What investors need to know about probate properties
You’ve found the perfect property to add to your investment portfolio. It ticks all the boxes — location, price, amenities. There’s one problem: It has to go through probate.
Let’s take a look at the probate process and what investors need to know to be prepared and ready to close.
What is probate?
When a person dies and leaves behind a property that has not been transferred to another person via a survivorship deed, trust, or any other legal manner, it must go through probate court.
Probate is the process in which a court decides how a deceased person’s assets and debts are distributed. They will consider the will and any claims made by potential heirs. From the probate process, the court will also determine who has the authority to sell the deceased individual’s name.
How are probate properties different from traditional home sales?
Homes going through probate are marketed and listed just like traditional home sales. The only difference is that the probate process must occur before the official sale. You can still enter into a contract and negotiate on a home going through probate, just know that the timeline is at the court’s mercy.
How long does a probate sale take?
Every probate case will be different, and the timeline of the process depends on several factors, such as whether there is a will, disputes between heirs, the court’s caseload, and more.
The most streamlined cases should typically take a few months. More complicated probate cases can take anywhere from six months to two years.
Pros and cons of probate sales
- Probate properties can sometimes sell for discounted prices
- Sellers are often eager to get the property off their hands
- Less competition - Many buyers will not want to deal with the complications of probate
- Potential defects
- It could take a lot of time to get to the closing table
- Must have the highest bid at the auction
Important probate terms
Decedent: The legal term for the person who has died and whose estate is in the probate process.
Will: The legal document in which a decedent has laid out how they would like assets distributed to heirs. Not everyone will have a will.
Estate: An estate consists of all a decedent’s assets. Assets may include cash, real estate property, stocks and bonds, life insurance policies, retirement accounts, vehicles, and personal belongings.
Beneficiaries: Heirs determined by the court, who will receive assets from the decedent’s estate if there is no will.
Executor: If there is a will, it will name a person to serve as executor of the estate. They will handle all activities related to the estate, such as paying taxes, distributing assets, and, as it relates here, selling real estate property.
Administrator: If there is no will, the court will appoint an estate administrator through probate. They will carry out the same duties as an executor.
How to Buy a Probate Property in Texas
As an investor, probate won’t impact you much other than creating the timeline requiring your presence once in court. Regardless, it is in your best interest to understand a bit about the process so you can know what to expect.
Once you have identified a probate property you’re interested in purchasing, you need to connect with the seller. If the family works with a real estate agent, you will go through them. If they are not, you will deal directly with the administrator or executor of the estate.
Much like in a traditional sale, you will coordinate with the administrator to visit and inspect the property. If you like what you see, you’ll submit an offer. The administrator will then take your offer to court for approval and confirmation.
The waiting game
Once your offer has been taken to court, the waiting period begins. Again, the timing depends on several factors outside of your control. But be prepared to wait two months at a minimum.
Should your offer be accepted, you’ll be given a date to appear in court. During your court appearance, there will be an auction in which other buyers can bid on the property — this process is often called overbidding.
If you have the winning offer, the court will likely confirm you without much complication. Next, you’ll wait around 30 to 45 days for the sale to close.
Costs of buying a home in probate
Just like in any other home purchase, there are several expenses you’ll need to be prepared for come closing day.
Closing costs will typically be around 1-5% of the purchase price. This amount covers several closing-related expenses, from the title settlement fee to broker fees and government recording costs.
You’ll also need to be on the lookout for any damages — for a family going through a tragic loss, home maintenance and upkeep will likely be the least of their priorities. A home inspector can help you identify any serious issues with the property.
Furthermore, you’ll need to ask about homeowner association fees and taxes.
Where to find probate sales in Texas
When it comes to probate cases, many sellers are eager to get the property off their hands. This offers a unique opportunity as an investor. Despite all the benefits of buying a home in probate, the most challenging part can sometimes be knowing where to find them.
At pointer data, we’ve built a platform that brings property leads directly to investors. BIRDDOG SOLUTIONS provides first-hand information on willing sellers, skip tracing with sellers' contact information, and helps you manage and organize your leads. The most significant advantage for investors is that they get advance notice of opportunities from homes in probate, preforeclosure, and other non-traditional circumstances.
Still have questions about buying a property in probate? Our team is here to help.
Contact us today.