Probate is expensive, time consuming and part of the public record. Learn more here, including how to avoid it.
Probate Real Estate Investing Offers Solutions to Estates Held in Probate
Probate real estate investing refers to purchasing property from estates held in probate. When a person dies all of their assets, including real estate, are transferred to probate. Depending on the complexities and circumstances, probate can last between six months to three years. If the decedent has an outstanding mortgage on their real estate holdings, the estate is responsible for making payments. Insurance, taxes and utilities must be paid through the estate, as well as property maintenance.Related Reading: Inheritance loans, real estate investing, executors, avoiding probate and alternatives.
Probate real estate investing provides an option to beneficiaries who are struggling to make ends meet. This is particularly true for estates which are managed by a probate executor who resides out of town. Property maintenance and mortgage payments can cause tremendous financial burden for estate administrators; particularly if it will take years to settle the estate through probate.
Investing in probate real estate can yield a tidy return on investment. Oftentimes, real estate can be purchased well-below current market value when beneficiaries are in need of cash. Purchasing probate real estate does not require special training. However, real estate investors who engage in purchasing probate properties should possess strong communication skills and a sense of compassion. Probate investors work with people who have recently lost a loved one. Therefore, it is important to approach estate administrators in a kind and gentle manner.
The first step of probate real estate investing requires a visit to the local courthouse. When an estate is placed into probate it becomes a matter of public record. Investors can locate potential real estate deals by researching probate records. In most cases, the decedent will have executed a Last Will and Testament which outlines how they would like their property and personal belongings distributed.
The name of the designated estate administrator is listed in the Will. The Administrator is authorized to make decisions regarding distribution of property. If the estate is in financial trouble and cannot afford to make payments on real estate holdings, the administrator plays an instrumental role in deciding to sell the property.
Next, investors will search deed records to locate real estate held in the decedent's name. Records of deeds record land ownership and transactions. Whenever property is transferred or sold, a new deed is recorded. Deed records reveal if the real estate has a mortgage. If so, the estate is required to continue payments throughout the duration of probate.
Probate real estate investors quickly learn how to determine if an estate needs to liquidate assets. If the real estate has a second mortgage attached to it, investors typically have a better chance of purchasing property from the estate.
Once probate investors compile a list of potential real estate deals, they must make contact with the estate administrator. This can be accomplished by phone, mail or in person. It is imperative that investors be respectful and offer condolences in their initial contact with the executor.
Many estate executors are unaware they can liquidate probate real estate holdings. Offering to purchase real estate held in probate could solve their financial problems and provide investors with instant equity in their investment.
It is important to note if multiple heirs exist, they must all agree to sell real estate held in probate. In some instances, the estate may be required to obtain permission from the probate judge to sell their real estate holdings.
Probate real estate investing offers multiple opportunities to obtain profitable deals. While it does require a bit of detective work and negotiating with grieving heirs, probate real estate deals can provide a win-win situation to all parties involved.