How Do Probate Sales Work?
Sometimes, the deceased will leave behind a will that accounts for everything, including what they want done with their property and who should be in control. This is less common than you think. Only 40% of Americans over the age of 45 have even the most basic plan in place.
Every state has different laws, but one thing will always be the same. The probate court will get involved, appoint an administrator, and give the most power to that person.
The more you know, the easier it will be to complete the probate process.
What Has To Happen First?
If there was no will, there was no executor. If that’s the case, the court has to appoint one. You aren’t allowed to step in and nominate yourself, even if no one wants to contest you.
Even if you’re the deceased’s only child, you do not automatically inherit the property without a will. In the event that this happens, you’ll need to submit the proper forms to the court.
The court will almost always appoint the closest living heir as the executor.
As the executor, you’ll have the biggest say in how all aspects of the estate are handled, including the home and the property will be transferred over to you.
Nothing can happen until the property actually belongs to the executor, so it’s best to get the ball rolling as soon as possible.
What Should I do as the Administrator During the Probate Process?
As the administrator during the probate process, you are responsible for the legal matters of the estate. There are a lot of very important decisions to make. The best thing you can do is make sure every decision you make is an informed one.
1. Understand the Process
Probate starts with filing a petition. If the will already explains who the executor is supposed to be, you can hand the will over to the court.
If there is no will, the named executor is deceased, or the named executor doesn’t want to be the executor, you’ll have to file a petition from scratch. If you and the other heirs can’t agree on who should be the executor, the court can decide.
The court publishes the probate in the newspaper to notify creditors that the family may not be aware of. You’ll need to notify creditors you know about and tell them about the probate.
Next, you’ll have to take an inventory of the entire estate.
This includes personal effects and any assets that can be liquidated (like stocks, bonds, interest, etc.). You can hire an appraiser if you need to.
Are you personally responsible for their debts?
All the debts left behind are to be paid from the estate - not out of your pocket. If the estate can't pay the debts, it doesn't fall back on you. As long as you don’t misrepresent debts, hide assets, or lie to creditors, you’re in the clear.
Once that’s all squared away, the property is then transferred to the administrator. The court will go over claims made by creditors, and decide which ones should be paid. If anything that is leftover is supposed to go into a trust fund, the trusts will then be set up.
You’re free to move things around after the court calls the debts settled.
If a huge debt needs to be paid, the court might take special actions. In some states, the probate courts may require that the home be sold at a certain minimum price to pay those debts. If you’re unaware of your state’s probate codes, you may need to do a little research.
2. Communicate with Your Family
You have some important conversations coming your way. The last thing you need is everyone arguing about what to do during probate. This can cause more than a few arguments and awkward Thanksgiving dinners: other people who feel that they’ve been mistreated during the process may be able to personally sue you, or file claims against the estate.
People are going to be a little upset – that’s normal. Just make sure you’re talking about what you’re going to do before you do it. Don’t make any moves unless everyone is aware. Let your family and the other heirs become a part of the decision process. Don’t leave any room for surprises.
3. Prepare the Home
No matter what you decide to do, the home needs to be prepared. If you want to have an estate sale, sell the property, rent the property, or move another family member in, you have to deal with everything that’s been left behind. Bring a few trusted heirs or family members with you, and go through the home.
Pack things up, and give the house a good cleaning. This may be especially necessary if the individual who owned the home was elderly, ill, or otherwise unable to care for their home. If the home is in bad shape, you may want to fix up the property. If you don’t or you can’t afford to, you still have some options.
What are you going to do with the home?
Now, it’s time to make the big choice.
You need to decide whether to sell, rent, or keep the property. Keeping the property is generally the easiest thing to do. If you or a family member want to move in, it’s as simple as packing and unpacking.
Or, you could keep it for a rental for extra income, or cash out for a large sum of money to cover expenses, debts, etc
Renting the property may have its perks, especially if you can make some money. Who couldn’t use a little extra money in their wallet at the end of the month? I
f you want to rent the property out yourself, you’ll have to look into becoming a landlord, and take on the responsibility of property management.
If you don’t want the added burden, you can hire a property management company. You’ll be making less in profit, but you’ll also get a free pass on doing a lot of the dirty work.
If you want to sell the house, you can go through a realtor, or an investor. If the house is worth a lot and the area has a fast moving real estate market, it may be worth checking out real estate agents. Just don’t forget they’ll take a commission. If the house sits on the market unsold for a while, the realtor may suggest reducing the price, but their commission will stay the same. With an investor, you may be getting less than what the home is worth. This has some distinct advantages.
How to Sell Your House in Probate
The administrator is the one responsible for making the decision to sell the probate property. If there’s multiple heirs, the other heirs have to be involved in the sale process.
This is because the funds from selling the home go directly into the estate, and the total value of the estate affects every heir. The court manages this process to make sure that everyone is informed.
The court handling the estate will be involved with the sale process most of the time.
How much control does the court have?
Depending on where you live, it may be possible to bypass the court, allowing you to do things the way you want. You might be able settle the estate and get the property out of probate without help. When all of the heirs agree, there’s no reason to get the court involved. Just make sure you’re aware of the probate laws in your state.
If you can’t avoid the court, or you need to sell the home while it’s still in probate, you’ll have to play by the court’s rules and require their approval. The court is going to want to get an appraisal, and they’re going to tell you how the home should be listed.
This usually involves aggressive advertisement and publishing the sale of the home in major local newspapers. The court can also approve or deny appraisals, and determine a minimum sale price.
