October 12

A Basic Guide to Probate Real Estate

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In 2019, existing home sales came in at a little over 5.3 million homes.

The vast majority of these sales happened through the traditional process. Buyers secured preapproval for a mortgage, shopped around for a house, and eventually closed on them.

For investors, however, there is another path for acquiring real estate called probate real estate. Rather than waiting around for homes to land on the market, investors go looking for real estate that’s still working its way through probate.

The sharp-eyed investor can snag excellent properties this way. Sound like your cup of tea? Keep reading for an easy-to-understand guide to probate real estate.

What Is Probate?

In basic terms, probate is the legal procedure that handles wills after someone dies or manages property when no will exists.

For example, let’s say that a wealthy grandparent dies. They leave behind a lot of assets, like real estate and even money.

Let’s say that the grandparent left a will. The court makes sure the will is authentic. If it is, the executor can then pay off any outstanding debts and distribute the assets per the will.

If the grandparent left no will, then things get trickier. The court steps in and takes a more active role in managing the assets.

What Does Probate Mean in Real Estate?

When someone dies with a will that goes through probate, it means the intended recipients will get the assets when probate ends. That goes for real estate, as well as other assets.

When someone dies without a will, distributing or managing assets falls on the court. Let’s say the same grandparent dies without a will and leaves behind a lot of real estate. The court ultimately decides that selling off the real estate is the best option.

That court-controlled property and the property that will go to heirs are probate real estate. Both options provide opportunities.

Finding Probate Real Estate Leads

Most court proceedings remain part of the public record unless the judge seals the record. As a general rule, judges don’t seal probate records. That means you can find out about them with a simple trip down to the local courthouse.

You ask at the front desk for directions to estates or probates. Someone will know where you should go inside the building.

Most courts will maintain a computer database that lists all the properties currently in probate, typically in the town, city, or county. You can search that database for a particular area or timeframe. A clerk can then provide you a copy of that information to take with you.

How to Buy Probate Real Estate Someone Will Inherit

Buying probate real estate that someone will inherit isn’t substantially different from buying other properties. What is different is that you can start the process early since the house isn’t on the market yet.

Many prospective inheritors don’t necessarily want a property, since they live out of the area. Empty property often becomes a target for vandalism. Managing a property from a distance complicates the matter even more.

In these cases, you typically work through a real estate agent with probate experience. You make an offer on the property contingent on the person actually inheriting it. Assuming they accept the offer and inherit, you buy it through the typical process.

Selling Inherited Probate Property

Let’s say that you get through the probate process and inherit a property you don’t want long-term. You can, of course, hire a seller’s agent and put it up for sale on the open market. The agent manages the marketing and calls you in when it’s time for decisions on an offer.

You can also look for businesses that specialize in buying up unwanted properties. These companies often take distressed properties that might not otherwise sell well on the open market.

Let’s say, for example, the property you got was badly maintained. Rehabbing the place might well cost more than you could make back when the property sells. In these cases, distressed property buyers can make sense.

Buying Court-Controlled Probate Property

Buying court-controlled probate property can get complicated. Each state sets its own rules for how the process will proceed.

In some cases, the court will put the house on the open market. It’s not unusual for the states to set a time period for selling the property. No court wants a property sitting on the market for nine months or a year.

Others run an auction process. These auctions vary in complexity, but most include rules about when you can enter a higher bid and how much you can up the bid. These rules exist primarily to avoid overbidding.

Even after you win the auction, there is typically a waiting period of anywhere from a month to a month-and-a-half while the court approves the sale.

Excellent properties will get serious competition. You should watch for the “diamond in the rough” homes that won’t draw the same attention. Succeeding in court-controlled sales means you must understand your state’s rules for they manage these sales.

Probate Real Estate Offers Opportunity

Probate real estate offers opportunities for investors and inheritors.

For investors, probate real estate gives you an opportunity to get an agreement on a property before it ever hits the open market. If you have an eye for those diamonds in the rough, you can walk away from a probate auction with a valuable property you got for a song.

Inheriting a property far from your home often proves more trouble than it’s worth. Managing such properties takes a lot of effort. Plus, the place remains a target for vandalism as long as remains empty.

Selling the property eliminates the problem. It also gives you some working capital you can sink into a local property or business venture. If the property wasn’t well-cared for, offloading it to a distressed property buyer can make it someone else’s problem.

Lisa Buys Austin Houses specializes in buying distress or unwanted homes. Check out our FAQs page for more information or give us a call at (512) 598-4929.


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