residential or commercial properties priced below their actual market value. Investors find excellent opportunities to obtain cheap assets that can generate lucrative returns here. The only disadvantage is that buying probate properties involves a long and tedious process.
How do probate sales work?
- Find probate properties. Buyers and investors can inquire directly at the probate court for active probate cases. Obituaries published in the local newspaper can also provide adequate leads. But the ideal option is to consult a local real estate agent who specializes in probate property transactions.
- Make an offer. Buyers must commit a 10% deposit to the executor to make their offer official. Estates can only accept offers on a provisional basis. The offer can only be confirmed in probate court. If you decide to withdraw your offer, you will lose your 10% deposit.
- Confirm the sale in probate court. A court date will be set 30 to 45 days after the estate accepts your offer. Throughout this period, the court will instruct the estate to market the property with the accepted offer price. If other buyers are interested, they will join you at the court hearing to bid for the property in an auction-style sale. If you lose to competing bidders, you can get your 10% deposit back.
- Close the sale. If you make the winning bid, demonstrate your ability to pay by presenting a cashier’s check. Sign a contract with the court to make the sale official. The closing process may take another 30 to 45 days to complete.
When someone passes away, the responsibility of determining what happens to their belongings and handling their final business affairs is left to their family members. In most states, estates that have not been included in a living trust are required to go through the probate process.
Probate is the legal procedure that ensures the correct individuals are given the rights to the decedent’s physical and financial assets. In situations wherein the decedent’s estate includes a property which will be sold during probate, you want to work with a real estate agent who has plenty of experience handling probate transactions. In this article, we give you several helpful tips on finding the right probate real estate agent.
When property is said to be in probate, it means that the court has taken over the supervision of a deceased person’s possessions in order to determine its heirs or beneficiaries. If the court sees it fit to liquidate assets in order to pay off the debts of the deceased and to give the heirs their share of the inheritance, the property then goes into the market. If you are the executor of the will or the appointed administrator of the estate, it falls on your hands to put the property up for sale. In this article, we give you helpful tips on selling a house in probate. These include hiring a probate real estate agent and attorney, filling out all required disclosures before selling, and keeping the home well maintained. By following these tips, you’ll be able to start selling in no time.