Can an heir buy the house from an estate?
It’s Brad from ProbateResource.com.
At Probate Resource, we are a real estate solutions company that specializes in probate inheritance properties. WE BUY PROPERTIES FOR CASH or we have a network of Real Estate agents across the country who are probate/inheritance experts. Fill out the form to find out more!
A common question we receive is whether an heir can buy a house from an estate, and the answer is YES! But there are some important things to consider. In many cases, we have worked with estates where one of the siblings or heirs wants to buy the house and continue living in it. However, it is essential to take certain factors into account before making any decisions.
Multiple Heirs
If you are trying to buy a house from an estate with multiple heirs, you need to consider the other heirs’ interests as well. You may want to get a great deal on the house, but you do not want to short-change your siblings or the other heirs. You need to keep in mind that all the other heirs need to agree to the transaction. If the other heirs are on board with your plan, you can make an offer to the estate. You should get an appraisal on the house to figure out what the house would likely sell for on the market. **Tip: it also may be a good idea to get an additional appraisal or a BPO (Brokers price opinion) from a Real Estate Broker so you have multiple options to present to the other heirs**
Market Value Of The Property
To determine the value of a property, you have a few options.
You can get an appraisal figure or a broker’s price opinion (BPO) from a real estate agent. However, keep in mind that if you opt for the latter, the agent will likely expect some form of compensation, either a fee to run the BPO or a future commission or listing. It’s important to understand that they won’t work for free. Once you have an idea of the property’s market value, you can calculate your share of the estate. For example, if you’re entitled to 25%, you can use that % in determining your offer to the estate.
If you want to buy a property at a discounted price, it may be considered fair to knock 25% off of the price if that’s your share of the estate, however if you’re looking for a bigger discount, that’s going to be between you and the other heirs to agree to. At the closing, the remaining 75% would go to the other heirs of the estate, while your 25% would be taken out of the total amount. You should get an appraisal to determine the actual value of the property. The cost of an appraisal generally ranges from four to five hundred dollars. You can reach out to a residential appraiser for this. Alternatively, you can opt for a BPO from a real estate agent who can give you their opinion on the potential selling price of the property.
It’s important to keep in mind that if the estate has any outstanding debts, those creditors must be paid back first before any money is distributed to the heirs. This is to avoid any potential lawsuits against the executor or administrator of the estate. For example, if you were to sell a house to yourself for less than its market value, and the creditor didn’t receive the full amount owed, they could come after you for the difference. It’s best to consult with a probate or real estate attorney before proceeding further in this matter. This can get complicated!
The Probate Process
Understand that I’m talking about the probate process and how important it is to consider various factors during this time. It’s crucial to ensure that all parties/heirs involved are fully aware of the situation and that EVERYTHING IS PUT IN WRITING! Verbal agreements can often lead to confusion and misunderstandings, which can cause problems down the line. It’s important to make sure that all heirs in the estate explicitly agree to any decisions made and that these decisions are clearly documented in writing. This will help prevent any disputes or disagreements that may arise later on.
Before you proceed, it is important to make sure that you have written documentation from all other heirs to the estate. They need to acknowledge that you are making an offer and you need to put this offer in writing. It is recommended to use a purchase and sale agreement, which you can find online or through a real estate agent. Ensure that the agreement is official and meets your state’s requirements (for a valid real estate contract). Additionally, it is important to process the transaction through a proper title company or real estate attorney, depending on your state’s laws. Do not simply use a quitclaim deed from the estate to yourself or anyone else, as this is often done incorrectly (and can cause issues down the road if you ever go to sell in the future). ** We see this VERY FREQUENTLY**
Warranty Deed
It is important to ensure that the title of a property is free of any issues that may arise in the future. Otherwise, these issues will have to be resolved at a later stage. To avoid this, it is recommended to obtain a WARRANTY DEED on the transaction. This means that a reputable title company or a real estate attorney is processing the transaction and issuing title insurance.
When there is a warranty deed, it typically means that the title is insurable, and any defects are covered. This indicates that the facts have been reviewed, and the transaction is valid, with no chain of title issues.
It is crucial to complete this process through the appropriate channels. If you are obtaining a mortgage to purchase the property, it is advisable to discuss the terms of the transaction with your lender to ensure that it is deemed an arms-length transaction.
I won’t be discussing arms-length transactions in this video. If you’re unfamiliar with the term, you can search for its definition on Google. Before proceeding with this type of transaction, it’s crucial to consult with your lender. They may not feel comfortable with it due to various reasons and may not fund the deal. While it’s great if you have cash, most people obtain a mortgage for the property. Therefore, it’s essential to involve your lender in the process early on.
If you’re one of the heirs and want to purchase the property, ensure that everything is documented in writing.
Multiple Heirs
It’s important to ensure that a proper appraisal or a BPO (Broker Price Opinion) is conducted for the estate so that other heirs are not being deprived of their rightful share. Also, if one of the heirs is interested in purchasing the property, it is crucial to ensure that they are a qualified buyer.
Many times, it happens that an heir claims to want to purchase the property but doesn’t have the necessary finances or qualifications to do so. In such cases, giving them time to arrange for the finances might not work as they may just keep delaying the process. (This happens more often than you might think…) This can cause unnecessary delays and conflicts among the heirs. Therefore, it is always better to make sure that the buyer is genuinely interested and qualified to avoid any complications later on.
For Example: Johnny believed that his siblings had treated him unfairly as he had hoped to buy their house but couldn’t do so. However, the truth was that he had delayed the process and didn’t follow the proper procedures. Now, his siblings are selling the property and Johnny feels that he has been denied the right to buy it.
It’s a common situation when one of the heirs wants to purchase the estate property. But it’s essential to follow all the legal guidelines and consult a real estate or probate attorney before proceeding. We can assist you in finding a reliable attorney from our extensive network of attorneys who specialize in real estate and probate law. We would be glad to refer you to one of our trusted attorneys. Please do not hesitate to contact us if you need any assistance.
Let’s Connect
In case you are watching this video to sell your house, we can make you a cash offer to purchase it. Alternatively, if you prefer the traditional route, we can list your property with one of the real estate agents in our network, including myself. Thank you for taking the time to watch this video.