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Basics Of The Probate Process For Real Estate Investors
Probate is the legal process of settling an estate when someone dies. Even if there is a legitimate will in place, an estate still goes through the probate process. So if you have made a will and have no idea about this issue concerning your investments, it is time to read up more about it.
The purpose of this process is to serve 2 main issues. To repay any debts that are owed. And to properly distribute the assets to beneficiaries and heirs. Because this is a legal process, you can expect different states and territories to have differing laws to dictate or enforce it. This is why you must know what are the rules you are playing within should you get involved. Getting the advice of a good attorney or a specialist agent will go a long way.
Now unless you work for a legal firm or you are a practitioner of law, you don’t really need to know the little details. As an investor, you are better off leaving the nitty gritty to your lawyer. But in states where the legislature is more complex, you might want to have a better overview of what you are getting involved in.
6 basic stages of the probate process
1) Someone dies
2) A personal representative (PR) is appointed to oversee the closing of the estate
3) The general public, together with creditors and heirs are notified of the death
4) Assets in the estate are converted into cash
5) Payment is made to settle outstanding taxes and bills of the deceased and estate
6) Balance of the assets are distributed to heirs or inheritors
The tricky part for investors is to find out whether court approval is a requirement for an estate. This is when there is direct supervision of the process by the probate court. It occurs more in states or territories that have more detailed laws governing the probate process.
This means that the first thing you should research is the legal parameters that surround a probate you are looking at. A certification or letter you found yourself should not be a good enough basis to direct your decision making.
The implication of having courts involved is that any decision made by the PR will have to be approved by it. And as you know, these are things that can very often throw up your plans like firecrackers. Since real estate is a valuable tangible asset, special attention is often given to it.
If you have every worked in the civil service or have dealt with government bodies, you will know that the biggest drawback is often the delays in progress. In such cases, you have to be prepared to commit time into the deal. Some people even go through workshops or training to get in tune with how everything works.
But the bigger drawback of court supervised probates is that you might not be able to secure as good a deal as you had wished. The irony is that supervised probates often involve very attractive real estate. You need to weigh up the opportunities and see whether they are worth your time and effort to pursue.
Why probate real estate?
It is just like any other place where investors pay attention to for finding lucrative deals to make. Just like why opportunists go to auction houses, why active players drive around looking for run down properties, why others look at property listings religiously.
The main sticky point for most people is that exploiting probate deals is like making the death of someone a festive occasion. This is definitely not the case. That is a mentality that you must get pass as an investor. Because in many ways, you are helping the heirs liquidate their assets quickly and effectively. The speed of access to cash could be much more valuable to them than the actual value of inherited real estate.
Good deals are difficult to find when the market is booming. Even though there are deal finding software that helps to quickly find deals, everything can look overvalued with little margin for profits. And while the rookies and masses chase after deals that are marketed in the open market, it is in these little niche areas where many veteran investors flourish. Should you get pass that mental block of taking advantage of probate opportunities, you could be looking at acquiring undervalued properties with little competition.
In markets where real estate is big on supply, everyone is chasing deals that are the easiest to spot. This leaves a gap which you can exploit in probate real estate since there is little attention being paid to them. You could very well find deals that are way better than what is available in the open market. In times like this, a lack of genuinely interested parties could put you in a very good position indeed.
Other than the prospect of buying a house below value, the best part of snapping up probate real estate is that these properties are often not one of those that have been neglected by a grouchy landlord. Unless your luck is really down, you are not going to find houses with cracked walls or shaky foundations. Gardens are trimmed and roofs don’t leak. More often than not, the property is being let go only because of death. Not because of negative cash flow or uncontrollable depreciation.
You can therefore expect to find homes that are well maintained with almost everything in working order. And if you are lucky, furniture and fittings come with your purchase. Leaving you without the need to refurnish these homes before flipping or renting out. A lesser headache with rehab can make it a really attractive proposition when you are a flipper.
While many real estate investors make their moves in niche playgrounds like the subdivision of land parcels, tax lien sales, tax deed sales, foreclosures, etc, probate is still an area that many knowingly ignore because the certain negative feelings attached to it. If you are able to get pass that, it could be a playing field where you can easily flourish.