Selling a House in Probate Chicago

Probate properties offer fantastic chances for real estate investors and buyers seeking bargains. But what steps must a homeowner going through probate take to sell their property? This article serves as a helpful guide for anyone facing the probate journey. It will clarify what probate means and provide tips on how to successfully sell a property in probate while still earning a profit.

What is a Probate?

When someone passes away, their belongings either go to the people named in their will or become the responsibility of the court if they didn’t leave a will (this is called dying intestate). The executor of the estate or the Court takes charge of the assets. There are two kinds of probate: formal and informal. Informal probate happens with little court involvement, usually when there’s a clear will or no disputes about who the heirs are. This article will focus on the more complicated formal probate process. This situation arises when the estate has significant debts, someone contests the will, or the original will cannot be found even though there was one. In these cases, the Court must step in.

Can a House Be Sold While in Probate?

Absolutely! A property in probate can be sold depending on how the estate was arranged when the owner passed away. There are three main parties who can sell the property: the executor of the estate—who is the person named in the will to handle how the estate is divided; the administrator, who is selected by the Court to oversee the estate in cases where the person died without a will; and the Court itself, which manages the estate when there are no heirs looking to take charge. Once the executor, administrator, or Court determines who will inherit the property, the heirs or beneficiaries can start the process to sell the probate property.

What Does it Take to Sell a House in Chicago While in Probate?

The main job of an executor is to take care of the estate’s belongings until they can be given to the rightful Heirs or beneficiaries, as stated in the will. Sometimes, the estate might have a lot of debt owed to creditors, or the property might have been neglected and owe back taxes. In such cases, the executor, the administrator, or the Court can sell the property to pay off the debts, even if there are Heirs involved.

For example, let’s consider an elderly woman who passes away with an executor handling her estate. She has two Heirs. Before her passing, she accumulated $90,000 in debt from hospital bills and credit cards. Her home is valued at $150,000, but she has no cash assets and owes $80,000 to the hospital and $10,000 in credit card debt. Even after her death, the estate must find a way to pay off this debt. If the Heirs cannot cover the debt, the executor must sell the house to pay the $90,000 owed. After selling the house, the remaining $60,000 will be split between the two Heirs.

A property can also be sold during probate if the person died without a will and there are no close Heirs. In this case, the Courts may decide to sell the property and share any profits with the nearest relatives.

Steps for Selling a House in Probate

If you have a property in IL tied up in probate and you’re unsure how to move forward, you’re not out of options. In many cases, depending on your local and state laws, selling a probate property can be broken down into just four steps. The first involves making sure an executor or administrator has been officially appointed by the court.

If you are the executor (or working in agreement with them), you’re now in a position to decide what to do next. Whether the estate has debts to settle or you’ve inherited a property that doesn’t make financial sense to keep, selling may be the right move. Before listing it, however, the home will need to be professionally appraised. Once that step is done, you can request court approval to list it for sale yourself (FSBO), work with an experienced probate realtor, or even sell directly to a real estate investor.

Decide How to Sell the Property: 

Valuation or Appraisal 

First up is figuring out what the property is worth. To do that, you’ll need a property valuation from a trusted local expert, or you can bring in a certified appraiser who understands probate rules in your area. In many states, the Court requires the property to be sold for no less than 90% of its appraised value. That makes it even more critical to choose an appraiser who has experience with probate cases and won’t over inflate the value, which could create setbacks in the process.

Listing the House 

Once the appraisal is complete, you, the executor, and/or your attorney will need to submit a notice of intent to sell the home and any other assets to the court. This document will include the appraised value and the method you plan to use for the sale. Options may include a public auction, a traditional listing, a private sale to an investor, and more. After the petition is approved, you can move forward with marketing the property. Whether you choose to go FSBO, hire a probate-savvy agent, or sell to an investor, be sure you’re working with someone who understands the probate process inside and out..

Offers

Whether offers come quickly or take time, you’ll eventually need to choose the one that makes the most sense for you. This means getting clear on your priorities for the sale. Do you need to close fast to settle debts tied to the estate? Are you hoping to wait for a higher offer to maximize profit? Or is the home in poor shape and better suited for a buyer who specializes in major renovations? All of these factors matter when deciding the timing and strategy for selling a probate property.

