Probate real estate investing is a special niche not many investors know about. This investment strategy involves buying real estate held in probate. Probate is the legal process used to distribute estate assets of a person who has died. In the best cases, probate takes about six months to settle. If complex issues or family disputes surround the estate, probate can drag on for years.
Probate real estate investing can provide a solution to heirs needing to sell real estate before probate settles. There can be many reasons heirs need to liquidate real estate holdings. One of the most common is the estate has insufficient funds to maintain the property.
Throughout the probate process the estate is responsible for property related expenses. If the decedent held a mortgage, the estate must continue making mortgage payments in order to avoid foreclosure. Additional expenses include homeowner's insurance, property taxes, utilities and homeowner's association dues.
Oftentimes, heirs reside out of town and cannot manage property upkeep. The estate will have to hire outside help to handle general maintenance such as lawn and pool care. If the estate cannot afford the care, the house could quickly become an eyesore and lose value.
The majority of heirs do not know they can sell real estate holdings during the probate process. Some states require court confirmation prior to selling probate property. Experts recommend working with an attorney when buying or selling real estate suspended in probate.
There are no special requirements for probate real estate investing. However, it is important to conduct research and understand the judicial process before diving in. Probate properties may not be the best option for a first-time real estate deal.
The first step of probate real estate investing involves making a trip to the local courthouse where probate cases are handled. Probated estates are a matter of public record and can be viewed by anyone.
Most of the required information can be found in the decedent's last will and testament. The Will includes contact information for the estate administrator, along with the decedent's wishes for distribution of assets and personal belongings.
Information regarding real estate is also contained within the Will. Conduct a search of deed records on the property. Records of Deed document land ownership and transactions. Every time real estate is transferred or sold, a new deed is recorded. Records of Deed disclose if the property has a mortgage note. If so, the estate may need to sell the property quickly.
The estate administrator is authorized to make decisions on behalf of the estate. However, if multiple heirs are entitled to the property they must all be in agreement before the sale can commence. If court confirmation is required, the sale might be postponed by 30 days or longer.
By carefully searching through information provided in Wills and probate documents, investors can develop a list of potential candidates. Initial contact will be made with the estate administrator. This can be done by phone, mail or in-person.
For obvious reasons, it is important to be respectful and offer your sincere condolences. Offering to purchase their real estate holdings could provide a solution they did not know existed.
This is a simplified overview of probate real estate investing. This niche offers endless possibilities and currently, is a technique few investors are using. Take time to become educated about investing in probate properties and learn the ropes. Doing so could pay off with handsome profits.