Searching for your niche? Probate real estate investing might be the right niche for you.
The Probate Process in a Nutshell
Probate is the process in which a deceased person (known as a decedent in legal terms) can have their debts settled by the sale of their property after their death.
First, if the decedent had a will, the executor who was nominated in the will becomes the legal representative of the estate. If there was no executor named, then someone will need to ask the court to appoint them as the administrator. Usually, a spouse or adult child is the executor or administrator.
Once appointed, the executor or administrator is responsible for filing a request, or petition, with the probate court. The court is held in the county where the decedent owned their property. Written notice of the court hearing must be published in local newspapers and mailed to all the decedent’s creditors, heirs, and beneficiaries. Any heir or beneficiary has the opportunity to object to the petition in court.
During this time, someone will have to conduct an inventory of all the decedent’s property. This includes real estate, belongings, stocks, bonds, and more. Once inventoried/appraised, they will start selling things off. When everything is sold, the representative will use the proceeds to pay estate and funeral expenses, debts, and taxes. Remaining money will be distributed to inheritors, based on the will or the court orders.
All throughout the process, there are rules to be followed and paperwork to be filled out. The specifics depend on the laws of the state and county that the court is held in. The probate process ends when the creditor’s claim period has passed, the debts and taxes are paid, and disputes are settled. The administrator will fill out the final paperwork and be released from their role. When all this is taken care of, the petition is granted and the property can be transferred to the recipient.
We explain all this for a couple reasons: so that you understand what probate is, and also to help you understand what a difficult process it can be for those who have just lost a loved one.
Challenges of Probate Real Estate
We’ll start with the challenges of probate real estate investing, and then move on to the benefits. The hard part: probate real estate involves talking about death. There’s no two ways about it. If you’re going to work in probate, you can’t be the type of person who shies away from topics of death. It’s going to come up at some point.
You’ll have to be tactful and make sure to be understanding of the people who have just lost a loved one. Offer your condolences, be mindful of what you say and do, and be helpful in assisting them through the process.
On top of the seller’s grief at the loss of their loved one, they’re also dealing with the probate process, which in some cases can be a confusing, drawn-out, and difficult process.
In many cases, the property has a lot of special memories for the seller. They likely have an emotional attachment. Though most of the sellers we’ve worked with have been motivated to sell, some people have trouble letting go of their loved one’s house, especially where there are childhood memories involved. These people may be a bit harder to deal with.
The Benefits of Probate Real Estate Investing
In most areas, probate real estate is not a very crowded niche. This makes it a GREAT opportunity for those who are willing to tackle the job! Many real estate investors don’t want to deal with the death aspect. Others have tried to break in, but they haven’t been very successful—perhaps because they took the generic approach by sending out a “WE BUY HOUSES!” postcard rather than a tactful letter. In any case, it’s very likely that probate will be a rewarding niche in your area.
Plus, when it comes to probate, sellers are usually very motivated. They want to get the aforementioned probate process taken care of as quickly as possible, because it’s draining their time and energy at an already-difficult time. They don’t want to spend time and money fixing up the house, they don’t want to deal with any existing mortgages, and they just plain want to get rid of the house. In the vast majority of cases they don’t want the house; they just want the money from the sale of the house. Use that to your advantage.
How to Market to Probate Sellers
Marketing to probate sellers requires a personal touch. Most experienced probate buyers use a nice, personal, professional letter. This letter can start with a pre-written template, but it should be personalized to its recipient. It should be typed on the computer so that it looks professional, but should be hand-signed and hand-addressed.
Express your condolences in the letter, and then get down to the issue. Let them know that you’re there to assist them with the sale of the home when the time is right. Don’t rush them.
To give them further incentive, you can offer to help them clean out the house if there is still furniture or other belongings that need to be sold or donated.
Some people would rather talk to the seller directly than send a letter that might end up unopened in the trash. However, we always recommend a letter over a phone call because a phone call can appear too aggressive. Let the grieving person contact you if interested, not the other way around.
Finding a Probate Property
Ready to get started? First, you’ll have to start sourcing probate properties. There are a number of ways to do this, but we suggest starting by looking through local obituaries or talking to someone who deals with last will and testaments. Formulate a great letter, start contacting potential sellers, and you’re well on your way to your first successful probate investment.