Probate leads are potential seller clients who inherit properties they often want to sell quickly after going through the probate process (the legal process of transferring the assets of a deceased person to heirs). Since many heirs live out of state, or are otherwise not prepared to maintain the property, they often look to sell quickly. While probate leads are great, in order to be truly successful you need to access as many leads as possible.
For most new real estate investors, locating, pitching, and closing probate leads sounds right up there with root canal as a way to spend an afternoon. You may even think probate investors are like ambulance chasing lawyers-except they actually chase hearses! The last thing you want to do is bother a grieving widow to make a buck, so probate investing is just not worth it. That is until you start reading about the jaw dropping deals many investors who specialize in probate leads are pulling in. Like most great real estate lead generation strategies, the hardest part is getting started.
That’s why we put together this guide. In this article we’ll tell you everything you need to know to start locating, pitching and closing probate properties the right way. No hearse chasing required. When it comes to real estate investing, lead generation is always a road block for new investors. They may have the cash, they may have the knowledge, they may have a great contractor, but when it comes too actually finding leads, most new investors are at a loss. How on earth do you manage to buy properties for less than they are really worth?
In order to buy probate properties or any property for below market value, one of four basic conditions must be met:
• The owner should want or need to sell the property quickly
• The owner should live out of state and not have the time, energy, or money to maintain the property
• If they’re not in or close to the foreclosure process, the owner shouldn’t be underwater on their mortgage
• The owner shouldn’t need the home as their primary residence
While pre foreclosures and short sales meet the first condition and absentee owners the second two, probate leads often meet all three conditions. For example, someone who unexpectedly inherits a home from a deceased relative is often unprepared for the financial burden of owning and maintaining a second home, often lives out of state, and rarely needs the home as a primary residence. Even better, since the mortgages of deceased people are often paid off, they own the property free and clear. That means any profit from selling the home will be seen as a windfall.
How to Buy Probate Properties
Probate properties are owned by the estate of a deceased homeowner and are often sold below market value to property investors and potential homebuyers. The process of purchasing these properties can take anywhere from 6 months to several years. Before buying a probate property, you should understand where to find these properties, how to purchase these properties, and the process of court approval for your purchase.
Finding Probate Property
• Contact local real estate agents: Probate property sales may be marketed like any other home sales, which mean that local real estate agents may have probate listings. The executor of the estate (the person in charge of disbursing a person’s goods after they die), will hire a real estate agency to handle the marketing and sale of the property.
• Call local real estate agents and explain that you are interested in purchasing a probate property.
• Ask them whether they handle probate properties.
• A good real estate agent will know when probate properties are coming available and be able to guide you through the probate process.
• Be very clear with your agent about how much you are willing to spend and the type of property you are interested in purchasing.
Contact your local probate court: A more direct way to identify probate properties is to go directly to probate court and speak with the court clerk. If there is not a specific clerk assigned to the probate court, ask to speak with a staff person who handles probate cases. You should request a list of individual probate cases filed within the previous six months.
• Once you get the list, you can identify all cases that remain open by checking the court’s online docket or by asking the staff person. The staff person can also provide you with information on how to check the docket electronically.
• After identifying open estates, request the inventories for each. When an estate goes through probate, the executor is required to take a complete inventory of the decedent’s property and file that inventory with the court.
• If you find any estates with property in an area that is desirable to you, contact the attorney for the estate or the executor. Their contact information should be on the case docket sheet maintained by the court.
• You should contact each representative directly and request information as to the status of the property, how they are handling the sale, and whether an asking price has been established. If the executor is very motivated to sell, they may negotiate with you directly if the court has already approved the asking price.
Buy property at a public auction: Certain properties are more typically sold at auction, such as farms. Public auctions are advertised and a number of buyers may show up to bid on one or more properties.
• If you are interested in probate properties because they can sometimes be acquired at a lower cost, you should be wary of purchasing at an auction. Properties sold at auction generally sell at or above fair market value for the property.
Review local newspapers: Local newspapers provide a variety of information that can be used to locate probate properties. When reviewing local newspaper, look for the following:
• Obituary notices;
• Published notices to creditors; and
• Notices of petition to administer an estate to be probate.
• All of these documents direct you to current estates in probate that may include real estate. As discussed above, you can follow-up on any of the notices in the local paper at probate court and request an inventory of the estate.
