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.
You can learn more about avoiding overpaying in court or have a look at probate properties currently listed for sale by The Sanborn Team. If you have questions about purchasing real property through probate, contact us at [email protected] or 310-777-2858.