A Guide To Probate Sales And Quitclaim Deeds

Property ownership comes with a complex set of guidelines and regulations you must abide by. When it comes time to transfer your ownership to someone else, it’s another headache entirely.  

Two common forms of property ownership transfer are probate sales and quitclaim deeds. What’s the difference? What should you know about both processes? 

This article dives into the essentials regarding both probate sales and quitclaim deeds. These terms are helpful to know when starting your real estate investment journey or when thinking about how your properties will thrive after you’ve passed away.  

Probate Sales in Real Estate 

Usually, someone with assets will leave a will outlining how they wish their properties, investments, and other valuables to be divided up once they pass away. Sometimes tragedies happen or the deceased did not draft a will—when that occurs, the relatives of the deceased person, or a court, will have to decide what to do with what they left behind.  

The legal process of transferring ownership or sale of the deceased person’s assets is called probate. What is a probate sale in real estate? A probate sale is the process of selling the property of the person who passed away. Probate sales can be legally complicated and emotionally taxing, but some buyers benefit greatly in the right circumstance. They are usually sold as is, meaning there are few if any contingencies on the transaction. While the probate sale occurs, the probate court will oversee the sale and ensure that all offers are reviewed and approved.  

If the homeowner owed more money than what they had in cash savings, the money received from the probate sale will be distributed to their creditors to attempt to cover leftover debt. Any remaining cash will go to their heirs.  

Process of a Probate Home Sale 

There are generally three steps to a probate home sale. Each of these take place in probate court, and the court will oversee all legal proceedings.  

Step #1: The Court Identifies Creditors 

The first step is for the court to determine who the deceased still owed money. These creditors will be paid first from the probate sale. Many Americans have debt—it could come in the form of student loans, credit card debt, or a mortgage. The probate sale proceeds, therefore, firstly go to credit card companies, mortgage lenders, or contractors.  

Step #2: The Probate Court Appoints a Representative to Handle the Sale 

The probate court can nominate someone to represent the estate and handle the property sale. These people are known as “administrators.” 

The administrator is responsible for gathering the money earned from the probate sale and distributing it to the proper parties. These parties will be the creditors the deceased owed, then the heirs if there is remaining cash.  

Step #3: The Administrator Puts the Property on the Market 

The administrator will handle the home sale then work with a real estate agent to list and show the property to interested buyers. In tandem with the probate court, the administrator and real estate agent will determine a listing price and consider offers.  

Keep in mind that the probate court will want to cover as much of the deceased homeowner’s debt as possible, so for them to approve a bid, it must be in their best interest (not necessarily in the best interest of the buyer).  

Buying Probate Real Estate 

Buyers sometimes look for probate properties to buy since they’re usually priced lower than traditional home sales. How would an interested buyer go about finding a home in probate?  

First, potential buyers start scouting for probate property listings and evaluating the property’s condition before making any decisions. They look for listings in local newspapers, online databases, or through real estate agents specializing in probate sales. 

Once a buyer finds a property of interest, they arrange a visit to assess its current state. Factors like needed repairs, location, and potential for appreciation are all under consideration. Buyers should also research comparable properties in the area to determine a fair offer price. 

Remember, probate sales typically involve properties sold ‘as is,’ so buyers must also factor in potential renovation and repair costs. Buyers should be prepared for a longer process than traditional real estate transactions, as court approval is needed for the sale. 

It’s always a good idea to seek guidance from a real estate attorney to navigate the complexities of probate court and buying probate real estate effectively. 

Quitclaim Deeds in Real Estate 

A quitclaim deed releases a person’s interest in a property without specifying the nature of the interest. It provides no warranties regarding the person’s rights in the property and is commonly used in non-sale situations, such as transfers between family members. To clarify, quitclaim deeds to not state that the grantor has interest in the property. All it says is that, if the grantor does have an interest, they relinquish that ownership.  

Since this deed doesn’t guarantee the grantor’s ownership interest, title insurance is typically not issued with a quitclaim deed. Quitclaim deeds are used to prevent the person who is relinquishing the property from later claiming that they have interest in the property. 

Quitclaim deeds typically contain a legal description of the property, the name of the person who is transferring interest, the name receiving the interest, the date, and both parties’ signatures. These signatures must be notarized by a certified notary to be valid.   

They are used for scenarios such as adding/removing a spouse from a title or clarifying ownership of inherited property. It involves the risk of the grantor’s valid ownership interest and can be used to change property title or clarify an easement. 

Types of Quitclaim Deeds 

Deeds can vary based on what they guarantee when the ownership is transferred. For example, warranty deeds grant differing levels of assurance when the transfer of ownership is completed. Warranty deeds are used in property sales and take on two forms: general warranty deeds and special warranty deeds.  

• General warranty deeds assure that the grantor owns the property fully, and that there is no other entity with a claim on it. This type of deed offers the highest form of protection for the grantor since it assures that the grantor had ownership rights for the entire history of the property, even when they were not the owner.  
• Special warranty deeds also claim that the grantor has full ownership, but only for as long as they’ve owned the property. Special warranty deeds come into play mostly in commercial real estate sales.  

Any type of quitclaim deed can be overturned or cancelled if both parties explicitly agree to nullify the transfer. However, if one party believes that the agreement was illegal, it will have to be decided in court.  

Using Quitclaim Deeds in Estate Planning 

Using quitclaim deeds can be beneficial in your estate planning strategy. By transferring property ownership before death through a quitclaim deed, you can avoid the probate process for that property. 

This proactive approach ensures that the property passes directly to the designated individual or living trust, bypassing the need for court involvement. Incorporating quitclaim deeds into your estate plan can help streamline the transfer of assets, potentially saving time and costs associated with probate court proceedings. 

To make the most of this strategy, ensure compliance with state laws, notarize the deed, and file it with the county clerk. Seeking legal guidance can further ensure a smooth and valid transfer of property ownership. 

Conclusion 

Now that you understand the ins and outs of probate sales and quitclaim deeds, you’re better equipped to navigate the world of real estate transactions and estate planning. 

Probate sales come into play when property distribution is at stake due to the absence of a will, while quitclaim deeds can be used to transfer property ownership more efficiently and can be done prior to the enactment of a will.  

By utilizing these strategies, you can make informed decisions and streamline the process of property transactions.