Having a clear sense of what you need to achieve with the sale will guide you toward the right offer — and help you move forward with confidence…

Notice of Proposed Action

Once a buyer makes an offer, they need to be informed that the sale can only be completed after the court’s confirmation. Due to disclosure law, this should not come as a surprise but a buyer inexperienced in probate may balk at the added time needed for the sale. This is often one of the reasons why a probate house is skipped over for another property, even if the probate property is priced to sell fast. The delayed timeline may cause a buyer to decide it’s not worth the wait. But if a buyer has come forward with an offer and doesn’t mind the wait, the Court will review the bid before releasing an order to approve the sale of the property.

Bidding

In the case of auctions, a property in probate can be marketed as ready to sell before the Court finalizes an Approval to Sale to help draw in more interested parties to bid. In the case of auctions, the Court often is the one who handles the bids. There are strict rules and guidelines that must be followed for this type of sale, making it only used as a last resort. Once someone has won the bidding the executor will petition the court to authorize the sale of the property, but if any of the Heirs object the sale can be canceled and the property put on hold as the Court decides the next steps.

Finalization of Sale

Hopefully, the sale of that house, condo, rental property, or piece of land is a smooth and straightforward experience. Even if you experienced a few hitches along the way, once you have an offer that the Court accepts it’s time to finalize the sale. The executor or lawyer will need to file a final account and petition for the final distribution but once the Court approves this, title documents can be signed to make the house sale official.

Mistakes to Avoid When Selling a Probate Property 

Moving Too Quickly 

When a person passes away, their family may try to move as quickly as possible to sell the property so that they have time to grieve. Or, if there is debt that has interest that is compounding monthly, the executor or administrator will try to sell the house as quickly as possible by valuing it below market value to pay off the estate. Sometimes a too-fast sale can also happen when the house is in poor shape or needs major upgrades the beneficiaries do not want to pay for. They may undervalue the property so that they can sell it as-is.

Not Completing a Real Estate Disclosure 

Depending on what state you live in, Real Estate Disclosure laws can be almost as tricky as the probate process! These laws are a list of issues (such as lead paint or asbestos) that must be disclosed to the buyers about a home before closing on the property. 

Most states require sellers and their agents to disclose in writing “material defects” about the home. According to the National Association of Certified Home Inspectors, material defects are “…a specific issue with a system or component of a residential property that may have a significant, adverse impact on the value of the property, or that poses an unreasonable risk to people. The fact that a system or component is near, at or beyond the end of its normal useful life is not, in itself, a material defect.”

Experienced real estate agents are great at navigating these tricky waters, but what if you inherited a house that you never lived in? How would you know what to disclose? In some states, the executor, person selling the property, and/or real estate agent may be exempt from filling out local real estate disclosure forms due to the property being in probate. This is because that person does not and did not live in the property, so would have no way of knowing what to disclose.

If you are unsure of your state laws, someone who is experienced in probate real estate (whether it be a real estate agent or investor who has purchased probate properties in the past) will be able to help you navigate these legal waters. If looking into the latter option, be sure to sell your property directly to an experienced investor who doesn’t mind purchasing a property in probate and is willing to take the risk of purchasing a home from someone who is unable to give proper disclosure. You do have options!

Failing to Hire a Lawyer

We can not emphasize this enough – a knowledgeable real estate lawyer with experience in probate can help you navigate the process of probate much faster and easier than going at it alone! Not only will they know how to petition the Court so that you can finally put that property up for sale, but they’ll be able to guide you through the legal steps to sell that unwanted house or property with less hassle and tears. Even consulting will help ensure you aren’t missing the blind spots of the probate process.

Waiting Too Long to Start the Probate Process

When someone loses a loved one, grief may cause us to put everything on hold while we process the loss of the deceased in our life. But what happens to the probate property during that time? Property taxes continue to add up, utility bills continue to come in, and the bank will want its monthly mortgage payments until the property is settled. Waiting too long can cause the estate’s expenses to add up fast, eating into the estate’s assets and leaving you in a difficult situation.