Probate is quite common in the US, with Americans spending an estimated $2 billion each year on costs associated with the probate process.
One of the reasons probate is so common is that 55 percent of Americans never create a will and only 10 percent of those that do prepare a trust. Upon the death of many people, the probate process is necessary to retitle the deceased’s assets to the heirs. This process also helps ensure that the debts of the estate are settled.
As you can probably imagine, selling a probate property can be a study in patience. The process itself is court-supervised to ensure that everything runs as it should.
In today’s blog, we take you through the right steps when selling probate real estate. This way, you get to avoid potential hurdles that so many people encounter.
Let’s get started.
Select a Competent Team
Unless you’re experienced in selling probate houses, it’s smart to locate seasoned professionals to help you out during the process. Start by choosing a probate lawyer to guide you on the legal aspect of selling a probate property.
Your probate attorney will help in the preparation of the required legal documents. They can come in handy when it comes to filing for a life insurance payout, completing the title search, making sure that all underwriters receive the right documentation, and submitting your final tax returns.
Your probate attorney will also be the one representing you in probate court, which is in your best interest since they have a thorough knowledge of the entire process.
Another expert you need in your team is a real estate agent. This professional can prove a great help when it comes to recruiting appraisers and home inspectors. They’ll also help ensure that you follow all the necessary regulations when selling real estate.
A top real estate agent will advise you on renovations that increase home value, as well as how to price your home right to attract a quick sale. Moreover, they’ll handle the negotiation process on your behalf to get you the best deal possible.
Petition the Probate Court
Now that you’ve assembled a great team, it’s time to petition the probate court to sell the property. You’ll need first to get a current value on the property. Your real estate agent should be able to recommend a certified appraiser to help out in this step.
Once you have an appraisal, your probate attorney will then petition the probate court to sell the home. They’ll submit a petition along with the appraisal. Keep in mind that probate homes cannot go on the market without the court’s approval.
Get an Agreement and Deposit From the Buyer
As the seller, you should plan to collect a deposit of about 10 percent from the prospective buyer. It’s vital that the buyer has a disclosure that notes that the property is in probate. Thus, the purchase agreement is contingent on the approval of the court.
The disclosure should also show any material issues that may impact the home’s value. Again, your attorney can prove helpful here, guiding you on how to complete disclosure forms to the extent that they are relevant in the sale.
At this junction, it’s important to avoid anything that would affect the home’s value. Don’t delay getting the petition to the probate court. If any conflicts arise among family members or friends, work with your probate lawyer to help move the process along.
It also helps to keep up with the home’s insurance and maintenance. If the home remains unoccupied during probate, find out if it’ll still be covered by the insurance.
Take the Current Bid to Court
When a home sale requires approval by a probate court to proceed, the court sets and publicizes a court date. The goal is to give people an opportunity to bid up the sale.
Typically, the current bid is stated in court. Other interested buyers may then submit higher bids as the judge directs. All prospective buyers that make a bid must also offer a cashier’s check.
It’s always a good idea to have a professional check whether the buyer properly made out the check to the estate. As we stated earlier, interested buyers need to make a deposit of at least 10 percent of the bid.
Review in advance the terms of the sale. Note that the order given by the court is final. At the end of the bidding process, you’ll need to refund the prior prospective buyer’s deposit if someone else has outbid them.
Close on the Property Sale
Once the property gets a buyer, a personal representative approved by the court will sign documents pertaining to the property on behalf of the deceased owner. Be sure to give an accurate legal description of the real estate to avert any challenges in the future.
Alert the IRS of the Transfer of Value
It’s a requirement to account for the distribution of the proceeds from the sales of real estate properties on IRS Forms 706 and 8971.
It also helps to be familiar with the rules pertaining to the reporting of a property’s location to your state.
Get It Right When Selling Probate Property
Selling probate property is an altogether different ballgame than selling conventional real estate. Take time to get a firm grasp on how the process works, so it’s easier to navigate the twists and turns along the way.
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