Guide to Buying an Estate Sale Home

Image of the front of an older two story house. Captioned: Guide to Buying an Estate Sale Home

Heirlooms and yard tools aren’t the only things you can get at estate sales. Sometimes, the houses themselves are for sale. And sometimes they’re great choices.

The local probate court oversees estate sales when homeowners die intestate (without leaving a will). And where there is a will, the executor may sell the late homeowner’s property to pay off the mortgage.

You might come across an estate sale in the listings. Or you could contact the county, and go through the open probate cases. But perhaps the easiest way to find good estate sales is to hire a local real estate pro. Some specialize in estate sale houses. Your agent will assist with the negotiation of a sales contract, the offer, and the closing — subject to court approval.

Court Procedures, Negotiation and Purchase

At the start, the house is in the estate. The court must approve a personal representative who has authority to negotiate and sell. The title company will require this authorization when opening escrow. Your agent will obtain the documents that confirm the personal representative’s authority.

The personal representative then starts the ball rolling by going to court, where a real estate appraisal will be ordered. The results are critical. Probate courts generally do not approve bids under 90% of the fair market value. The real estate agent will have the title company run a title search before listing the home as a probate sale.  

Estate sales can be in formal probate, for which the estate’s personal representative hires a real estate lawyer and goes through an approval process every step of the way. Expect the formal process to take six months or more before the deed can be transferred.

Step 1. Valuation.

Find out the price that the heirs expect to receive. Is it reasonable? Your real estate agent will evaluate the home based on comparable homes in the area and arrange of a home inspection, to discover the likely repair needs and costs.

Your agent’s research is an investment in a deal that the court might not, ultimately, approve. Yet it’s absolutely vital to have a clear idea of the home’s value and what work needs to be done, to know your bid makes financial sense. 

Step 2. Financing.

You must show the court proof of ability to finance the home, with no contingency. Otherwise, you won’t be able to bid on the home.

Some buyers use home loans that leverage the value of their current homes to buy second homes, including estate homes. 

Step 3. Offer.

Send your bid to the personal representative of the estate. If it’s accepted, the court must then review and approve it. Your bid must be accompanied by the required 10% deposit.

Step 4. Petition for Hearing Date.

If the personal representative(s) accept the offer, they will petition for the confirmation of sale hearing and closing date. Courts can have sizable backlogs, so be prepared to wait for your date.

Step 5. Public Advertisement.

The buyer must show up for the hearing date. Meanwhile, the agreed-upon price is publicly advertised — usually for 30 days. The public announcement must include your offer price. This enables other possible bidders to be prepared and bid on the home at the hearing. 

Step 6. Hearing and Auction.

Attend the confirmation of sale hearing — which is also an auction, in which the court attempts to attract bids. The whole process has a purpose; it’s designed to get the best deal for the heirs.

Your bid is the baseline, and any higher bid must be placed at a specific, court-set amount over yours. If no one is ready with a deposit to outbid you, the court will confirm that you will receive the home, if you are ready to pay the amount required by the court, with the correct form of payment.

Step 7. Completion of the Sale.

Work with the personal representative to go through with your purchase, or — unless you were outbid — you may lose your deposit money. Unlike in the traditional sale, in which serious home inspection issues are cause for a buyer to pull out with no penalties, an estate sale buyer is expected to take the house no matter what a home inspection might uncover.

Step 8. Deed Transfer.

The title will transfer to your name several weeks after the hearing. Congrats on your new home!

Note: If there are multiple heirs selling the house, emotions understandably run high; heirs might lack time to grieve or work out their differences before having to dispose of a loved one’s home. This process takes patience.

Small Estates

Most states simplify probate for small estates. For example, a personal representative may use Utah’s informal probate option for small estates where the probate property is valued at less than $100,000 and doesn’t include a home. Informal probate can occur for modest estates, or where the late owner put the home into a living trust, or where the deed shows a co-owner with survivorship rights. Different states have different variations. If the estate qualifies for an informal process, a lawyer is not required.

In some states, simplified probate can occur when the home is probate property. California permits an executor of a will to act with “full authority” (as opposed to “limited authority”) to sell estate property — no agent, appraisal, no requirement to obtain 90% of the home’s value in the sale. The court may require advertising under its rules for a “notice of sale” before the transaction, to allow beneficiaries time to object. Throughout the transaction, the executor must make decisions in the estate’s best interests, subject to a later review of the court. Yet by using full authority the sale can occur quickly.

If the house is situated in Pennsylvania, probate property up to $50,000 in value may be transferred by a simple affidavit, without notice to creditors, with the court’s permission. Real estate is not counted in that limit. Some very large estates bypass probate and apply a simplified process for assets left in the will.

Insuring an Estate Sale Home

Check for signs of damage in a home you’re buying as-is. When an estate is selling, disclosure understandably isn’t as complete as it would normally be. You might not receive a seller’s disclosure at all if, under state law, the personal representative of the estate does not have to fill out a real estate seller’s disclosure form.

That said, the idea is not just “buyer beware” with probate sales. Once the personal representative knows of any material defect in the home, a legal duty is triggered to disclose this information to the potential buyer. The real estate agents on both sides of the deal have to be mindful of their fiduciary duties as well, and may be subject to disclosure duties.

Because of the disclosure challenges, hidden title problems may be more likely to exist in the history of an estate sale home. The best way to lower your risk is to buy an owner’s title insurance policy to cover unknown title defects. Consult with the title company in advance about recommendations for extended coverage in your situation. You will only need to pay for an owner’s title policy once, at closing. The typical owner’s policy protects you for as long as you keep the home, and your heirs too.

Bottom Line: The Court’s in Charge

Probate sales happen all the time. They are a normal part of the real estate world. Some estate sale homes are in rough shape; others are in fine condition, and just need a little updating. An experienced real estate agent can help you find the type of home that suits your goals.

Buying a home from an estate may take longer, though. And whether your bid succeeds is ultimately up to the local probate court.

Supporting References

Ca. Prob. Code §§ 10304, 10308(b).

20 Pa. Cons. Stat. Ann. § 3102.

Ut. Code § 75-3-1201.

Photo credit: Erik Mclean, via Unsplash.