Every year in the United States real estate, including residential and commercial properties, are sold through the estate and probate process. There can be a number of significant benefits associated with purchasing a real property via an estate sale. With that in mind, there are a set of legalities associated with probate real estate that need to be understood generally by a person interested in making a purchase of this type of property.
The Legalities of Different Types of Probate Real Estate Sales
There exist three primary ways in which probate real estate is sold. When considering the prospect of purchasing real estate from an estate, an understanding of this trio of options is necessary. The three primary ways in which probate real estate is sold are:
- Estate auction
- Marketplace sale with a real estate agent
- Marketplace sale without a real estate agent
Real Estate Sale by Auction
Oftentimes a real estate sale by auction proves to be a way in which an individual is able to buy a piece of property for a particularly reasonable price. The reality is that oftentimes real property will sell for a price a good measure below market value at an estate sale by auction.
When a real estate sale by auction is conducted, a buyer needs to be prepared to consummate the sale promptly. In other words, a buyer needs to be able to demonstrate that he or she has the cash available to pay for the property if that individual has the winning bid.
Real Estate Marketplace Sale With Real Estate Agent
The second way in which a real estate sale can occur is via the open market with the assistance of a real estate agent. Overall, this type of sale is generally like any other that occurs in the real estate market. Noting this, there are some differences, most that arise from the requirements of the probate court.
Once an offer is made on a piece of property subject to the estate and probate process, the probate court may need to approve the contract. This is not always the case and depends upon the type of estate that has been opened up in regard to a deceased person’s assets. (This is an issue that is discussed in more detail in a moment.) There can be a bit of a delay between the signing of a sales contract and closing due to the need to obtain probate court approval in some instances.
Real Estate Marketplace Sales Without Real Estate Agent
Finally, probate real estate is sold in some instances “by owner.” This situation is virtually like any other for sale by owner setup, with the exception of the possible involvement of the probate court. As is the case for an open market sale involving a real estate agent, the need for probate court approval may exist once a contract is signed.
The Initiation of the Probate Process
In advance of an estate sale of any kind, including one involving real estate, there are a series of preliminary legal matters associated with the probate process that must be addressed. There are many misconceptions about the probate process that need to be clarified.
After a person passes on, a determination is made as to whether or not that individual made a last will and testament. If a will was written, the instrument will dictate how the deceased person’s property, including real estate, is to be disposed of. In addition, a will designates an individual to serve as the executor of the estate. The executor is the individual vested with the authority to carry out the directives of the will and all other matters associated with an estate. This includes all aspects of an estate sale, including the sale of real estate.
If there is no will, and the need to probate or open an estate exists, an administrator or personal representative ultimately will be appointed by the court to deal with the affairs of an estate. This individual has the same type of authority and responsibility as does an executor.
A formal probate process need not be initiated in all situations. For example, a good number of cases involve situations in which formal probate is not needed because the assets of a deceased person automatically pass to a spouse or into a trust. In other situations, an estate doesn’t have enough in the way of assets to necessitate a formal probate process in court.
Estate Sale and Property Appraisal
If the court is involved in the probate process, a judge is highly likely to order a formal appraisal of real estate before it is placed on a market for sale. This is likely to be the case even when a professional real estate agent is involved in the process and has a solid knowledge of such thing as comparable sales prices of real estate in the area.
Estate Sale Not at Arm’s Length
A relatively common occurrence when it comes to an estate sale involving real property is a transaction that is not at arm’s length. What this means is that real property is sold to an individual with close ties to the estate or deceased person. For example, a family member decided to purchase a real estate.
This type of estate sale transaction will be scrutinized by the court if a formal probate process is initiated. This is done to ensure that no heir to the estate will be put at a disadvantage due to a real estate sale that was not undertaken at arm’s length.
Professional Estate Sale Assistance
A person interested in buying real estate via some type of estate sale should consider seriously engaging the services of professionals. Professionals that can be of assistance when it comes to buying or selling real estate include a skilled estate lawyer and an experienced real estate professional.