Buying probate property is a little-known way to enhance investment portfolios or buy a house priced below market value. Investing in probated real estate requires a little more work than buying homes from realtors or mortgage lenders, but the savings can be well worth the effort.
Probate property is real estate held in probate court. When a person dies their assets are held in probate until the last will is validated and outstanding debts are paid. On average, the probate process lasts between three and nine months. Inheritance property cannot be distributed to heirs until the estate is settled.
Probated real estate can inflict financial harm on estates not equipped to pay for property-related expenses. If the decedent held a mortgage note, the estate is legally required to continue making loan payments. Otherwise, the property will fall into foreclosure. In addition to home loan installments, the estate is responsible for taxes, insurance, and maintenance costs.
When decedent estates do not have sufficient funds to cover expenses, the probate executor must obtain court authorization to sell the property. When multiple heirs are entitled to probate property they must all agree to the sale unless ordered through the court.
Lack of funds is the primary reason estates' need to sell real estate. However, estate executors often elect to sell probate real estate to eliminate expenses or duties associated with the property. This is particularly true when decedents do not have heirs to bequeath the property to or when estate administrators reside out of town.
In order to properly maintain probate property via long distance, estate executors usually must hire contractors to take care of maintenance duties and landscaping. These costs are absorbed by the estate and leave less money available to heirs.
Probate administrators act as fiduciary for the estate and must make financial decisions for the good of the estate. If probate costs outweigh estate assets, the best decision is to sell the property.
When decedents die their last will is presented to probate courts. Wills are a matter of public record and can be viewed by anyone who visits the courthouse. Therefore, the first step of locating potential probate properties for sale involves paying a visit to local courthouses.
Wills contain contact information for the probate personal representative, along with details of inheritance property and real estate holdings. After contact information and potential properties, the next step involves searching property records. These documents reveal if a mortgage note is attached to the property, along with the appraised value of the real estate. Investors should scout out probate properties that fall within their price range.
Finally, buyers will need to contact the estate administrator to determine if they are interested in selling the probate property. It is best to contact administrators by phone or mail. Always express condolences for the loss before asking about buying the decedent's property.
Probate executors are often unaware they can sell real estate held in probate. Making a reasonable offer on the real estate can provide financial relief to the estate. In many cases, heirs are eager to sell real estate for less than it is worth to obtain a lump sum cash offer.
Most states require real estate investors to submit bids to buy probate property through the court. Oftentimes, investors will compete with other investors to purchase the real estate. Once a bid is accepted, buyers attend a court confirmation to complete the transaction and property transfers within 30 to 45 days.
In addition to making a good investment, probate real estate can be a good option for first time home buyers or those seeking a vacation home. We invite you to browse our probate property article library to discover additional real estate investment strategies.
Published on July 20, 2010 at 03:16 AM