A “Probate Sale” is a commonly used term in the real estate industry. However, most people do not truly understand what a probate sale or auction actually entails.
Read below to discover everything you need to know about a probate sale, whether you are the buyer or the seller.
What is a Probate Sale?
A probate sale is a court-ordered real estate sale where the titleholder of the subject property has either passed away intestate (i.e., without a will) or if there is a Will, the Will did not bequeath the property. As such, an estate attorney is typically held responsible for selling the property to distribute the profits to the remaining family members who are the rightful heirs of the deceased owner. A probate court in the county where the property is located will order a property to be put on the market.
While this concept may seem simple, it is actually a fairly complicated process with various moving parts and legal procedures that must be taken to effectuate a probate sale.
How is a Probate Sale Commenced?
Different counties within the state of New York have different rules and regulations in regards to how they handle probate sales. However, there are a few common procedures that typically take place across the board, which are as follows.
First, a representative or an attorney from the probate property must file a petition with the Surrogate’s Court in the county where the person was residing at the time of their death. This representative or attorney will also file the death certificate and a Will (if applicable.) After filing the proper petition in Surrogate’s Court, with the proper paperwork, the petitioner/representative is required to send legal notice to all heirs, creditors, and anyone else that may have an interest in the property. After this requirement is met, the Surrogate’s Court will conduct its own hearing to allow interested buyers to bid on the subject property.
Selling a Probate Property in New York City
Once the Court has ordered a probate sale of the subject property, the attorney or representative responsible for the transaction will hire a real estate agent to list and sell the property. Generally speaking, the listing price of most probate property will be well below the market value for the area. Additionally, the estate owners typically will not make any repairs to the property and more than likely will be selling the property “as is” in an effort to complete the transaction faster.
Additionally, sellers of probate property typically require buyers to put at least a 10% down deposit and sometimes more. This is more or less a precautionary step by the estate to ensure that the property sells for the highest price.
If the seller accepts the offer and the Court approves it, a date, time, and location will be set by the Court for the sale. Once everything is set for the probate auction seller must keep in mind that any individual present during the option can make a higher bid of 5% or more above the original bid.
Once the offer is accepted by the Court and the sellers, the administrator of the probate estate Must send a notice of proposed action to the heirs of the estate. The heirs then have 15 days to object or disagree with the notice.
Purchasing a probate property in New York
While probate property can be bought at a great bargain, there are some things that buyers must be aware of before committing to purchasing this type of property.
Multiple disclosures. There is a significant number of disclosures that go along with the sale of probate property. As such, it is important that buyers have an experienced real estate agent and/or lawyer to walk through the transaction carefully as the paperwork may become overwhelming.
No contingencies. If you are relying on third-party financing etc., to purchase a probate property, keep in mind that the seller does not have to offer any contingencies. It is your best bet to have advance approval before committing to this type of deal.
“As-Is.” The seller’s family often will not repair anything within the property. As their main goal is to get the best price and the fastest amount of time. As such, if you consider yourself a high-maintenance buyer who requires a lot of repairs, purchasing a probate property is probably not your best bet.
Final Thoughts: Is a Probate Sale Right For You
Whether you are a real estate investor or just an individual buyer looking to add a probate property to your portfolio, it’s important to consider the risks involved in this type of transaction. In any event, if you have your heart set on purchasing this type of bargain property, the best thing you can do is familiarize yourself with the legalities and terminology involved. Recruit an experienced team comprising of a real estate agent in your market who has dealt with probate properties in the past, as well as an experienced lawyer to guide you through the process.
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Authored by: Stanley Montfort
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