There are a lot of bargain properties that serious investors are aware of and pursue. These include foreclosures, REO, short sales, divorces, and other distressed properties. An often overlooked source of distressed properties are estate sales and probate properties.
When a loved one dies, someone in the family is typically assigned as the executor of the will. If there is no will, someone is appointed the executor of the estate. The executor of a will seldom has the skills and knowledge to legally and properly liquidate the estate. For help, they turn to an estate attorney.
Just as in the general real estate market, you find a wide variety of reasons motivating people to sell estate properties. Working with an estate attorney doesn't automatically mean they will deliver bargain properties to you. But occasionally, they will have a client that needs to sell a property fast or who is otherwise fed up and wants to close the case, settle the estate, and be done.
There are a number of reasons why an estate attorney would turn to an investor like you for a quick sale. There is a fast clock ticking if there’s still a mortgage on the property and the death of the owner has stopped the income that produced the payments.
The heirs may decide to rent it out or list it with a Realtor for a full price retail sale. Yet other executors are less sophisticated or ill equipped to handle situations at this level. This is when the estate attorney turns to you. The attorney is not all that concerned about what the seller and the buyer agree upon. They’re more interested in closing out the estate and getting paid.
Also, the death of the owner doesn't stop property taxes and insurance costs from coming due. If the estate is short on cash and income and the property is the largest asset, chances are good the heirs will want to sell quickly. Selling the property may be the only way of raising cash to pay off other debts the estate is responsible for. Selling quickly is also a way to stop what little is left from eroding away.
Sometimes the property you’re interested in is but a fraction of a large estate. The more heirs there are, the less your low offer affects each heir. Yes, it may be true that the property is worth $50,000 more than what you’re offering, BUT if there are five heirs, each heir is only affected $10,000. And, if the five heirs are looking to net about $200,000 each from the estate, the heirs may be very likely to say, “The heck with $10,000... close the estate and give me my $200K!” The old “Dollar waitin’ on a Dime” adage comes to mind. I love it when the property is the last thing between closing out the estate and the heirs getting a big fat check.
There are a lot of reasons that motivate executors and heirs. And every single one of those reasons are exactly why you should be motivated to start networking with estate attorneys.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.