Should You Sell a Probate Property Directly to an Investor or List It on the MLS?
By Nancy Andreason, Probate & Trust Real Estate Specialist, Coldwell Banker Realty
In most cases, listing a probate property on the MLS is the better way to protect the estate and maximize the sale price. Open-market exposure creates competition among many buyers, including investors, instead of leaving the estate to negotiate with just one. There are exceptions, and every estate is different, so talk with the estate's attorney before deciding.
This is one of the questions I'm asked most often, and it's a fair one. Here's how I think about it.
Prefer to watch? Should You Sell a Probate Property to an Investor?
Why Investors Want Probate Properties
Probate homes are often in original condition, and many investors are actively looking for exactly that kind of property. Across Orange County and Los Angeles County, that interest is steady. Over the years I've worked with many professional investors. Many are excellent to work with, and some you may want to avoid. I have investors who would gladly make an offer on many of my listings.
Whose Interests Come First
My responsibility isn't to any one investor. It's to the estate. Executors and Administrators have a duty to the estate and its beneficiaries, and my job is to help them make decisions that protect the estate and maximize its value. Having completed 130+ probate sales, I've seen firsthand how much that decision can affect the outcome for the estate and its beneficiaries.
Why the MLS Usually Wins
When we list a trust or probate property on the MLS, we often receive multiple offers. Instead of negotiating with one buyer, we create competition among many, including investors bidding against each other. That competition tends to produce a higher price AND stronger terms for the estate, such as fewer contingencies or a cleaner closing timeline, which is very important.
Listing on the MLS doesn't shut investors out. An investor who wants the home can still make an offer. They just have to compete for it.
A good example is a Newport Beach property we listed that had significant deferred maintenance. It was a true fixer, but a unique one, with open views of the beach and bay directly across the street. Investors represented by their agents were interested and wanted their offers accepted quickly. Instead, we waited through the weekend and received five offers. We also asked agents to submit their clients' highest and best offers up front, which kept the process straightforward. We ended up with an offer significantly higher than our list price, and the estate was very pleased. Had the estate sold directly to an investor, or even accepted the first offer that came in, it would not have achieved that level of success.
When a Direct Sale Can Make Sense
There are legitimate reasons to sell directly. Examples include:
Title, occupancy, or access problems limit who can realistically buy. For example, a tenant may refuse to leave, and the estate would rather sell directly to an investor than go through the eviction process. Or there may have been fraud on the title, and the estate is concerned about future fraudulent activity.
The beneficiaries prioritize speed and certainty over top price and understand the trade-off.
Even then, get a competitive market analysis first so the estate knows what the property would likely sell for and what it's giving up.
Questions to Ask Before Accepting an Investor Offer
What does a competitive market analysis say the home is worth in today's market?
Is the offer truly all-cash with proof of funds? Is the buyer the actual purchaser, or planning to assign the contract to someone else?
Do the beneficiaries and the estate's attorney understand and agree with the approach?
Frequently Asked Questions
Should an Executor or Administrator sell a probate house directly to an investor?
Usually the better approach is to expose the property to the open market through the MLS, where investors can still compete with other buyers. A direct sale can make sense in some situations, but it should be a deliberate decision, not a default.
Is a cash offer from an investor better than an MLS offer?
Not necessarily. Cash offers can be fast and simple, but a single offer is negotiated without competition. Multiple MLS offers can raise both the price and the quality of the terms, and many of those offers are all cash, too.
Investors often pitch the idea that the estate will come out ahead because there are no real estate commissions and the property will be purchased "as-is." While that may sound appealing, the reality can be very different. In many cases, these properties are purchased well below what they could have sold for with proper open-market exposure. The estate may save a few percentage points in commissions, only to lose 10% or more on the sale price. What appears to be a savings can ultimately cost the estate tens of thousands, or even hundreds of thousands, of dollars.
Can investors still buy a probate property listed on the MLS?
Yes, of course. Investors are welcome to bid. They simply compete against other buyers, which works in the estate's favor.
Do I need court approval to sell a probate property to an investor?
There is no rule that prevents a probate property from being sold to an investor. Whether court confirmation is required generally depends on the authority granted to the personal representative, not on who is purchasing the property.
If the personal representative has Limited Authority, the sale of real property requires court confirmation. The sale is presented to the court for approval, and the circumstances surrounding the sale and how the property was marketed will need to be verified. This includes exposure on the MLS, advertising, open houses, and other efforts made to obtain the best price and terms for the estate.
Every situation is different, but it would be unusual for a Limited Authority probate property to simply be sold directly to an investor without first exposing it to the open market. When court confirmation is required, the court ultimately determines whether the sale will be approved.
Even with Full Authority, where court confirmation isn't required, beneficiaries generally receive a Notice of Proposed Action and have the opportunity to object. A direct sale to an investor is a decision the heirs have a voice in.
How do I know whether an investor's offer is fair?
Compare the offer with a competitive market analysis and consider how the property might perform with full market exposure. However, there is really no way to know exactly what the open market will pay until the property is exposed to qualified buyers and they have an opportunity to compete for it.
Price is also only part of the equation. Some investor offers contain terms or loopholes that make it relatively easy for the buyer to cancel and recover their deposit. Another tactic is to ask for a very short inspection period, sometimes just one to three days, and then use that period to come back and try to renegotiate the price or ask for concessions.
This is where working with an experienced probate real estate professional is important. I have systems and specific terms in place to help protect the estate from these tactics. Investors know up front what they must agree to for their offer to be accepted. The goal is not simply to get the highest offer on paper. It is to secure a strong offer, with strong terms, from a buyer who is prepared to perform at the price they offered.
Do probate homes in Orange County and Los Angeles County attract investors?
Yes. Many are in original condition, which is exactly what investors look for. That's why competition on the MLS is so effective.
Every estate is different. Every property is unique. My role is to help Executors and Administrators make informed decisions that protect the estate and maximize its value.
Disclaimer: This article is for general informational purposes only and is not legal, tax, or financial advice. Probate procedures vary by case, so consult the estate's attorney and tax professional before making decisions.
Thinking about selling a probate or trust property in Orange County or Los Angeles County?
Nancy Andreason | Coldwell Banker Realty | CalRE #01730309
714-944-3300 | [email protected] | AndreasonGroup.com
