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Probate sale: Definition, how it works and more

Published April 23, 2024| minute read

    This article is for educational purposes only. JPMorgan Chase Bank N.A. does not offer probate loan financing. Any information described in this article may vary by lender.

    The passing of a loved one is an understandably delicate moment, but it also comes with many key details to attend to carefully. If the deceased has left behind any assets to their beneficiaries, for instance, this distribution will need to be officialized, typically involving processes known as probate or probate sales. This may feel a little daunting for both beneficiaries and prospective homebuyers, but despite the investment of time and potentially complex legal procedures, probate sales may come with some unique benefits. Let’s take a closer look at how probate and probate sales work, and break down the pros, cons and other considerations you may want to be aware of.

    What is probate?

    When a deceased person leaves behind assets that need to be distributed among their beneficiaries, the legal process of handling this distribution is referred to as probate. If you need to sell property from the estate to divide the proceeds, pay taxes and settle any of the deceased’s debts, this real estate transaction is known as a probate sale.

    Every probate situation is different, and depending on your location and the estate, it may include some or all the following steps:

    1. Filing a petition and naming an executor: To begin the process, you’ll have to file a petition with the local probate court where the deceased party lived. This petition will typically include a breakdown of the deceased's assets and, if they left one, their will. Once the petition is filed, the court will name an executor to handle administrative tasks such as appraising assets, making payments to creditors and distributing proceeds among any heirs. Executors are typically family members, friends, lawyers or accountants. They’ll be responsible for notifying beneficiaries and creditors that proceedings have started. This is when the heirs, creditors and beneficiaries can make claims or contest the will if they choose.
    2. Identifying and appraising all assets: The executor is also responsible for taking inventory of the deceased’s assets and property, including everything from bank accounts, investments and real estate to personal items and vehicles.
    3. Paying taxes and settling debts: Once all assets and properties have been accounted for, it’s time to use them to pay taxes and settle debts. In some cases, it's necessary to sell property to cover these costs — this is where probate sales come in.
    4. Distributing property and assets: Next, the remaining assets or proceeds from the probate sale are distributed among the heirs or beneficiaries.
    5. Closing the estate: After all assets have been distributed, the executor is able to close the estate with the probate court.

    Depending on whether there’s any disagreement over settling the estate, or if it’s especially large, the entire process may take anywhere from months to years.

    What is a probate sale and how does it work?

    Perhaps you’re wondering, “If a house is in probate, can it be sold?” The answer is “Yes.” A probate sale occurs when a property needs to be sold to pay taxes and debts, and also to divide the proceeds between heirs and beneficiaries. While a probate sale is just one step of the overall probate process, it involves several steps of its own, and may benefit from the aid of experienced real estate attorneys. From start to finish, the stages of a probate sale will likely look something like this:

    1. Petition for sale: Like in the beginning of the probate process, the executor will need to file a petition, this time requesting permission to sell any property in question.
    2. Appraisal: Once approved, the property will need to be appraised.
    3. Probate listing and showing: After appraisal, the property is generally listed for sale with a real estate agent who will market the property and show it to prospective buyers.
    4. Sale of the property: Once an offer is made, it will need to be approved by the executor, who is entitled to make a counteroffer.
    5. Court confirmation: Should an offer be accepted, it needs to be confirmed by the probate court. This will typically involve a hearing where the sale is reviewed by the court to ensure it’s fair to all creditors, beneficiaries and heirs. If this goes smoothly, the sale will be confirmed.
    6. Distribution of proceeds: After confirmation of the sale, the closing process will commence. Once the probate property is sold, the proceeds will be divvied up to pay any relevant taxes or debts, and, finally, distributed among the heirs or beneficiaries.

    Pros and cons of buying a probate house

    Understanding the pros and cons of buying a probate house could help you mitigate some of the downsides and make informed decisions as you explore this type of sale. While every probate process is different, here are some of the potential perks and considerations to keep in mind:

    Pros of probate sales

    • Potentially below-market prices: Probate sales are often priced below market value, though this may be due to the longer timeline or the fact that probate properties are generally sold as is.
    • Clear title: Because the probate process is expected to resolve any liens or other title issues, probate sales often come with a clear title. This means there’s generally less risk of issues that could affect the buyer’s legal ownership of the home or property.
    • Court oversight: Having the court involved in the sale could give you a little extra peace of mind and protection, as well as the knowledge that the process is being settled fairly.
    • Less competition: Probate sales don’t typically get as much exposure as other properties and may come with their own complications. This may mean less competition for buyers who aren’t in a rush or are willing to purchase a home as is.

    Cons of probate sales

    • Timeline: Because of the complex probate process, probate sales may take longer than other types of sales.
    • Condition: Probate sales are often made as-is and may not be in the best condition. This could mean pouring more money and time into the property.
    • Court costs: The legal and administrative costs involved with a probate sale could add up over time. If you’re looking into one, it may be wise to budget for unexpected costs.

    Finding a probate property

    If you fully understand the pros and cons of buying a probate house and are looking to find a probate property, there are several ways to locate one:

    • Public records: Your local probate court should be able to provide you with records of recent probate cases, allowing you to contact the executors of any cases that are still current.
    • Local listings: Look online or in your local newspaper to find any current probate listings for probate sales. Auction listings are also your friend, as many probate properties are sold through that bidding process.
    • Talk to the professionals: Local real estate agents or real estate attorneys may be aware of probate sales that might not be immediately available to the public.

    In summary

    The probate process and probate sales may seem a bit complicated and time-consuming, but they’re necessary parts of managing an estate after someone passes away. For the loved ones of the deceased and their executors, probate may help ensure a fair distribution of assets and the payment of pesky taxes and debts. For buyers, a probate sale could mean lower prices, less competition and the reassurance of a clean house title. While this may come at the cost of a little extra time and some extra expenses, if you do your due diligence, a probate sale could help you find the property that suits your needs.

    Probate sale FAQs

    1. Are probate sales cash only?

    While cash sales are appealing to some sellers, probate sales aren’t strictly cash only. That said, you will likely be required to put down a cash deposit if you’re looking to make an offer.

    2. What is a certified probate real estate specialist?

    A certified probate real estate specialist (CPRES) is a real estate agent or broker who has completed a certification program tailored to the probate process.

    3. Can you avoid probate with a will?

    While many estates, with or without wills, go through the probate process, there are some exceptions. The rules vary based on where you live, the size of the estate and the nature of the will, so it’s best to consult with your local real estate professionals or attorney for some insight on your specific situation.

    4. Can you finance probate sale?

    Technically yes, but since probate sales don’t have contingencies, it’s more difficult to get a mortgage to finance the sale. Note that Chase doesn’t currently provide such financing. It is recommended title on the home is clear and has gone through the probate process. Consult a real estate professional for advice.

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