During an estate sale, the property usually functions as an open house for many people to attend and choose what they would like to buy. However, there are also cases when the house itself becomes an item for sale.
For example, when a person dies intestate, meaning without the last will and testament, the probate court oversees a probate sale. Or, the house can be put up for sale by an executor if there are not enough financial assets to pay off the deceased person’s debts.
In this article, you will find information about six necessary steps to buy a home at an estate sale, ranging from evaluating the house, financing, and making the offer to filing the petition for hearing date in the court and attending it, among other things. Read on to prepare yourself for a big purchase!
Evaluating the Property
First of all, you need to take a closer look at the property itself and decide whether it is the right one you want to buy. The first thing to check is whether there are any violations or code complaints that could cost you money in the future. If there are any such issues, you might be able to negotiate with the estate sale agent to get them fixed first.
Among things to evaluate is the condition of the house itself, including roofing, flooring, and foundation, electrical and plumbing systems, as well as appliances. If possible, hire an inspector to do this evaluation for you. If you are buying a house with problems, make sure that they are not unsolvable. Otherwise, you might end up paying a lot more than you expect.
Finding Financing for the House
Once you have evaluated that the house is worth buying and there are no violations, it is time to explore financing options. There are several ways to finance your estate sale home purchase:
- Get a loan from a bank. There are two types of loans you can get: a mortgage loan and an equity loan (or home equity loan). Your home secures a mortgage loan – the bank loans you money against your home, and you pay back the loan principal plus interest. An equity loan, or home equity loan, is not secured by any collateral (such as your home), but it usually has higher interest rates and fees than a mortgage loan.
- Use your savings. If you have enough savings to cover the purchase yourself, it will save you money on interest and origination fees. You may also consider getting a loan from your friends or family members if you know someone who will lend you the money.
- Pay cash. It is possible to pay in cash for your new house, but it’s risky. You may spend more because you cannot get any discounts on closing costs or fees when paying in cash. However, you should check any suitable options and take advantage of the discounts available when paying in cash if there are any.
Making the Offer
Now you need to make an offer to the person in charge of handling the estate sale – usually, it is an executor or an estate sale agent. Here are some tips for making an offer during an estate sale:
- Prepare a competitive offer that is good for both parties. Your offer should be fair for both you and the seller. Make sure that it is a reasonable price for the property you will be getting.
- Include everything in your offer. For example, if any repairs need to be done before moving in, state this in your offer. This way, when the estate sale agent or executor accepts your offer, they will know that these things need to be done before closing the deal.
- Negotiate. Sometimes, people might be willing to negotiate on the price of their home before accepting your offer. If it makes sense for both parties, go ahead and try negotiating for a lower price. It never hurts to try.
- Be patient. If your offer was accepted, but no one has called yet about scheduling an inspection of the property, do not fret. Remember that there might be other offers competing against yours, and the estate sale agent might not be able to call you immediately after receiving your offer. Do not be too urgent about this part of the process; just wait until they call.
Arranging an Inspection and Home Appraisal
Once your offer was accepted by the estate sale agent or executor, things can start moving quickly. Before closing the deal and transferring ownership of the property to you, both parties will arrange a home appraisal and inspection of the property by professional specialists:
- Home appraisal. An appraiser will come to your new property and assess its market value based on comparable properties in its neighborhood. They will provide a detailed report about how much they think this property is worth (the estimated market value) and what factors have impacted this estimate (such as recent sales of similar houses nearby).
- Home inspection. A home inspector will visit the property and inspect it thoroughly, looking at every aspect of its structure and systems. They will prepare a report detailing what they found while inspecting the house and whether there is anything wrong with it that needs repair or replacement before you move in.
Both home appraisals and home inspections are optional, but most buyers ask for them. As a buyer, this information helps you determine whether buying this particular house makes sense financially and compared to other properties being sold in its neighborhood.
Attending the Hearing
Once the appraisal is done and the inspection report is presented, you will attend a hearing with the estate sale agent and the executor or personal representative of the estate in order to close the deal. At this hearing, there are two things that a judge will do:
- Close probate. The judge will officially close probate and issue a Certificate of Sale or a Certificate of Distribution. If there are no debts or creditors, the executor can request a Certificate of Distribution.
- Set a hearing date. The judge will set a hearing date to finalize the sale with all parties present. You must attend this hearing; otherwise, you might lose your chance to buy this property. If you cannot participate in the hearing, you should inform the estate sale agent beforehand and find another way to communicate with them.
Finalizing Your Purchase
After attending the hearing, everything is ready for you to become an owner finally. You will receive a closing statement from the estate sale agent with all the fees and costs listed on it. These fees and expenses include things such as:
- real estate commission
- title insurance fee
- transfer tax
- loan fees
- credit check fee
- home inspection fee
- appraisal fee
There might also be other charges depending on the case. If any repairs needed to be done, those expenses need to be paid off as well.
If you decided to look for a house on estate sales, you should know which steps are necessary to take in order to complete the purchase. The first of them is to evaluate the property yourself and determine any significant repairs or improvements to be done if needed.
However, do not neglect to arrange a home inspection and appraisal – these steps are optional, but they will provide you with a clear understanding of what house you are going to get. Depending on the situation, you may also want to negotiate the price to get the best deal possible.
Remember that attending the hearing in court is necessary to finalize your purchase. Be prepared and good luck!