While the concept of probate real estate sales remains sensitive, it is nonetheless a viable acquisition strategy that every serious investor needs to consider. If for nothing else, investors should pay special considerations to any means of acquiring their next deal. And, as it turns out, probate real estate sales are a great way to find deals with encouraging profit margin potential. What’s more, these deals will only make themselves available to those that actually understand the process.
If you intend to take advantage of probate home sales, I suggest you educate yourself on the process as a whole. That way, when the time comes, you’ll not only be able to act, but rather act timely and accordingly. Only then will the benefits of probate acquisitions make themselves available to you.
How Do Probate Real Estate Sales Work?
Probate is simply the legal process that settles a deceased person’s debts and formally passes their property’s legal title to the intended heirs. That is, of course, if there is a will to properly identify the intended recipients.
The parameters of a will typically dictate who the property will go to, but I digress. Not every scenario is as transparent as we would like to assume. It is all too common for homeowners to pass away without officially naming who will receive their property. In the event a homeowner passes away without naming any heirs to receive the home, the state steps in to administer the sale of the home through a special probate court.
Probate real estate sales that make it to probate court are a result of the vacuum in ownership that is created when someone passes away. Better yet, homes will be sold through a probate court when the deceased homeowner doesn’t bequeath their asset to anyone or never got around to making a will.
Fortunately for real estate investors looking to capitalize on probate real estate sales, each scenario (whether the home was bequeathed to heirs or brought to probate court) offers an opportunity to acquire a deal at an encouraging price.
If the subject property is bequeathed to an heir and/or heirs, it stands to reason that you may be able to acquire the deal if you play your cards right. If for nothing else, most heirs would rather receive cash for the property (which you can offer with the help of a private lender) than deal with a home that could have a number of undisclosed costs and issues. In fact, most heirs would jump at the opportunity to sell their inherited properties, and are motivated to do so before they turn into a headache. Therein lies the greatest benefit of probate real estate sales: motivation.
More often than not, those that receive a property through a will are motivated not to deal with the hassles that have become synonymous with homeownership. Their motivation, therefore, can serve as an opportunity for you to intervene an offer an “alternative solution.” If their motivation is strong enough, and your negotiation skills graceful enough, you could end up with a great deal on your hands.
If, on the other hand, the property makes it to probate court, you’ll have to change your approach. Instead of dealing directly with the heirs of a property, probate court will typically market the subject property just like any other. According to Zillow, “The probate attorney or the estate representative will hire a local real estate agent, sign a listing agreement, and show the property, just as they would a traditional listing.” Not unlike a traditional sale probate real estate sales that make it to court will base their listing prices on comparables, listing agent suggestions and independent appraisals. Either way, the original offer and sale date is subject to the court’s confirmation.
According to Zillow, “Once the sale date is determined, the parties now must wait a minimum of 30 to 45 days. During this time, the court requires that the property be properly advertised and marketed with the new accepted price.”
It is worth noting, however, that each state has their own probate laws, so there is no 100 percent, universal process to abide by. This is information is more of a broad overview than a specific process. At the very least, it should be enough to get the ball rolling on your next probate real estate sale.