In my Probate Real Estate Business over the last 25 years there has been a transition from sales going to court for sale confirmation to probate sales avoiding the court overbid process by using the I.A.E.A. In the 80's and 90's about 70-80% of the probates went to court and I had to fight to control the sale under the I.A.E.A which allowed the estate to bypass the red-tape and treat the sale almost like a regular sale. Today in the 2000's it switched and 70-80% are under the I.A.E.A and only 20-30% go to court. Part of this has been the good old boy attorney's have retired and the new breed attorney understands the I.A.E.A is better for everyone and helps close the probate quicker. In any event it has made my Probate Agent business easier not having to convince the executor and estate attorney to go through the I.A.E.A.
This blog is about when you have to go to the court sale confirmation. Please understand this should be rare because almost all probates can avoid the court confirmation even if there is no will providing the petitioner/executor will work with you and petition the sale through the I.A.E.A. The only time you can't go through the I.A.E.A with the sale is if the will actually states the sale must be confirmed by court. So make sure you understand what you are dealing with prior to making an offer so you can control the sale. It may sound like a lot here but it is fairly easy once you understand the entire process.
If you are going to court, your or your clients offer will be with the court referree's office for 6-8 weeks going through the process to make sure all the paperwork is correct in the probate process and that your sale meets court rules. There will be a court hearing and at the court if anything found by the court investigator is not in order the sale will be postponed and this happens quite often so delays are part of the probate game. Understand that your sale can go through this 6-8 week period and make it all the way to the court confirmation hearing then before your sale is confirmed the court referee will ask if there are any other interested buyers who would like to bid on the subject property. If there are then the judge will call those interested up to the table and we will start the process of "Let's Make a Deal". I have been in this situation as both the offer going to be confirmed and also as a bidder.
As a Probate Agent you must understand what is going on or you could be in hot water with your client if anything goes wrong. First, anyone bidding will have to come up over the bid price going to court. Let's say your bid is $100K, any other bidder must start around $105K so there is a buffer. Your bid going to court is a credit bid so if you are bidding more you don't have to have a deposit with you in court as your original 10% deposit is still valid. Any other bidder will have to have a 10% deposit (based on their bid) to qualify for to bid. The court referee will ask the estate attorney to go to each bidder and qualify that they have a 10% deposit (not check) before the bidding will start. Also keep in mind that when going to court the referee will check if the original bid was no less than 90% of the court appraisal of the estate home. This is another rule which can hurt any wholesale buys with probate homes and why most investors stay away. Once in awhile a court appraisal will be off (low) and even with the 90% rule you can make a decent purchase. This is another reason I usually only take a retail client to court to bid so we have a good chance of winning the bid with a higher offer.
If there are multiple bidders they will all be there and the court referee will explain how the bid process will go and at what increments the bidding will work. It may be $1000 to $5000 each bid up over the last bid. In any event make sure you know your upper price and don't go over it. Many have been caught up in the bidding war and pay way to much for the Probate Home so be a pro and know your max. There will always be another property as sales are every week.
Also, a key point to understand is when you bid at court there are no contingencies (loan, appraisal, inspections, disclosures) so if you win the bid and don't close for any reason your and or your clients 10% deposit is at risk and the courts are tough on this. Make sure you know what you are buying before you bid. I have my contractor look at the property before the bid so we have a good idea if there are any major issues and then discuss and have the buyer sign that they understand the situation. I have my lender pre-approve the buyer first if we are financing and also do discuss the price if we think there will be any issues with the bank approving our sale price because again we don't have a contingency for a low appraisal and your buyer will have to make up the difference or not close and lose their deposit.
You can stay quite active just working probate court confirmed sales but make sure you understand the rules so your not in any kind of issue with your client if they loose their deposit. Again the Probate Agent Pro's know what they are doing and it's just information that you may not have at the moment. Take the time and expense to educate yourself and jump into the Probate Arena as it's very lucrative for those who understand the game....
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