Questions About Today’s Real Estate?
The ins & outs of probate sales
I may be making an offer on a probate property and my real estate agent suggested that I educate myself on the process. Are there any pitfalls involved in buying a probate home? What is the procedure of the court overbid? What are the bidding increments? How often do homes get overbid? What else can you tell me about probates? Max
The first thing I would suggest is that you work with a Realtor® who understands probates and can explain the process. As the seller is deceased, the typical seller disclosures will not usually be made. As with any home purchase, you should hire a competent home inspector who will thoroughly inspect the home. At this time, it may be likely that your inspector may make recommendations suggesting additional inspections such as chimney or foundation. If the judge confirms the sale, your purchase money deposit will be at risk (make sure you have completed and approved all of your inspections prior to the court confirmation hearing).
When you go to court, the first overbid is a somewhat complicated formula, it is approximately 5% (your Realtor® should explain the precise calculation to you). Assume the seller accepted your $600,000 offer and the first overbid is (approximately) $630,000. Any buyer can come to court and bid this amount for an “as is” sale (no contingencies). Assuming that a bidder offers this amount, you and any other bidders will have the opportunity to bid again. The next increment can be any amount … $500, $5,000 – whatever amount the judge determines. This goes on until there are no more bids; the highest bidder opens escrow and their deposit is given to the seller’s agent at this time.
As far as the likelihood of someone overbidding at the court confirmation hearing, in today’s real estate market with so few homes listed for sale, I think it is likely. But it depends on your offered price and the amount of the first overbid (your Realtor® should be able to shed some light on this).