When purchasing property through probate, buyers have two ways to make the purchase. Buyers can either:
1. make an offer on the property and it is accepted
2. the buyer will appear in court to overbid the initial accepted offer made by another buyer.
In both cases, you may find yourself in court bidding against one or more buyers so it is important to be aware of the rules and way probate real estate transactions work as well as work with a probate-savvy real estate agent.
In probate real estate transactions there are important terms and conditions that make probate different from typical real estate transactions. In general, the terms of a probate 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 the title insurance fees.
Once the 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 Court. The formula stipulates is the accepted offer plus 10% of the first $10,000 plus 5% of the balance.
Example: A probate 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 the cashier’s check.
To overbid on a property, the buyer must have in hand a cashier’s check for at a minimum, 10% of the opening bid. Personal checks will not be accepted. The cashier’s check must be made payable to either the estate, the trust, or the conservatorship. This information is available prior to the court date through the listing agent.
As an overbidder, if you are the eventual buyer, you will purchase the property with the same terms and conditions as the party who made the original offer. You cannot ask for different terms to improve your chances of getting the property, like in a typical real estate transaction.
Many overbidders come to court unprepared. They believe they will be able to negotiate like in a non-probate transaction, they do not have the necessary payment made to the correct payee in a cashiers check, or they are not prepared to raise their bid.