When a person dies, someone has to distribute or sell their assets. If the deceased has a property that hasnâ€™t been willed to someone, or that their heirs donâ€™t want, it will often be sold at an estate sale. In some cases, owners will hold estate sales themselves if they need to downsize or move.
A personâ€™s estate includes their house and everything in it, meaning furniture, antiques and the property itself are up for grabs in an estate sale. If youâ€™re looking for a house, you might be able to score a decent deal on one through an estate sale.
What is an estate sale?
Estate sales are typically initiated by the ownerâ€™s heirs or relatives. They may have inherited the home but have chosen not to live in it, or theyâ€™re selling the property to pay off their loved oneâ€™s debts. An estate sale may include the home the person lived in or owned and/or their valuables.
Buying an estate sale home vs. a probate sale home
An estate sale is held by an ownerâ€™s heirs or loved ones, or a company or real estate agency theyâ€™ve hired to handle the process. A probate sale happens when the decedent, or person who has died, passes away without a will. A probate court administrator will handle the estate and sale of the property, and the proceeds from the sale will be used to pay off creditors and any other outstanding accounts.
Probate courts publicize a personâ€™s death so that anyone who has a claim to the proceeds of the estate can file that with the court. Itâ€™s worth looking out for probate home sales because the selling prices can be lower than market value.
If youâ€™re in a hot real estate market and the house is being sold in a bidding process, be prepared to pay market value (at a minimum), as bidding can be competitive. Youâ€™re also less likely to negotiate for a lower price at a probate sale.
5 tips for purchasing a home from an estate sale
Follow these tips before getting a mortgage for an estate sale home:
- Keep an eye out for estate sale listings and treat them as open houses. Check local classified ads and online real estate sites. You can also contact local estate sale companies or probate courts to ask about recent listings. Estate sales are held over a few days (often a weekend), so go back a couple of times if needed. Test the water pressure, take measurements (but be subtle) and spend plenty of time in each room absorbing all the details. Look for foundation cracking or settling so you can ask questions after touring the home.
- Donâ€™t judge a house by its listing photos. Remember that the seller may be a grieving relative or a court administrator, neither of whom are going to be super motivated to stage the home the way a traditional seller would. Even if the online photos are lackluster, reserve judgment until you see the property in person â€” the house might have more charm than you think. Be realistic about your budget and timetable, though, if you think the home needs more repairs or improvements than you can handle.
- Get preapproved. Get preapproved for a mortgage before you start looking at houses. Preapproval will help you move faster when youâ€™re ready to buy, and it may give you some leverage in price negotiations.
- Move quickly on inspections and use due diligence.Schedule a home appraisal and inspections as soon as possible because these will affect your loan application and your offer. If a home inspector finds serious problems with the home, youâ€™ll likely want to reduce your offer accordingly. Your mortgage lender will require you to take out lenderâ€™s title insurance, which protects the lender from financial loss if any ownership claims arise after closing. The lender will also order a title search for any liens, ownership disputes or judgments against the property. In addition, consider buying an ownerâ€™s title insurance policy to protect your investment if ownership is disputed later on.
- Budget for renovations. Be realistic about what you need to change to make the home livable. If the dated wallpaper, crown molding and kitchen backsplash make you feel like youâ€™re in a time warp, build those renovations into your budget. Look beyond the low selling price to account for all of the costs youâ€™ll need to cover with your mortgage.