My old pal, Terry, has been a great salesman his entire working life. And, it’s not just because he gets to know a product or service so well that he can speak knowledgeably and clearly about its benefits. It’s because people have always enjoyed working with him and buying from him. His enthusiasm is palpable. So, when he told me that he was planning to shift gears and start buying and selling houses as a business like I’ve been doing for the better part of a couple of decades, there was no doubt in my mind that he’d succeed.
And, true to his nature, Terry had already been investigating how to find the best deals on real estate in town by the time we talked. He was leaning strongly towards learning how to buy probate properties since they seemed to hold good potential for providing decent returns. But, he also sensed that the process of buying probate properties wouldn’t be without its risks. Already he was thinking like a pro. So, I reviewed the process with him and gave him some guidance for avoiding the potential pitfalls he was sure to encounter.
How to Buy Probate Properties
Terry isn’t the first investor, new or otherwise, who’s looked to buying probate properties as a solid investment strategy. I’m sure he won’t be the last. These homes, because they’re owned by a deceased individual, either fall to the estate’s heirs or become the state’s responsibility to sell. And, neither party tends to want the house on their books for long since property taxes, insurance, and maintenance fees can run high. So, they’re often priced below market value to attract buyers who can move fast and with cash. That’s why probate properties appeal to a lot of investors. If you’re looking for a home to buy and renovate cheaply so that you can sell it for a profit afterward, probate properties probably appeal to you, too.
Relying on this real estate investment strategy for acquiring good deals, however, is not without its risks. That makes seeking to understand your state’s probate laws a critical component to learning how to buy probate properties in the first place. For example, some states allow for long filing periods in case any person, group, or business wants to submit a claim against a home before its sold. Since that is a claim you, as the buyer, could inherit and have to resolve, you may want to think twice about purchasing one of these houses at all.
Even if your state doesn’t have similar laws, the general process of buying probate properties should give you some pause. I’ll go through the steps to tell you why:
You will have to find the properties.
There are several ways you can find properties in probate, but they each require more work than it may be worth—and not really pay off in the end. You can search in local newspapers for obituary notices and ads for probate court hearings. You can visit the probate court directly to inquire about open estate cases and their inventory. And, you can check online for probate auctions.
But, for each of these options, you’ll have to do a bit more digging to determine if a property is slated for sale, at what price, and when—if at all. And, that will cost you more time. Of course, you can also connect with a real estate agent who handles probate sales or get one to set up a search for you in your local Multiple Listing Service (MLS). Just keep in mind that your competitors will likely be doing the same and that will make keeping the price tag cheap difficult.
You will have to offer according to the court’s terms.
In making an offer on a probate property you will typically have no negotiating room on the terms and you will most certainly have to take the property ‘as-is.’ Everything from the deposit amount and how it must be paid to the maximum time you have to close will be set by the court. And, the terms won’t always be easy to follow. Large all-cash deposits and no-contingency offers are the norm. Any offer suggesting otherwise usually gets rejected outright.
It’s important to keep in mind that you more than likely won’t get to inspect the property, either. And, since probate properties are sold ‘as-is,’ that could spell big trouble for your returns. It’s rare that a home that has gone into probate is in the best shape of its life. Often, these houses have been neglected or sitting vacant for years. But, you won’t know how bad it is from a single group viewing—if a viewing is even granted at all. And, when you don’t know what you’re getting into, you might find yourself in a money pit.
You will have to wait.
If your offer gets accepted, it’s not necessarily a done deal. Since most probate sales need approval from the court, you’ll have to wait for your offer to be reviewed. And, though court confirmation can take as few as 30 days, it very often takes as long as six months or more. Then again, it may not happen at all if the judge rejects your price and throws your offer out. While you’ve been waiting to find out with your funds tied up, you could have been investing in another house and already have it back on the market freshly rehabbed to sell.
You may have to outbid your competition.
While you’re waiting on court approval, your competition will be circling—and this should cause you concern. Probate sales that need court confirmation are usually subject to overbid. So, you can expect that both the house and your offer will be advertised while the court considers your price. That gives your competitors time to consider what they can offer, too.
Even if the property’s sale is confirmed at the number you provided, the chance is always high that the court will give other investors the opportunity to outbid you. And, that increases your risk of paying too much if you get caught up in the auction-style feeding frenzy that ensues. The flip side, of course, is that you also risk losing the property altogether to someone who is willing to pay more whether they should or not.
Unfortunately, in the end, knowing how to buy probate properties doesn’t always get you closer to acquiring the best deals. And, obviously, the process is a big hassle to boot. Plus, you can find older, smaller, uglier houses that are priced below market value easier than searching for homes in probate. All you need is a better idea for getting qualified real estate investor leads on distressed homeowners who are alive and eager to sell.
A Better Idea for Getting the Most Qualified Leads
It was many moons ago that I learned how to buy probate properties, though I can’t say that I ever actually bought one. I got outbid in court—twice. And, both times came after months of waiting for the confirmation hearing while my funds were tied up in the deposit. I could have been buying other properties to renovate and sell each time I decided to unsuccessfully chase a probate deal, and that still burns till this day. But, unlike Terry, I had not been thinking like a pro. And, I’d neglected to consult with one for better lead-finding ideas.
Once I got the bright idea to become an independently owned and operated HomeVestors® franchisee, I no longer had to spin my wheels chasing any deals. Thanks to the marketing tools and resources that I gained immediate access to, like the nationally-known “We Buy Ugly Houses®” ad campaign, motivated sellers of fixer-upper properties started coming to me. And, with a trusted name like HomeVestors behind me, they don’t need to be sold on selling to me.
Need a good idea for getting some of the best qualified real estate investment leads? Think like a pro and call HomeVestors about becoming a franchisee today!
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