Learn how to become a probate real estate agent.
Probate properties listings often overlooked by real estate agents. Mainly, because of their unique selling process. Understand the sales process to create a niche as a “Probate Real Estate Agent”.
Becoming a Probate Real Estate Agent
Two important things for you to understand about probate real estate sales:
1. The property becomes available due to the death of its owner. This requires agents’ respectfulness and sensitivity; plus
2. Selling probate properties take more time. Agents need patience.
However, the ability to learn patience, sensitivity, and respectfulness creates a lucrative real estate sales niche.
What is Probate Real Estate Property?
Probate is the legal process which takes place after someone’s death. All the deceased’s assets come under the scrutiny of the probate court to ensure the assets pay all outstanding debts like taxes and expenses. The remaining assets go to the heirs according to the will.
Real estate properties often sell during the probate process when the available cash can’t pay off the debts. If no heirs or a will exist, the state sells the properties.
How Does the Probate Real Estate Sale Process Work?
Probate lawyers explain the real estate sales process like this:
1. The probate court follows a series of steps to oversee the sale of real estate.
2. The administrator or executor (hereinafter, “representative”) of the estate must follow guidelines set by the probate court.
3. Outright sale or a bidding process options available to the probate court. The heirs who find an all-cash buyer can ask the representative or the judge to allow a quick direct sale to the investor. Or, the judge may require a formal listing or a public auction open to bidders.
How to Find Probate Real Estate
Some companies sell lists of probate real properties. However, they often include properties sold or probates already completed. Thus, their reliability and being up to date often becomes an issue.
Free: On the other hand, you can locate probate properties for Free. All probate procedures appear in the county records. Especially, at the individual courthouses. Some counties publish their probate data online.
The county records include the property’s address. Also, the name of the deceased, the heirs, and representative. With this public information, you reach out to the heirs about your ability to sell all the real estate.
However, never come on too strong or show disrespect for the deceased. Instead, show respect and convey your condolences before your interest in selling the property. Lack of respect leads to sure failure.
In addition, knowing these people often steer you to earlier leads:
- Funeral directors;
- Mortuary employees;
- Probate lawyers;
- Emergency room hospital staff; and
- Obituary reporters.
The Benefits of Investing in Probate Real Estate
From an investor’s standpoint, many benefits arise with investing in probate properties. Such as:
1. Motivated Sellers
After the probate closes, unsold real estate transfers to the heirs.
A high number of heirs prefer to sell real properties rather than renting or moving in themselves. Many adult heirs already own their home. Sad memories associated with the house and the deceased often motivates heirs to sell. Outstanding debts of the deceased often need a quick sale to pay them off.
Federal and state estate taxes also motivates heirs to make quick sales.
Producing an all-cash buyer solves all these problems.
2. Clear Titles
Many probate real properties don’t have a mortgage. Purchasing properties with clear title and no liens create a win for the investors.
3. Below Market Value
Due to the nature of probate properties, 10% below market value often occurs.
After title transfers to the heirs, they generally prefer all-cash buyers to save time and ensure a quick sale. Also, the heirs most likely prefer not to make repairs on the property. These lead to making the price more attractive for investors.
4. Less Competition
Probate properties competition is low. Most real estate investors don’t know about probate properties. Nor, do they understand the probate process. Less competition creates better opportunities for the investor.
5. Greater Profits
All the above benefits leads to greater profits for probate properties investors. The best of the “Buy Low, Sell High” investment strategy.
Sure, an older deceased owner may not have maintained the property requiring some fixing up. Yet, like a “fix and flip” property, don’t make an offer until after inspecting the property.
Thus, eager sellers, less competition, and buying at below market prices make investing in probate properties lucrative investments.
Understanding the Probate Court Process for Selling Real Estate
California Probate Code
California’s Probate Code establishes the process for courts selling real properties.
Often, the estate’s representative asks the court to grant full authority to sell the real properties. If the court agrees, it issues “Letters of Testamentary with Full Authority”. As an alternative, the court only grants limited authority subject to the court’s approval of all sales.
Real estate agents prefer working with an estate representative with full authority to sell the properties. However, probate courts often approve the sale of real properties.
The law requires the representative to provide the heirs with a written “Notice of a Sale” before listing the properties. However, the heirs maintain the right to petition the court to accept any offers they get. The court may agree with the heirs or allow the representative to list the properties with a real estate brokerage.
Before setting a listing price, the probate court appoints an appraiser called the “Probate Referee” to appraise the real properties. The law requires real estate in probate to sell for at least 90% of the appraised value. For many investors, buying at 10% less than market value seems attractive.
If an offer arises, the representative notifies the heirs of the offer and its terms. If the heirs make no objections, the sale proceeds towards a confirmation court hearing. On the other hand, if the heirs protest, the court decides who prevails.
How Probate Real Estate Agents Earn Commissions
The confirmation hearing allows the court to approve the sale. However, other buyers may attend to overbid the original buyer. This is good for the real estate agent as the commission grows with each higher bid. The winning bidder pays with a cashier’s check. After that, the agent collects the commission.
Selling Probate Real Property by Consent
If all parties agree to an offer they sign legal documents which allow the sale by consent without requiring a confirmation hearing.
If the Probate Real Property Doesn’t Sell
After the time limit to list and sell the real property expires with no buyers, the court may approve lowering the sales price. Thus, the minimum 90% of appraised value requirement no longer applies.
Also, the court may approve a probate auction setting a minimum bidding price. The winning bidder pays with a cashier’s check.
After the Probate Real Property Sells
Once the property sells, the funds become part of the estate. A “Petition for Final Distribution” sets forth the net sales proceeds after all debts get paid. Then the remaining proceeds become divided amongst the heirs according to the will.
How to become a probate real estate agent requires patience, sensitivity, and respectfulness of the deceased.
In addition, learning how the legal probate process works in your area. Read the links provided above to the San Diego County Superior Court.
All probate records are open to the public. Therefore, locating property addresses, the heirs, and estate representative won’t cost you anything other than your time.
Get to know probate lawyers and judges, along with appraisers acting as Probate Referees, and others mentioned above. They may recommend you as a listing agent.
Find all cash investors willing to purchase probate real properties during the process. Or, after the properties transfer title to the heirs.
If a confirmation hearing or an outright probate auction occurs, line up a solid all cash buyer to bid on properties.
Finally, after a few successful purchases use the experience to market yourself as a “Probate Real Estate Agent”.
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Steven Rich, MBA – Guest Blogger
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