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In today's market, a major part of a successful real estate investing business is being able to find and buy houses at a discount. One great way for investors to do that is by buying a house in probate.
Whether you're searching for a new method of acquiring an investment property or simply want to understand how buying probate property works, this article will walk you through the process of buying a house in probate as a real estate investor.
What are probate properties?
Probate properties are real property, such as a home or investment property, that is in the legal process called probate, which is meant to carry out the estate of the deceased, including the settling of their assets. Properties in probate are sent through the probate court even if the deceased left a will, which eventually passes the inherited house onto the beneficiaries of the estate, or the heirs, if any.
From there, the heirs or the court-appointed estate representative is responsible for the property and the sale of the property, if desired.
Why buying a probate property as an investor can be worthwhile
Probate properties are often sold at a discount because, in most cases, it's a distressed sale. The executor of the will is now dealing with the loss of a loved one in addition to handling their estate. This can be burdensome for many, especially if the inherited property is out of state.
For this reason, some heirs prefer to sell the property for a set amount, which can be below the appraised value, to simply be done with it. If it's a court-appointed sale, their goal is to sell the property as quickly as possible in order to reduce the time and resources spent by the court system.
How to buy a probate property directly
If you want to buy a probate property, the first step is to begin contacting the correct probate leads. All properties in probate are listed in public records in the county courthouse. Investors can sift through these records, gathering the contact information for the heirs or for the executor of the will.
If an investor doesn't have the time or resources to go to the courthouse to gather this information themselves, they can buy probate leads from companies who gather this data on a county-by-county level.
If a sales price is agreed, you will enter into a contract as normal and close in the specified timeline with a title company or attorney. Sometimes, the probate process will need to be completed before the heirs or executor are able to finalize the sale, so it's important to be patient and understanding of the process.
- Gather probate leads from the county courthouse or buy probate leads.
- Market to the executor of the will or heirs.
- Negotiate the purchase of the property outside of the court with the heirs or executor directly.
- Enter into a contract closing with a title company or attorney as normal.
How to buy a probate property from the court
If there is no will and the court is responsible for selling the estate because there are no named heirs or beneficiaries, they will hire a probate real estate agent to assist in the process of selling the home.
The process for buying a probate property from the court will vary by state, but many states use the same process.
The agent will first get an appraisal on the property, then list it for sale. Probate sales in this manner require the investor to place at least a 10% deposit when making an offer. Once there is an accepted offer, the court will send an official notice to the heirs. If no response or objection to the offer is filed after 15 days, then the court will proceed with either a hearing date to get a petition for approval for the sale amount by the court or approve the amount, which varies by state.
- Search for probate listings in the MLS or work with a probate agent.
- Negotiate the purchase of the property with the selling agent.
- Once an offer is accepted by the selling agent, the investor needs to put a 10% deposit down.
- The court sends a notice to the heirs, requiring a 15-day waiting period for response.
- Court petition to approve the final price and close.
Things to keep in mind when buying probate property
Probate law varies from state to state, and how much an estate requires in order to go through probate as well as the probate process will differ depending on the property location. It's important to work with an experienced probate attorney in your state and to get comfortable with your state laws and processes if you intend on buying a house in probate.
Also, keep in mind that not every home in probate will be sold at a discount. The discount relates to the condition of the property, the distress the owner or heirs are in, and how motivated they are to sell. While it can be a tricky sale to navigate, it can also be a lucrative investment strategy that is beneficial for both parties.
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