Looking for probate listings in Southern California? Wondering about court proceedings and protocols for making an offer? LA City Probate invites you to review our tips for buyers and contact us if you would like to work with one our qualified buyer’s agent from our team.
5 Things You Need to Know When Buying Probate Real Estate
First, probate properties are sold “as is” so don’t expect the owner to make repairs or improvements — or to lower the price because of existing problems. Second, always Read the disclosures! There are special disclosure documents governing probate sales, so be sure you understand the terms before you make an offer. Third, be prepared in court. If a probate sale requires court confirmation, the timing and amount of your offer and the form in which you make your deposit are closely regulated. Fourth, there are usually no contingencies on probate sales. In other words, the seller does not have to wait for you to find a loan or to sell your existing home. Get advance approval from your lender. And lastly, work with a probate expert. When you are selecting a real estate agent to assist you with your purchase, ask for details of their recent probate experience in your marketplace. While any agent can represent you, only a probate expert can assure that your transaction is managed correctly so you get the property and the terms you want.
How to Avoid Overpaying for Probate in Court
A probate property that requires court confirmation allows for interested buyers to come to court and overbid the initial offer.
When the judge calls the sale and you stand up to overbid, the judge will state what the opening bid is and set the increments for increases.
Here are some tips to increase your chances of being the successful purchaser:
- Be prepared. Make sure your agent has reviewed the sale comparables with you in advance so you know you are purchasing the property for what you feel it’s worth.
- Be aware in advance and understand the terms of the sale. These terms are not negotiable.
- Bring your poker face. Don’t let the opposing bidder know what you are willing to pay.
- Although the judge may say that the next bid is $5,000 more, you can always offer more than that to show your competition that you are serious. When a bidder jumps the bid higher than the judge dictates, the other bidder may back off.
- Know your top dollar and at what price you are going to walk away from the property. Don’t get caught up in the competition of bidding.
- Again, make sure you have a cashier’s check that it is payable to the right party and that it is for at least 10 percent of the minimum overbid. If the check does not meet those standards, you won’t be able to play, no matter how much you want the property.
How to Buy Probate Real Estate
As a buyer of real property through probate, you have two opportunities to make your purchase: 1) you make an offer on the property and it is accepted, or 2) you appear in court to overbid the initial accepted offer made buy another buyer. In either case, you may find yourself in court bidding against one or more prepared and eager buyers, so it pays to be aware of the rules and to work with a probate-savvy real estate agent.
There are important terms and conditions for probate sales — terms that make them different from other real estate transactions. While you should always check the terms prior to making an offer, in general, the terms of the sale are as follows:
- The property is sold “as-is”
- No contingencies
- No repairs, including no termite or retrofitting
- 30-day escrow
- Seller pays for the escrow fees and title insurance fees
Once an initial offer on a probate property has been accepted by the court, the minimum overbid in court is established according to a set formula dictated by the Probate Code: the accepted offer plus 10% of the first $10,000 plus 5% of the balance.
EXAMPLE: A property is listed at $200,000. The accepted offer is $175,000.
The minimum overbid is calculated as follows:
Accepted offer = $175,000
+.10 x $10,000 = $1,000
+ .05 x $165,000 = $8,250
Minimum overbid = $184,250
x .10 = $18,425 amount of cashier’s check
For the probate attorney and the court to allow you to overbid on the property, you must have in hand a cashier’s check for at least 10% of the opening bid. Personal checks are not accepted. The cashier’s check must be made payable to either the estate, the trust or the conservatorship. This information is available from the listing agent before you come to court.
As an overbidder in court, if you are the successful buyer, you will purchase the property under the same terms and conditions as the party who made the original offer. Unlike with other real estate transactions, you cannot ask for different terms in the hope of improving your chances of getting the property.
Unfortunately, many overbidders appear in court unprepared – they expect to be able to negotiate, as they would a non-probate transaction; they fail to have the necessary payment in the specified form made out to the correct payee; or they are not prepared financially to raise their bid, even though they really want the property.
If you would like more information on overbidding in court or more information about a specific property that is going to court for confirmation, LA City Probate is ready to assist you today. Call us at 310-482-2035.