Buying Probate Property
Prepare for a lengthy sales process: After identifying a probate property in which you are interested, you should be prepared for a potentially long process. Generally, purchasing a probate property takes at least six months and could take much longer. If you have a hard timeline for moving into a property, it may be better not to purchase a probate property.
Make an offer: You can make an offer on the probate property at any time. However, you should be aware that there are specific requirements for probate properties that are not typically required for regular real estate.
• When you make an offer, you must also give a deposit of 10% of the offer price.
• The representative of the estate may accept or give a counter offer.
• Even if your offer is accepted, it is only a provisional acceptance until the probate court confirms the offer.
• If you are overbid or the court does not confirm you as the buyer, you should be able to get your 10% deposit refunded to you. If you choose not to move forward with the purchase on your own, you will lose your 10% deposit. If you are approved as the buyer, your deposit will go towards the purchase of the property.
Ask for an inspection: If your offer is accepted, you should request to have a home inspection. Most often, family members selling a property do not know all of the problems with the property. By having the home inspected, you get a better understanding of the potential problems with the home and whether the value of the home is less than you originally anticipated.
• It is important to note that some sellers may refuse an inspection and that probate property sales are “as is.” This means that you are purchasing the home in its current condition without any warranties from the seller.
• If the inspection uncovers that the home is in utter disrepair and needs a significant investment to make the home livable, you will have to decide what is in your best interest.
• Remember, if you withdraw your offer you will lose your deposit.
Finalizing the Purchase of Probate Property in Court
Move forward after the offer is accepted: Once the seller accepts your offer the attorney for the estate applies for a court date so that the sale can be confirmed.
• The court date is usually between 30 to 45 days from when the application for a date is submitted.
• The court requires that the estate advertise the property with the new accepted price. Some states, such as California, require that the new probate price be marketed to the public as 5% higher than the offer plus $500.
• Even after the court date is set, real estate agents can continue to show the property with the hope of getting a higher bid for the property.
Attend court hearing: In order for the sale to be confirmed, you must attend a court hearing, along with any other buyers interested in the property. The court will identify the property you made an offer on and then conduct an auction style bidding process. If there are no other bidders, then the court will most likely confirm your offer.
Outbid other buyers: If there are other interested parties, the court will begin raising the price of the property at an incremental rate until a final bidder is left. This process is referred to as overbidding. If another buyer outbids your initial bid, you have the right to continue bidding on the property until a final bidder remains by outbidding everyone else.
• The court may choose to raise the price of the house by increments of $5,000 or adopt a more complicated formula. For example, some courts may set the minimum overbid as “the accepted offer plus 10% of the first $10,000 plus 5% of the balance.
• In order for an overbid to be successful, the over bidder must present the court with a cashier’s check made payable to the estate in an amount that is at least 10% of the overbid price.
• Therefore, those who intend to engage in overbidding must set a top amount that they are willing to pay and have a cashier’s check in that amount prior to attending the court hearing.
• If you placed the initial bid on the property and you want to ensure that you are not outbid, you should bring a cashier’s check with you to the court hearing so that you can engage in the bidding process if necessary.
• If an over bidder fails to have the correct payment, either in form or amount, or the payment is made out to the wrong party, the court will not confirm their purchase of the property.
Finalize the purchase: Once a bidder is confirmed as the purchaser, they have to demonstrate that they have the financing to move forward with the purchase of the property. The buyer would then sign a contract with the estate court.
• The buyer and the estate would close on the real estate transaction, all funds would be transferred to the estate, and the buyer would become the new property owner.
• This process may take about 30-45 days from the court hearing.
Rather than trying to locate a real estate agent with experience in probate properties, you could go to your local probate court to find them. When you get there, ask to speak with the court clerk or the individual assigned to the probate court. To make sure you get the right list, ask for the last six months’ worth of probate cases. After receiving the probate cases, identify the ones that remain open by checking the court’s online docket or by asking someone who works at the court office.
Once you recognize the open estates, make sure you ask for the inventory for each property. The inventory is drawn up by the executor of the property and then gets filed with the court. If you find any properties that you would like to view, contact the executor or the attorney for the estate by using the contact information on the docket sheet. Make sure you talk to either the executor or the attorney directly to understand more about the property. You want to know if there have been any offers made, how the executor is handling the sale, and if the court has approved an asking price. If one has been approved and the executor is motivated to sell, they may negotiate with you directly.
Probate Lawyer Free Consultation
When you need legal help with probate in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
itemprop=”addressLocality”>West Jordan, Utah
84088 United States
Telephone: (801) 676-5506