People own property. People owe taxes. People die. I don’t mean to be morbid, but these are facts of life. Every investor is aware of, and many specialize in one of these sources of investment properties: foreclosures, REO, short sales, divorces, fire damage, damaged foundations, hoarders, and other distressed properties. In today’s market, these can be difficult to find and too many investors are pursuing the same properties. On the other hand, probate and estate properties are in constant supply and often overlooked. If you need help processing the necessary documents for a probate property, you may consult a probate attorney.
Not all estates make good investments. Some are valuable “as is” and the heirs won’t have any trouble selling for top price. Some heirs move into these houses as their primary residence. But some will be a burden to heirs instead of a valuable asset. The two biggest problems for heirs are properties that elder relatives neglected for years and properties that owe back taxes (or both). Another common reason that heirs want to sell quickly is to pocket the profit without hassles. Many heirs live out of state. Or the estate has other debts needing to be settled and the property is the easiest to liquidate. There are many reasons why heirs want to sell quickly. Investors are knowledgeable at resolving all of these.
Regardless of other factors, there is still a clock ticking that puts pressure on heirs to make decisions. There may still be a mortgage needing to be paid. Property taxes will come due. HOA fees come due. Utilities still need to be paid and the property requires upkeep. If the deceased had a pension paying these expenses, the pension has stopped coming in. If expenses were paid from a 401k or other savings account, the heirs would rather inherit the cash than pay it out for expenses. There are many reasons why heirs want to sell probate property fast.
Sometimes the property you’re interested in is only a fraction of a larger estate. The more heirs there are, the less your low offer affects each individual 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 total estate, the heirs may be highly likely to say, “The heck with $10,000... close the estate and give me my $200K!” The adage “Dollar waitin’ on a Dime” comes to mind. It’s to your advantage when the property is the last thing between closing out the estate and the heirs getting a big fat check.
There are many ways that investors can generate probate leads for probate property. The most effective and least amount of work is by networking with estate planning and probate attorneys. When you have a good relationship with attorneys, they will contact you when you can help. However, stay in contact regularly so they remember you and be careful not to ask attorneys to do anything unethical or that causes a conflict of interest. You can also occasionally visit your local probate court where you may be able to get a list of all current probate cases or you may have to dig a little deeper. You also might find county probate records online or listed in the local newspaper.
However you find these, be highly sensitive to the fact that the heir(s) has recently experienced the death of a loved one. You don’t want to be known as a hearse chaser. If contacting an heir within the first couple of weeks of a death, a written letter can be the best way to start. Often there will be multiple heirs. It’s a good idea to send the letter to each one so that they all have the same information. If you can’t find contact information for the heirs or an attorney, send the letter to the deceased’s address. Chances are that someone is picking up the mail. Wait at least a week to 10 days before trying to make telephone or personal contact. It can be a good idea to let the first contact wait for a month or two. Allow the heirs to go through their initial grieving and to understand the circumstances involving the probate property. Heirs might be completely surprised to learn there is a tax lien on the property.
The probate process varies from state to state. It typically takes from 6 to 12 weeks. Some states have processes to assure the best price is received. These may require a public probate sale/auction. Generally, probate courts stipulate the home be sold “as is.” You will want to make a “no contingency” offer. Once the sale is approved, you need to be able to close quickly. All cash of your own or from private lenders is often the best solution.
Can you offer tips about probate investing? Please leave a comment.
Also, our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions, inquiries, or article ideas to [email protected].