Can A House Be Sold in Probate?
Yes, but some things must be kept in mind, and local courts set forth specific processes to sell a house in probate legally and without issues. If the property was not left to a beneficiary in a written will, the estate’s executor could sell the home to help cover costs associated with probate.
Losing someone as they exit this journey called life is tough all on its own. Add the complexities to it that legalities come with makes it even tougher. Speaking of which, many people find themselves wondering:
· Can you sell a house before probate is completed?· Can you sell a house without going through probate?· How long does it take to sell a house in probate?
These are the most common questions we come across from visitors that find our website to the people we meet with in person. Of course, there are many more questions people have when dealing with this kind of situation, but for the sake of brevity, we will focus on these aspects of probate home sales and save the many others for another day.
First, one must determine who is authorized to sell a house in probate.
This is done through the court that has the jurisdiction needed to follow the probate process. In most cases, where one made final arrangements and had a living will & testament written, an executor will be listed. The executor is the person who is tasked with getting an appraisal on the home that was left behind and valuations of any other assets within the estate.
If there was not a will, or if no executor was assigned, the court will take it upon itself to assign an executor. Keep in mind that there are specific steps that the executor must take to remain in full compliance with the laws governing where the probate is pursued.
Next, the court will determine what type of probate process will be pursued.
There are only two ways this can go (_unless you live in a place like Texas where there is another form of probate used_), FORMAL PROBATE OR INFORMAL PROBATE. Informal probate is usually embraced when everything is clearly outlined in the will, and there are no objections. It can be done without holding a hearing or going before a judge. However, formal probate requires a filing with the court and oversight during the entire process.
Once an executor is assigned, this is the best time to get an appraisal done since it will be required by the court no matter what. In most cases, any home sold in probate must have an appraisal done to determine its value, and the selling price must be at least 90% of the appraised value. An excellent way to speed up the entire process is to seek out a skilled homebuyer who specializes in buying homes that are in probate, as they will know what to do to speed things up for you.
Now it is time for the actual probate court hearing; this can be expected.
Besides the legal expenses ( which can wind up being 6% to 10% according to the ABA [https://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/the_probate_process/] ), a probate hearing is pretty straightforward. Usually, it takes place when the sale of a home has been initiated, in which case the buyer must put 10% down to secure the home. At the probate hearing, others who want to bid on the property will be given a chance to do so.
Even though bidding can take place at the hearing, this does not mean that every bid is acceptable, as there comes a set of rules and regulations that must be upheld during the probate process. For example, anyone besides the home buyer who wants to bid on the property must submit 105% more than the selling price plus a $500 fee. So, while an outside bidder can come in and start bidding, just initiating the bidding can be costly and usually deters it from even happening.
Depending on where the probate is taking place, it can also be required for additional bids to be in increments of $5,000-$10,000. This is not applicable everywhere, but it still does exist in certain locations.
Where there is an informal probate process in play, here is how to sell the home.
If there is informal probate required, you can count on it being a lot less work throughout the process, which also makes it a lot quicker. Usually, this is done by a Probate Registrar (type of court clerk), and only an application is required. This is often used for estates that show no sign of complexities when it comes to distributing the assets and property of one who has passed away.
You are only required to file an application, as the court will not be overseeing the probate process when it has been determined as informal. Whereas the traditional approach of formal probate has been known to take months, and at times even years, to make it through the process. Think of it as the less complex method of the two.
Who gets the money for a house sold in probate, and exactly how is it split up?
This depends on if there was a living will filed before death, and if it was filed, who was included within the list of heirs. If there were no will, this would depend upon what state you live in and what the law says when it comes to distributing the assets and property left behind.
During the probate process, creditors, funeral providers, tax authorities, and others who are owed by the one who passed have a chance to recover what is owed to them. Once the court determines that all estate debts have been covered, the remaining funds will be distributed accordingly to the appropriate beneficiaries/heirs.