Probate property is an asset or assets that are left by a deceased person and that must pass through probate court. This includes assets that are either distributed by a will or left by a person who has died intestate, or without a will. Although real estate is usually what is referred to when discussing the buying and selling of probate assets, any asset that is part of the estate—such as jewelry, stocks, cars, and collectibles—can be sold. Because an executor's main responsibility is to preserve the estate's assets so they can be distributed to heirs, the selling of probate assets usually occurs only when necessary to pay off creditors, although other situations such as eminent domain might necessitate a sale.
Selling probate property
Probate property is often sold when there is not enough cash to pay the debts of the estate. For example, if the deceased left a home worth $100,000, $2,000 cash, credit card debt of $20,000, and no other assets, the home would need to be sold to pay off the debt and settle the estate. The remaining proceeds of the sale would be distributed to the heirs. Probate property is also sold when the deceased dies intestate and with no immediate heirs, in which case the courts may order the property to be sold and the closest relatives located to receive the proceeds.
Probate property can be sold by:
- The executor of the estate, or person named in the will to manage the business of distributing and wrapping up the estate
- The administrator of the estate, or person appointed by the court to manage the estate when the deceased dies intestate and heirs are seeking to have the estate administered
- The court, in intestate situations where no heirs are seeking administration
Heirs can also seek a sale after they inherit the home through a probate procedure, at which point the home is technically no longer probate property.
Probate property insurance
No matter who is selling the property—the court, the executor, or the heirs—it's important to make sure the home is insured throughout the process, as the homeowner's insurance policy most likely expired when the deceased passed away. Therefore, a new policy must be purchased in the name of the current owner, either the estate of the deceased or the heirs who have inherited and wish to sell it, so that it is protected against fire and other damage.
How to buy probate property
Real estate sold in a probate sale can be a very good bargain for investors or potential homeowners. Generally, the executor or administrator wants to sell the property as quickly as possible, often below market value. Improvements are usually not made to the property prior to the sale, so this can be a good opportunity to buy a property to either flip it or improve it to live in.
The procedure for buying probate real estate is different in each state. When a property is sold by the court, it is placed for sale like in an auction. Your local court may list the properties available on its website. It's also possible to track down properties for sale by researching people listed in obituaries and determining if they left property behind. Depending on the jurisdiction, you must submit a bid or appear at the auction. If you win, you are usually required to pay in cash or check.
If the executor is selling the property to satisfy creditors, you must send an offer to the executor. The property may or may not be listed for sale with a real estate agent. In many states, the court must approve the purchase offer, which can take several weeks. In some situations, the heirs decide to sell the home themselves after the probate process has ended. In such situations, the sale is conducted like a regular real estate transaction in your state.
For help selling probate property, you may want to talk to an attorney or use an online service provider, who can help you understand the rules and procedures in your state.
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