How to Invest in Probate Real Estate

How to Invest in Probate Real Estate

How to Invest in Probate Real Estate

Investing in probate real estate isn't anything new, but not many investors specialize in this niche. Probate real estate refers to property held in probate court during the estate settlement process. Properties are oftentimes sold well below market value and usually in good condition.

The sale of probate real estate can be ordered through the court to pay off financial obligations of the decedent or sold through the probate administrator managing the estate. Much depends on the state where property is located and the circumstances surrounding the sale.

Court-ordered sales are often conducted in the courtroom and multiple buyers can submit purchase offers. When probate administrators manage the sale they might accept multiple offers or engage in private transactions. Investors must abide by state probate laws or court directives when purchasing estate realty.

Estate administrators can elect to sell real estate for a variety of reasons. The most common is when estates are not financially capable of paying real estate related expenses. During probate, the estate is responsible for paying mortgage loan installments, property taxes and insurance, and required maintenance. If loan payments cannot be met the property can fall into foreclosure.

Another common reason for selling probate real estate is no one is available to care for the property. When the probate personal representative resides out of town or has physical limitations or time constraints, they may have to pay outside sources to maintain the property. Depending on the duration of probate these expenses can become costly.

If heirs contest the decedent's last will and testament, the estate administrator may be forced to liquidate inheritance property to cover defense legal fees. If more than one heir is entitled to the property, all heirs must agree to the sale unless court-ordered.

Before ever submitting a purchase offer on probate real estate, investors must take time to become educated about the process involved. Each state and each estate will be different. There are many variables that exist when buying estate properties. When in doubt consult with a real estate or probate attorney.

The most common procedure for locating probated properties is searching public records. When a person dies their last Will is submitted through probate court and becomes a matter of public record. Investors visit courthouses or download records via their computer.

The last will provides information about estate holdings, along with contact information for the estate executor or their attorney. Once investors obtain property information they review property records to find out if the decedent has an outstanding mortgage note, accrued home equity, or owns the property outright. The next step involves contacting the estate executor to discuss the potential sale.

Estate administrators are often unaware they can sell real estate during the probate process. While this can be a touchy matter, investors who buy probate properties can relieve financial burdens for cash-strapped estates.

It is not uncommon for investors to buy probated homes well below market value. While it takes longer to locate investment properties, the savings can outweigh the time and effort. This type of real estate investing strategy is virtually untapped. Those who take time to master the process have the potential to earn a high return on investment with probate real estate.

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