I See Dead People or Why is a Probate or Trust Sale Like an REO?

My sister in law as executor of the estate just sold my mother and father in law’s house.  She chose a realtor who lived in the neighborhood who also was an reo realtor without a lot of reo inventory right now. (Not an unusual situation)  She turned out to be the perfect agent for the job because of her REO background.  She took a home that was filled to the brim with things that no one in the family wanted, had it cleaned out, trashed out, secured,  on the market at an aggressive price, and sold in 2 weeks.  I couldn’t have done better myself, except I would have staged it, but that is a separate story.

Getting a probate or trust sale ready for market is very similar to an REO.  When a homeowner dies his or her personal property must be disposed.  Things of value need to be appraised for tax purposes and are distributed accorded to the terms of the will, or in the case of no will sold and the money distributed according to state law.  There is often much left over that is not of value and someone needs to trash the home out, much the same way as an REO home is trashed out.  This job is often left to the realtor. The home will almost always be vacant, and again the realtor will need to make sure it is secure.

While probates and trusts do have some differences in the technicalities of sale from an REO, many of the disclosure exemptions are the same.  The executor is exempt from the  transfer disclosure, the seller’s questionnaire, the smoke detector requirement, and signature on the natural hazard report, but not exempt from providing the report.  If the realtor knows anything about the property he or she does have a duty to disclose anything that is material.

Homes that are sold through probates or trusts are very often not perfect.  There may have been a death on the property or there could have been many years of deferred maintenance when the owners got older.  They may even have been left empty for a period of time while the owner was in assisted living or a nursing home.  Like an REO property the realtor must make adjustments to the suggested price based on these issues which are common to both kinds of sales.  (Generally the death on the property is not found in REO properties, but it can happen.)

The other big similarity is that both REO homes and trust or probate homes have to be sold.  They are not owned by people who have the luxury to test the market and sell if they get the price they want.  They need to be sold, either to settle an estate or in the case of an REO to mitigate a loss.  As a result they are a wonderful opportunity for a buyer to get a home at a great price or a realtor to get an assured sale.  Both sides win in these types of sales.

So why the comparison?  If you are an REO realtor and add probates and trusts to your repertoire then many of the skills you have learned are very useful.  If you are an investor it is a good place to look when REO inventory is not getting you everything you want.  If you are an end user buyer these homes are worth exploring because of the motivation of most of the sellers.