Introduction

 

Buying a distressed property such as a deceased estate or foreclosure property can be an excellent way of securing a home or commercial property at below market rate. Whether you buy a deceased estate or a foreclosure, it is important to understand the ins and outs of the property buying process in order to get the best results.

 

What is a Deceased Estate?

A deceased estate is the collection of possessions belonging to an individual upon their death. This will include the contents of their home, the home itself if it was solely owned by them, and any other items or investments they may have had.

 

Usually when someone dies they leave a will expressing what they would like to happen with their possessions and appointing an executor to oversee the process, although some people die ‘intestate’, or without having made a will. In this case, letters of administration need to be granted in order to begin the process of passing down or selling the estate.

 

Property that forms part of a deceased estate often comes up for sale. This may be because there is no-one to whom it should be left or because there are debts against the estate or the property itself. If the house is in need of renovations or a quick sale is required, buying a deceased estate can be a good way of obtaining a bargain.

 

What is a Foreclosure Property?

A foreclosure property is a property that has been repossessed by the mortgage lender because the mortgagee has failed to make their repayments on their home loan. The lender has the right to begin repossession proceedings once three repayments in a row have been missed.

 

When a foreclosure occurs, the lender’s priority is to sell the property as quickly as possible. This is because selling quickly can often be less costly in the long run than holding onto a vacant property for several months while attempting to sell it for the highest possible price.

 

Foreclosures provide excellent opportunities to buy homes for less than market value. It is also possible to buy property at the pre-foreclosure stage, once the process is underway but before the property reverts to the ownership of the bank. While this can take a little more work and negotiation, there may be less competition from other potential buyers if the property has not yet made it to the open market.

 

Pros and Cons of Buying a Deceased Estate or Foreclosure Property

Deceased estates and foreclosure properties are often referred to as ‘distressed property’. There are pros and cons to buying a distressed property.

 

Buying Deceased Estates or Foreclosure Property
Pros	Cons
Easy Sale Process Whether the property is being sold by the bank or the owner, chances are the seller will be wanting the sale to proceed as trouble-free as possible.Impersonal   Banks and estate administrators expect to receive low offers for the property they are selling. While they are under no obligation to accept, they are unlikely to be offended if they receive an offer that is well below market value.   Quick Sale Completion Having a property sitting empty is worth little to a lender, so they will be aiming to close the sale as quickly as possible to remove the property from their portfolio.   If the house is at the pre-foreclosure stage, the owner will be keen to complete a sale before the property is officially repossessed.	Competition With the financial crisis taking a toll on property owners, foreclosures are on the increase. The more competition there is in the market the higher the price other buyers will be prepared to pay.    Transaction Delays Distressed properties do not always represent the quick-buy solution that their reputation would suggest. There may be question marks over which institution or individual actually owns the full title, especially if there is a second mortgage involved or a former spouse still appears on the deed.   Condition Some foreclosed properties have been maintained in good condition – especially if they are pre-foreclosures where the owner has worked hard to try to retain the property’s value.   Others, however, may have lain empty for some time and may be in significant disrepair. Deceased properties may need extensive modernisation, especially if the deceased has lived in it for a considerable amount of time.

 

 

Where to Buy a Deceased Estate / Foreclosure Property

While deceased estates are commonly sold at auction, foreclosure properties may also be sold directly by estate agents or via an auction or online classified ads site like Gumtree. In the case of pre-foreclosure properties, direct sales via online classified sites are highly popular with distressed buyers who are looking for a quick sale. If you are considering buying a distressed property, this can be an exciting place to start.

 

 

Deceased Estate / Foreclosure Property Buying Process

When buying a deceased estate there may be a certain amount of paperwork and bureaucracy to deal with. Before proceeding, you need to ask whether probate has been granted. Probate is the official proof that a will is valid. In the event that the owner died intestate, letters of administration will be required instead. Insist on a copy of the relevant document before you proceed with any purchase.

 

Once a price is agreed, you are required to pay a deposit. If probate is already granted then the sale can proceed as normal. If it is not, there can be significant delays to the process, for example if the will is contested. If your purchase is subject to the granting of probate, it is a good idea to agree to a date by which the granting of probate must be achieved, giving you the right to terminate the contract if the seller fails to deliver.

 

Foreclosure property purchases are often quicker than probate sales, so it is important to make sure you have everything in place before you begin.

 

• Organise your finances so that you are ready to move quickly.

 

• Have a reliable conveyancing lawyer or property lawyer in place to help you through the process from start to finish, who can be relied upon to organise your paperwork within the required – often short – timeframes.

 

• Ensure you have funds set aside for repairs and renovation. In many cases the previous owner will have been facing financial hardship and may not have kept the property in a good state of repair.

 

• Avoid buying sight-unseen, as this can increase the possibility of buying a property that needs more work than you expect.

 

• Do your research. Investigate property values in the area to be sure that you really are getting a bargain. Assess the potential for capital growth if you sell within a certain timescale, or, if you are planning to rent the property out as an investment, compare it with other properties in the area to get an idea of yield you can expect.

 

As with any property purchase, it is important to carry out legal and administrative checks thoroughly to identify any legal claims that a third party may have against the property. Typically these legal claims might include easements, judgments, mortgages, property taxes, and other taxes such as income tax.

 

Property Legal Claims to Identify and Rectify
Easements	For example, the right for a utility company to access the land Will usually remain when the property is sold
Judgments	Court orders relating to unpaid debts to lenders or service providers Will usually be removed when the property is sold
Mortgages	Any mortgage, but especially a second or third mortgage Will usually be removed when the property is sold
Property taxes	The current owner of a property is responsible for any taxes owed upon it New owner becomes current owner post-sale, so if there are any unpaid taxes they will be your responsibility and you must pay them off in full when you take ownership
Other taxes	For example, income tax These should be paid off by the current owner before or at the moment of transferring title Buyer should ensure this has been done

 

How to Buy a Deceased Estate / Foreclosure Property on Gumtree

Buying a deceased estate or a foreclosure property can be challenging, but it can also be a highly effective way of securing a property below market rate.

 

There is a wide variety of residential and commercial properties advertised on Gumtree at any given time in locations all across Australia. To view the latest property listings click on this quick link: http://www.gumtree.com.au/s-real-estate/c9296.

 

You can further hone your search by entering your preferred location (for example ‘Sydney’) in the location box or clicking on the location’s name in the left-hand navigation.

 

You also can specify a particular type of sale, for instance ‘probate sale’ (http://www.gumtree.com.au/s-probate+sale/k0).

 

Once you have found a potential home or commercial property, be absolutely sure to do your due diligence. When you are satisfied that everything is in order, you can proceed with buying your deceased estate or foreclosure property with confidence.