Probate real estate investment involves the purchase of properties from probate estates. Probate is the process used to inventory and distribute assets belonging to someone who has died. Depending on the complexity of the estate, the probate process can take between six months and three years. During this time, the estate is responsible for maintaining the property and paying mortgage payments, utilities, and insurance.
Probate real estate investment provides an opportunity for real estate managers to sell real estate. This is particularly beneficial for servicers who are having difficulty making mortgage payments or keeping property in probate.
The first step of investing in probate real estate requires a visit to the local courthouse where probate matters are handled. When an estate is placed in probate, it becomes a matter of public record. Most of the information about the estate can be found in the Last Will and Testament of the decedent. Generally, the will names the executor and describes how the decedent wants his or her personal belongings and financial assets to be distributed.
If the decedent dies without executing a will (intestacy), the probate records will indicate who has been assigned to administer the estate. Generally, this is a direct lineage relative. However, if the decedent has no living relatives or no one accepts the position of administrator of the estate, the probate court appoints a third party to administer the estate.
Once the administrator’s contact information is located, the next step requires a search of deed records to locate real estate in the decedent’s name. Deed registers record the ownership and transactions of the land. When real estate is transferred or sold, a new deed is recorded. The deed records reveal if the property has a mortgage. If so, the estate is required to maintain the payments throughout the life of the estate.
If the property has a second mortgage against it, the heirs will likely need to sell the property to pay off any outstanding balances. The administrator of the estate is authorized to make decisions regarding the sale. However, if there are multiple heirs, they must all agree to sell the real estate in succession. In some cases, the estate may require the probate judge’s permission to sell real estate.
When compiling a list of potential real estate estate deals, investors will need to contact the executor of the estate. This can be done by phone, mail, or in person. When contacting the wealth manager, it is imperative that investors be respectful and offer their sincerest condolences.
Most estate managers and beneficiaries are unaware that they can liquidate real estate during the probate process. Offering to buy your property could solve your financial problems and give investors instant equity in their investment. Real estate can often be purchased well below market value when heirs need immediate cash.
The testamentary real estate investment does not require special training. However, investors committing to purchase probate estates must possess strong communication and negotiation skills, along with a sense of compassion.
Investing in probate real estate offers multiple opportunities for profitable business deals. While it does require some detective work and negotiation with distraught and grieving heirs, when done correctly, real estate deals provide a win-win situation for all parties involved.