My wife and I are considering buying a house in California from a probate seller. We went to the house Saturday and talked to the selling realtor. The story is that the original owner died in 1996. Several family members then lived in the house off and on through the years. About 3 years ago the house was completely vacant, and a squatter moved in. Turns out, that squatter was wanted by the federal government, so they raided the house, causing some damage here and there. After all this, it took about two years for the courts to figure out who actually owns the house and approve of the sale.
This house is in East Palo Alto, CA, the cheapest neighborhood in an area overflowing with extremely wealthy neighborhoods. The house is listed for $415K, and we would finance about half of that. The goal is to rehab-while-living-in-it for 2-3 years and then sell it at a profit (with that sale marking our FI finish line). Our walk-through inspection of the house was satisfactory and barring any major problems the come up in inspection (roof, plumbing, electrical), we feel confident that we could build a lot of value in this property. The other hope is that the forces of gentrification will increase the property value over that amount of time. We feel confident that we could sell the property for at least $500K in the future, after all repairs, so we're trying to determine the best purchase price and understand what repair costs will be.
So, my questions are:
- Do you have any recommended reading for buying from a probate seller? I've read all the things that come up from googling that term around. (Offers need 10% cash down, there is an "overbidding period", etc.)
- Are there any additional costs in a probate sale?
- How would you compare a probate sale to a forclosure?
- How much should we bid? Should we wait and try to "overbid"?
- We have not talked to a bank about financing yet, would this type of sale cause any problems? The offer period is open until 2/25/2015.
Thanks for any advice you have. Long time reader, infrequent poster.