Buying real estate can be challenging at any time. When you are in the market, a property that turns out to be part of an estate can be confusing. What is probate real estate in Oregon, and what are the upsides and downsides of buying a probate property?
Buying probate real estate in Oregon can be advantageous. The process can be a little different from a typical real estate transaction. If you understand the circumstances and process, though, you can decide whether a probate property is the right purchase for you.
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What is probate, and how does a property being in probate affect real estate in Oregon?
At its most basic, Oregon probate is the legal process through which a person’s property is distributed after their death. (There’s more to it, of course, and it can get more complicated, but that’s the gist.)
Sometimes real estate doesn’t have to go through probate, such as transfer-on-death (TOD) deeds, living trusts, and joint ownership with right of survivorship (JTWROS). In these circumstances, property ownership typically transfers to the new, designated owners without passing through probate.
It’s not uncommon, however, for Oregon property to pass through probate. During the process, the estate’s personal representative may offer real property for sale. In that case, it’s possible that the real estate will be on the market, available to potential buyers like you.
When a property is in probate in Oregon, however, the sales process will be a little different, such as:
- The sale cannot conclude until the court considers the probate process complete (usually 5-7 months in Oregon, but can take longer)
- Property can be owned by the state, depending on the circumstances of the deceased
- State of repair, quality, and condition can vary
- Can have more emotional tension around the people involved in the estate
How the Oregon probate sale process works
At a high level, the overall formal probate sales process for probate real estate in Oregon works like this:
- The probate court appoints a personal representative, or PR
- During probate, any estate instruments, such as a will, are filed with the court
- If there wasn’t a will (known as being intestate), the court and PR process the estate based on the process and requirements outlined in Oregon law
- Real property receives appraisal and value
- Property listed for sale in as-is condition, with little to no negotiating room for changes, repairs, etc.
- Prospective buyers submit offers with earnest money
- Court and PR review all offers (or, depending on the sale process and circumstances, the court reserves the right to sell the property via auction, or have buyers bid in a courthouse auction)
- Sale closes and ownership transfers to the new owner
Most estates pass through Oregon probate within 5 to 7 months. However, complications or legal contests can make that take longer.
What about small estates?
Oregon law allows for real property valued at $200,000 or less to be considered as a “small estate” or “simple estate.” If the full estate, not just the real property component, qualifies for a small estate affidavit, the property sales process can be streamlined.
Small estate proceedings can begin in as little as 30 days after the deceased passed away, instead of at least four months.
How long does buying probate real estate in Oregon take?
In Oregon, it can take less than 60 days to sell a home. If you are interested in buying a probate property in Oregon, the process may take up to a year to complete. For a regular estate,
- An estate can be filed immediately after death, but timing varies
- A four-month minimum period is required for creditors to file with the court
- Probate can settle after the four-month period
- Most estates conclude probate within 5-7 months, but up to a year is not uncommon
If probate takes longer, it’s usually due to a contested will, complexity in the estate, or problems such as missing records, incorrect/incomplete paperwork, etc. Consider your own circumstances regarding property, housing, investment plans, etc., so that you are ready for the timeline probate real estate can need before ownership changes hands.
Costs
When a buyer makes an offer on a probate property in Oregon, they also must put down earnest money, typically 10% of the purchase price.
Buyers also take on a no-contingency risk. In other words, they agree to buy the probate property as-is. The buyer may have to surrender the earnest money if the deal falls through.
On the seller’s side, the estate handles costs related to the sale of the property. That can include reasonable fees for the PR, filing fees, an appraisal, and any necessary bonds. The estate also pays the seller’s closing costs. Here are common types of fees, but the amount varies (usually by the total size of the estate) paid by the estate on the seller’s side:
- Court filing fees
- Probate bond
- Mail or other public notifications
- Appraisal fees
- Executor fees
Pros and cons
Buying real estate can be a challenge, especially in the current market. A probate property could be a great opportunity, but it’s important to understand there are upsides and downsides:
Pros
- Pricing is often lower than similar properties on the market
- Could be a way for prospective homeowners to purchase a property
- Finances or other pressures may make the seller willing to sell quickly and at a more favorable price
- Probate sales can be less competitive than other sales
- Investors may maximize their investments
Cons
- As-is condition could mean problems with the property or more work to do before the property is habitable or ready to re-sell
- Probate sales take longer than most real estate sales in Oregon
- At-risk earnest money could be thousands of dollars
- Seller typically is not expected to negotiate or be open to discussing price, fixes, modifications, etc.
- Court and PR have the final say on approving the deal, and may also have potential buyers bid for the property in auction
The biggest pro typically comes down to price. Oregon probate real estate typically costs less than similar properties on the market. However, the longer timelines, as-is property condition, and delays out of the buyer’s control can be major downsides.
What buyers want to know before making an offer
While Oregon probate real estate has risks, the informed buyer who understands the risks and process can still be in a suitable position to make a purchase that is to their benefit. Before making an offer:
- Understand how many probate properties you’re willing to devote time, energy, resources, and money to before you make offers
- Arrange a paid inspection
- Compare the property’s assessed value to regular properties on the market and those that have recently sold
- Under the overall probate process for the county where the property is located
- Seek a real estate agent who has experience with probate properties
- Work with a probate-experienced real estate broker, known as a Certified Probate Real Estate Specialist (CPRES)
- Consult an Oregon estate planning or probate attorney
- Understand your financing options before you make your offer: Will you be paying cash, or trying to arrange a mortgage?
Discussing your situation and vision can be crucial to making your way forward with a probate property purchase. A CPRES, Oregon estate attorney, and/or mortgage professional can all be useful so you understand your options, commitments, and limitations.
Oregon probate real estate can be an opportunity
What is probate real estate in Oregon? It can be an opportunity to find the home or investment property key to your plans.
It can also have some major differences and drawbacks that make a probate property less attractive to buyers. However, when a buyer understands the process, requirements, pros, and cons, they can make the right choice for their future. And it just might be with a probate property.
Are you trying to understand Oregon probate real estate as a buyer or seller?
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