What is a probate sale?
Updated March 14, 2022
When someone dies, particularly if there’s no will, property sales and the disposal of all of their other assets are handled by a probate court, whose mandate is to get the highest possible prices.
Probate courts are established and operate under regulations set by each U.S. state. Because of this, the rules and procedures, and even when they come into play, vary.
In most instances, estates go through the probate process even if the deceased made a will. Careful estate planning, however, can minimize or even eliminate the procedure.
In New York, for instance, all estates valued at over US$50,000 go through probate even if there is a will. The only way to avoid probate is to place assets in a revocable living trust.
The executor designated in the will is the point person for the home sale. If there is no named executor, the job falls to the closest relative.
Probate sales require a lot of paperwork, and while deals can be had, they're not for the faint of heart. Credit: Dimitri Karastelev/Unsplash
California follows a similar procedure to New York’s.
Several countries, including Australia, England, Scotland and Wales, also use the probate system.
Probate courts have been in existence for centuries.
The purpose of the process, in addition to facilitating the disposal of assets, is to verify and validate the authenticity of the will.
The English word “probate,” in fact, comes from the Latin verb probare, which means to prove or examine.
While it’s possible to buy some properties at reduced market rates in probate sales, there are several drawbacks that may mitigate any gains.
The sales are so complicated that buyers often have to hire a real estate lawyer or work with a real estate agent who has expertise in this field. The process is drawn out, and there is an element of risk—unlike in conventional sales, the deceased, of course, cannot disclose any relevant information—the bathroom faucet leaks or a major shopping center is going to be built next door—that would potentially negatively impact the property’s price.
Sometimes, potential buyers pay to have the home inspected to flag any flagrant problems even though they may not ultimately purchase the property.
Probate sales also can take longer to close than conventional ones, with the probate court’s calling all the shots and setting the timelines.
It is the court that authorizes a real estate agent to list the property at a price set by the court, often with the input of the agent, a representative of the estate, a licensed home appraiser or other consultants.
Once the property is on the market, potential buyers can make offers that must be backed up with a 10% down payment, usually conveyed via a cashier’s check. Once an offer is accepted, it is sent to the court for approval at a confirmation hearing.
A sale date is set, and a waiting period of 30 to 45 days ensues so the property can be marketed and advertised with the price the potential buyer has offered.
Family members of the deceased are required to be notified and must be given time to comment on the sale.
During the actual confirmation hearing, which is rather like an auction, other bidders may make higher offers. The winning bidder is required to produce the 10% down payment in cash or a cashier’s check immediately.
If there are no additional bidders, the property is sold to the original bidder, who loses the 10% deposit if he/she backs out of the sale.