What can I sell my home for?
The court is acting in the best interest of the deceased when it comes to settling the estate. This means that they want the home appraised correctly, and they won’t allow the home to sell for less than 90% of its appraisal value.
The executor is responsible for finding an approved appraiser to inspect the property and determine its value. If the executor cannot do this, the court will take on that responsibility. The court will give you a real estate agent, who is responsible for handling the sale.
The bidding starts at 90% of the appraisal value. Potential buyers will start putting in their offers.
Like in any auction, the home goes to the highest bidder.
The winning bidder will present the court with a deposit check, and that check will then become part of the estate. The court can use the check to pay estate expenses, and fulfill debts or allotments as per the estate’s requirements.
What if the house is in bad condition?
If the house is in bad shape, it may be difficult to find a buyer. Houses in bad shape, especially if there is significant structural damage involved, will appraise very low. The probate court wants the highest offer possible, but properties that are undesirable don’t draw up much attention.
A real estate agent may not be able to market them, and this makes the sale process difficult.
Are there advantages of selling to an Investor over a Realtor?
Sometimes, selling the home fast for cash is really the best way to do things. It closes probate quicker, and it’s always a guaranteed sale.
Other times, it isn’t.
A realtor may be able to do a better job – especially if the house is in good condition and the market is in your favor. Investors on the other hand, will buy great properties like these, but won’t be able to guarantee the 90% of the appraised value.
In all truthfulness, Investors are better suited for people in a hurry, especially if the property involved needs a lot of work or can’t sell easily on the market.
Is It Possible to do a Short Sale on a Probate Home?
You have the option to request a short sale on a probate home that’s seen better days. If the house needs a lot of work, buyers may not be drawn to it – no matter how reasonable the price is.
Since the probate court is only interested in selling the home close to the appraisal value, low value homes can still move just as quickly as in-demand properties in great areas.
You just need to find the right real estate investor.
What Resources Are Available To Help Me Through the Probate Process?
This is probably the first and only time you’ll have to handle the probate process. It’s only natural to feel a little unsure about what you’re doing. There’s no shame in getting help. That’s why so many probate resources exist.
Instead of biting off more than you can chew, try leaving some of the work to professionals who are qualified to take on certain jobs associated with the probate process.
1. Paperwork and Law Resources
If the will of the deceased was unclear, or the deceased did not have a will, you’ll need to file probate paperwork in order to start the process. Nobody can do anything with the estate until an executor is appointed. If you’re looking to be the executor, you’ll have to petition the court. You’ll be able to find this paperwork online, or you can request it at the court house.
You’ll also need to understand probate law in your state. Many states use Uniform Probate Code, though some states do things a little differently. You can read comprehensive information about probate law as it varies state to state on the internet.
2. Real Estate Agents
You may be able to start selling the home during the probate process. You’ll need to get the property appraised and set a minimum selling price with the help of the probate court.
The real estate agent will focus on the promotion and sale of the property, though going this route means that the value added to the estate after the sale of the home will be less than you expect. You have to pay the realtor’s commission.
If the probate property really needs work, you’ll have to hire contractors. Little things like repainting or changing outlet covers are simple enough to do on your own, but major work probably needs to be done by a pro.
Old, stained carpet will need to be removed and replaced. New windows may need to be installed, and the roof may need to be fixed. If you don’t have the budget for that, you can sell the home the way you found it.
4. Moving Companies
After the estate has been settled, you’re going to need to do something with all of the personal belongings that have been left behind. Let family members decide which of the personal effects they want, and save the rest for an estate sale. If you don’t intend on selling any of it, you’ll still need to clear it out of the home and get it someplace where it can be safely stored.
If you don’t want to pack it and haul it all yourself, you can always call a moving company for help. All you’ll need to do is supervise and provide instruction. Professional movers will be able to safely pack valuables, including fragile possessions, and transport them to their new destination.
Figuring out all of the estate finances involves a lot of math. If you don’t know what you’re doing, you can easily wind up paying debts that didn’t need to be paid.
If you want to know the total value of the estate and how much of that is owed out to creditors, an accountant will be able to get those numbers together for you. Settling the estate will be much smoother – there’s little room for mistakes this way.
If you don’t want to deal with the court, you can always hire an probate attorney to handle things on your behalf. This is an expensive route, but if you can afford it, it will save you a lot of time.
If you and your family just want some time to process your emotions, perhaps you could all chip in a little for an attorney to act in your stead.
7. Clean Up Crews
We accumulate a lot of junk, especially if we’ve been living in the same place for a while. Your probate property may be crowded. The stuff you aren’t keeping, or any garbage lying around the yard, is going to need to be taken care of.
Clean up crews can haul off things like old or broken furniture, defunct appliances, and other large items that would otherwise be difficult to move.
8. Storage Units
Where are you going to put all the stuff you want to keep, but don’t have a place for? A storage unit is a good temporary solution. Though they’re expensive in the long term, they’re a good layover for important items, like pieces of furniture or antiques, that need safe keeping before they’ve found a permanent new home.
9. Home Investors
If you’re looking to sell your probate property quickly, an investor is a valuable alternative to a realtor. The advantage of working with an investor is that, even though you’ll likely be offered less than what the home is worth, Investors will buy homes regardless of the condition that they’re in, so you won’t have to pay to fix anything.
Investors also don’t take commission or closing fees that cut into the profit from the sale of the home. If you’re having trouble unloading the property due to damage, a slow housing market, or a lack of time, a company like Nava Tri-Estates can really help.
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