Real estate investment is a little like investing in the stock market. While it’s not as volatile (and emotional) as the latter, it sure is as fraught with risk – but at the same time, you can strike gold.
When it comes to probate property, as with every other type of property, you need to weigh the benefits and downsides. Whether it is a good investment or not is a decision that rests entirely with you. What we can do to help you make an educated decision is to give you the straight dope.
And starting with the good news…
The Benefits of Buying Probate Property
As tasteless as it may sound, the truth of the matter is that people check out every other day. What this means is they leave behind houses and properties that have to be taken care of, one way or another.
A property usually finds itself in probate if the deceased failed to leave a will, and so the state has to step in to mediate over the sale of the same. And even if they did leave a will, the probate process can still kick in under certain circumstances.
In a majority of cases though, the estate usually has some debts that need to be settled, or the court has to act as a mediator to divide the estate amongst the heirs, or the heirs usually cannot agree on what to do with the property.
Probate properties are not rare – you will find them everywhere. And in fact, they tend to be some of the most attractive properties for an investor.
Which takes us to our next point…
Often the case, probate properties have a certain sense of urgency to them with regard to the seller looking to get the sale behind them. Usually, the beneficiaries are not looking to own the property. Plus, they are not willing to incur any costs towards any repairs prior to a sale either.
For the savvy investor, there are little bargaining chips in such circumstances. However, any investor willing to wrap up the deal ASAP will get rewarded, especially during those instances when the seller is highly motivated. One way to pique the owner’s interest is to make them a cash offer, followed by a down-payment of say, at least 10 percent.
The Downsides of Investing in Probate Property
Can be Time-consuming
It is true that a good deal of probate owners tend to be motivated sellers. What is also true is that should the property find itself under a probate court, its disposal may be put off for several months, at least.
There are a host of intricacies involved, and a probate property purchase is just one of those pesky deals that can’t be closed overnight. There are multiple parties involved in the process itself, from the heirs, to the court, to the probate attorneys, and the estate executor.
If there are any disagreements between the heirs, it gets even murkier. Ditto if the deceased had any outstanding financial obligations, as these have to be sorted out amidst some pretty thick red tape.
If you are lucky, it may take some few months. However, reaching a resolution could drag on for years.
Chances of Losing Funds
For every offer you make on a probate property, often, you are required to factor in a down-payment of 10 percent of the offer price, a payment that is non-refundable. You can still miss out on purchasing the house (and lose your down-payment) despite the fact that your offer may be accepted.
Some areas may advertise probate properties at the accepted offer price, plus a percentage of the price. This becomes the new probate price, a figure the property is freshly marketed at, attracting other buyers in the process. During those times that the money may not be happy, it is a risk you may want to avoid because, you know, Murphy’s Law? Other niches might be advisable during such a time.
Probate properties come with a slew of unique challenges not just for new investors, but also seasoned vets.
If you have any lingering question regarding probate properties and how to invest in them, do feel free to get in touch with us. We will be happy to answer your questions and provide expert advice that may come in handy at some point.