Real estate investing in probate properties can be a profitable niche for investors. While there is no special training involved, investors need to learn the process of researching public records and become educated about probate laws.
Real estate investing in probate provides investors with the opportunity to buy discounted properties in good condition while alleviating financial burdens of decedent estates. Probate is required for all estates that are not protected by a trust. The average duration of probate is 7 to 8 months.
When probated properties are secured by a mortgage note, the decedent’s estate is responsible for paying costs associated with the property. This includes mortgage payments, property taxes and insurance, homeowner’s association dues, and required maintenance. If the estate is financially incapable of paying expenses, the property could fall into foreclosure.
If the house is owned outright, the estate is responsible for remitting property taxes and Realtor Oro Valley premiums throughout the probate process. The home must be maintained and properly secured. This can be challenging for estate administrators who live out of town and can add additional costs to the estate. Common expenses include lawn and pool care, or hiring subcontractors to perform maintenance.
Estate administrators can elect to sell the property if it is causing financial harm to the estate. If the estate does not have sufficient funds to cover outstanding debts, the probate judge can order the property sold.
The process for selling probate homes depends on the type of probate used. The most common is known as ‘court confirmation’ and all aspects of estate management must be approved by a judge. The second is governed under the Independent Administration of Estate’s Act (IAEA) which allows estate executors to engage in estate management duties without court supervision.
In order to buy probated properties investors must determine which probate process is being used. Properties can be purchased directly through the estate executor when IAEA is effective. Bids must be presented through the court when court confirmation is required.
To locate probate real estate investors must research public records. When a person dies their last will and testament is recorded through probate court. The Will contains information about estate assets, beneficiaries, and contact information for the estate administrator.
Once investors locate estates with real estate holdings they make note of the property address, than search property records to determine if the house is secured by a mortgage note or owned outright.
Property records reveal the appraised property value, along with year built, lot size, and square footage. The lien holder’s name is included if a mortgage is attached. Investors can also determine if creditor or tax liens are attached to the property.