When most people think of real estate, buying or selling property is what comes to mind. But there is another way a home can transfer hands called probate that happens after a person passes away.
The death of a loved one can be emotionally taxing, and understandably so. With emotions of grief and loss running high, the last thing anyone wants is for the surviving parties to become enmeshed in a nasty, drawn-out estate war.
So, what does probate mean in real estate? Probate in real estate refers to the legal process spearheaded by the courts to review your property and award it to deserving beneficiaries, regardless if there is a will or not. The probate process can take a while to finalize. And it can take even longer if the case is riddled with complexities, such as the absence of a will.
Probate: Will Vs. No Will
In most cases, probate with a will is less complex. In this instance, the homeowner leaves a will with clear instructions for the intended beneficiaries. An executor, usually the financial advisor, takes responsibility for the probate process. The executor files the will with the courts and carries out the final wishes of the deceased by passing the property to the stated beneficiaries.
Beneficiaries can decide to keep or sell the house. Usually, the will of the deceased lists a surviving spouse as the beneficiary. However, children or grandchildren can also be beneficiaries. If the children mentioned in a will are under the age of 18, the courts appoint a probate guardian—usually an immediate family member or next of kin—to assume the role of executor of their estate.
The probate process in the absence of a will tends to drag on longer. The court appoints an administrator who functions as an executor to oversee the process. The probate court assesses and reviews the homeowner’s properties, and divides them among the surviving spouse and children of the deceased.
The distribution hierarchy begins with the spouse. If the deceased was unmarried or widowed, the children are first in line. The court may consider other relatives, but close friends are rarely part of the equation.
Selling A House In Probate
The executor appointed by the courts may need to sell the house if there are no appointed beneficiaries. When this happens, the executor will have to partner with a real estate agent to handle the transaction and bring a buyer to the table as would happen with a traditional sale.
The executor is the one who ultimately chooses the buyer for the house. The sale of a home may also include having inspections on the apartments and houses in terms of safety. Personal belongings in the home are also appraised. After the sale of the house is complete, the state determines how the proceeds and personal belongings are divided between beneficiaries.
It’s worthwhile to point out that if there’s no surviving spouse, children, or any known close relatives, the house automatically becomes the property of the state.
Implications Of Probate
Whether a will exists or not, the death of a homeowner doesn’t extinguish the amounts owed for the mortgage. The person inheriting the house must continue to make monthly repayments if the house isn’t paid off in full.
Some mortgages have insurance that covers any remaining debt outstanding at the time the homeowner dies. If the home is to be sold, you may want to put it on the market after holding onto it for a few years, if you believe the value will rise over time. That way you can make a nice profit off the home.
Probate is a necessary legal process that ensures a home left by the deceased owner is granted to the rightful heirs. The goal of probate is to eliminate fraud and facilitate the fair distribution of property, with or without a formal will. Unfortunately, probate is often a long, drawn-out, and costly process. And it becomes even more complex if there isn’t a will in place. To ensure that the probate of an estate goes smoothly when the time comes, it’s advisable to work with a reputable real estate agency or direct home buying company. This is especially true in strong markets such with real estate in San Diego.