Selling a House in Probate

How to Sell a House in Probate

When someone passes away, their belongings are distributed to family, friends, or even the government. This includes real estate like the person’s former home. Unlike most possessions, a house can’t be sold or handed over right away, even if the person owned the property outright. Instead, the house has to go through what’s called probate.

This adds a few extra steps to a sale, but with good legal services, it won’t disrupt the process too much. We’ll help you get started with this guide for selling a probate house and how it differs from a regular sale.

What Does ‘In Probate’ Mean?

When a house is in probate, it’s still considered part of the deceased person’s estate. Probate is the legal process the court system uses to settle someone’s estate after they die. During probate, debts are paid and possessions are handed out based on what’s written in the will. This doesn’t include the house until the court appoints someone to manage the estate. Usually it’s the will’s executor, but the court may appoint someone else if the will does not.

A house can avoid probate if it was held in a living trust owned jointly with the inheritor, or set up with a deed that automatically transfers the title upon death. This is uncommon for most families, which is why houses often go through probate.

How Are Probate Sales Different?

While selling a house in probate also includes listing, showings, offers, and closing, probate sales may have extra steps in between that make these deals a little different from the routine. Probate sales are different because:

The timeline is longer, and there’s more paperwork: These extra documents provide the paper trail needed to provide notice to family members and confirm the seller has the legal right to do so.

Someone else is selling on the owner’s behalf: In normal sales, the owner decides the price themselves, signs the paperwork etc. That can’t be the case in probate sales, so an executor or administrator is nominated instead.

The court still needs to approve the sale: Depending on the situation, courts need to review or approve the sale before it can move forward. For example, the court often holds a hearing where other buyers can present their bids.

The house was sold as-is: Sellers are expected to disclose known problems with the house, but in probate sales, the seller is likely someone who never lived (or even set foot) in the house. They can’t know about any hidden problems unless the former owner told them.

Selling a House in Probate: Step by Step

Step 1: Start Probate with the Court, and Appoint the Executor/Administrator

The first step requires someone like a family member to file a petition with the local probate court to open the case and get the ball rolling. They will appoint the executor for the sale, which is usually whoever is listed in the will. If the will does not name someone, an impartial administrator is appointed instead.

State law establishes the priority of who should be named executor, with spouses getting first priority before adult children, parents, and then siblings. If two people have the same priority and can’t agree, the court will decide who to appoint or if both of them have to work together.

Once appointed, the executor or administrator receives Testamentary Letters or Letters of Administration from the court, proving they have the legal authority to act on behalf of the estate.

Step 2: Get the House Appraised

Courts often require a formal appraisal because many states have laws restricting offers for a house in probate to within a certain percentage of the appraisal. This keeps the offers more in line with what the appraisal report generates.

Step 3: Figure Out How Much Court Approval Is Needed

If the executor has full authority, they have the broad power to sell the house as normal. But there are also many probate cases with limited or full supervision, where the court needs to approve things like the list price, offers, and the final sale before closing can proceed. Check with local probate attorneys to learn more about what degree of control would apply for your situation.

Step 4: List/Market the House

Once the court approves everything, the house can be listed for sale in line with the appraised value. If the executor has full authority, they can accept an offer like a normal sale. But in limited or full supervision cases, any accepted offer must be reviewed and approved first.

Steps 5 and 6 mostly relate to sales with some degree of supervision.

Step 5: Resolve Court Notice and Overbidding Hearing

In supervised sales, the proposed offer needs to be made public, and the court sets a date for a hearing where other interested buyers can present offers higher than what was accepted. This is called overbidding, and requires the new offer to exceed the original by a certain amount before bidding can resume. Courts hold these overbidding hearings to ensure money is not left on the table.

Step 7: Get Court Approval of the Sale and Close

The judge will confirm the winning offer at the hearing, clearing the way for the sale to close. Title is transferred to the buyer, funds are exchanged, and proceeds are given to the estate to be distributed to heirs.

Probate Homes Are Sold ‘As-Is’: 5 Reasons Why

Selling a home as-is means the seller doesn’t make any repairs or improvements on the home’s condition. Probate homes are sold this way for a number reasons, including:

1. Probate sellers didn’t live there: Even when the executor is a relative, it’s rare for the probate sellers to have actually lived in the property. It’s natural that they would not know about hidden problems.
2. Legal risk is reduced: Executors must manage the estate fairly, and without the firsthand experience mentioned above, can’t know about maintenance problems. Selling as-is protects the seller from angry buyers who have later found more problems.
3. There’s usually no money left for repairs: Estate funds are a contentious subject, and family members may disagree on what was considered “worth” repairing.
4. Holding costs make delays costly: The longer probate drags on, the more it costs in property taxes, insurance, and other upkeep. Selling as-is keeps things moving.
5. The home is assumed to have deferred maintenance: Many probate homes belonged to elderly owners who fell behind on maintenance. Assuming some risk from the start keeps bidders’ offers more in line with potential repairs.

Selling a House in Probate Can Be Simple with the Right Help

While these extra steps might seem inconvenient at first, the biggest differences between a normal sale and probate is who has the legal authority to sell, and how involved the court system is with deciding that. With a good executor and proper paperwork, the estate and everyone connected to it will be well protected until an offer is accepted.