When Chad asked me about buying probate properties, I knew what he was doing. He was looking for a real estate investment strategy that would give him an edge over his competitors. We all want that edge. Even successful old-timers like myself want to know that we’re doing everything in our power to find the best deals. And, most of us have tried every possible real estate investment opportunity out there—including buying probate properties—just to be sure.
Some work well enough to help you boost the standing of your portfolio and build your business, while others simply don’t. If you’re not careful, there are a few that could even make your business go bust. So, to give him an edge over what most investors learn through trial-and-error—including me—I told him what I thought about buying probate properties, as well as where I knew he could find the best real estate deals.
Buying Probate Properties: Boost or Bust?
The biggest benefit to buying a probate property is the opportunity to acquire a home inexpensively that can then be renovated and sold, or rented out, for potentially good returns. They tend to be sold at below-market value—whether there are heirs or not—for a couple of reasons. First, when there are heirs, they may have no interest in living in the home or taking on the costs of paying the taxes, property insurance, and maintenance fees associated with it. So, they often want to unload it as quickly as possible. And, when there aren’t any heirs, the state becomes responsible for the sale. They, too, often want it off their books fast. In either case, the home ends up priced affordably in probate and you could end up with a great investment property in your portfolio.
Unfortunately, you’ll have to overcome multiple hurdles in order to purchase that potentially good probate deal. And, these hurdles may vary from state to state since probate procedures are determined by state, not federal, law. For example, the probate process from start to finish can take anywhere from a few months to several years depending on the deadlines set for filing the appropriate legal paperwork. These deadlines can affect how, when, and whether you can close as well as if you’ll see any returns. California’s deadlines come around fairly fast, whereas Texas gives more time—including to creditors who may want to make a claim against the property. So, it’s critical that you learn your state’s laws so that you know what you’re really getting into. But, generally speaking, the pursuit of these properties might not be the boost to your bottom line that you were hoping for anyway. Consider the following:
- There are strict guidelines for making an offer. Almost all probate sales come with strict guidelines for making an offer. Most, for example, require that at least a 10% deposit in cash or a cash equivalent, like a cashier’s check, accompany your paperwork. And, many won’t allow for any contingencies or extra time to close the deal. Instead, you’ll likely have to fully fund escrow according to the instructions provided. Present an offer that says otherwise and you’ll probably get ignored. Fail to follow the guidelines once accepted and you could lose the property—and, your deposit. So, read the fine print before making an offer on any probate property.
- Inspections are not guaranteed. Rarely will you be granted a home inspection and, even if you are, you’ll probably still have to take the property ‘as-is.’ What you’re most likely to get is a one-time viewing that’s been arranged for everyone who shows interest. But, even that may be designed to weed out those who can’t, or won’t, buy the house in its current condition. And, since these houses have often been sitting vacant, neglected, and vandalized for years, it’s doubtful you’ll want to buy what you see at any price. Of course, if you don’t get to see the inside you shouldn’t be entertaining the thought to buy the house at all—unless you like tossing your cash into a money pit, that is.
- Acceptance of your offer is only provisional. With most probate sales, an acceptance is only provisional. That means that the court, or an attorney granted full authority, gets final approval of your offer. It also means they may reject it. And, this can take anywhere from 30 days to a couple of months or more—plenty of time for you to buy, renovate, and sell another house that’s not in probate. Even when confirmation from the court is not required, an official acceptance can still take months to receive if there are multiple heirs scattered around the globe or they don’t agree on what the final sale price should be. Unfortunately, the intent to unload a probate property fast, whether by heirs or by the state, seldom results in a quick sale and that tends to be frustrating for everyone.
- Your acceptance will be advertised. After your offer is provisionally accepted and awaiting approval from all parties, other offers may still pour in—and, get consideration. And, if court confirmation is required, your offer will be advertised in the paper in an effort to drum up more interest should you not get approved. The listing real estate agent may continue showing the property for the same reason. Of course, if your offer is subject to overbid, it’s also likely that the court intends to hold an auction with your offered price as the starting bid. So, they’ll market the home as much as they can in order to get as many bidders to court as possible.
- You may have to attend court—and lose the property. Since you may have to attend court for your offer to be confirmed, you should make sure to plan on it. Even properties that don’t start out needing confirmation from a judge often end up on the court’s docket down the line. If your offer is the accepted one, your presence will be required—whether competing bids are being presented alongside yours or not. Fail to attend and you will lose the house. Of course, with the possibility of an auction-style sale looming over most probates these days, the likelihood that other offers will ultimately be entertained is high. This makes the prospect of losing the house to overbid strong—unless, of course, your willingness to bid higher is stronger. And, that can make for a disappointing end to what, months or years before, may have seemed like a potentially profitable beginning.
When you really get down to it, there are real estate investment strategies that are less of a hassle to contend with than buying probate properties. Some of those strategies—like those that bring motivated sellers to you—can boost your chances of landing a good deal in a shorter amount of time and with less risk of busting your bottom line. All you need to know is where to dig up such a strategy.
Find and Close on Good Deals Faster With Great Leads
Years ago, I put my hard-earned cash down on a probate property only to have my offer outbid in court four months later. I could have kicked myself for even trying. While I was waiting for a court date, other investment opportunities came and went. By the time I lost that property in court, I could have had another one rehabbed and sold. Trying to buy probate properties didn’t give me an edge at all. It only made me edgy.
But, things smoothed out once I became an independently owned and operated HomeVestors® franchisee. Since motivated sellers of local distressed homes knew how to find me, thanks to the nationally-recognized “We Buy Ugly Houses®” marketing campaign, I didn’t have to wait to close, or not close, on a property when my offer was accepted. And, I didn’t have to navigate any hurdles to get my offer accepted or perform an inspection, either. I only had to pick up the phone when the seller called and do my best to help them feel at home selling to me—something that’s not hard to do when you’ve got the HomeVestors® national brand behind you.
Don’t get stuck in a dead-end method for finding good deals fast. Find and close on great investment properties by connecting directly with sellers. Call HomeVestors to find out how today!
Each franchise office is independently owned and operated.