When a person passes away they dictate ownership of their belongings using a will. This is referred to as the probate process. Of all the various items that might be on a will, there is usually a home. This may be the place where the deceased lived or one of their additional properties. They tend to pass these properties along to their children, grandchildren, or other relatives. But, according to Annika Bansal, the people who receive the homes always happy about the idea of managing a new property.
There are a number of reasons why a recipient may not desire ownership of the house. It may require a lot of additional work. It may need to be cleaned and restored. It may be a long way from where they currently live. Or they may not have the funds to manage the upkeep and ownership of the property. That means they will usually be wanting to rid themselves of the home as soon as possible.
A person with a home that they do not want is always good news to real estate investors. In this case, probate investors work to build relationships with people in the probate process so that they may purchase these properties for incredible deals. It can be an extremely lucrative business, but it does not come without its challenges.
You’ll need to locate the probate properties before you have the potential to invest. Probate properties are not listed as clearly as other properties on the real estate market. However, you should be able to purchase a list containing current probate properties in most cities. This is not always a guarantee though. If not, then you will need to visit a local courthouse and find the listings for yourself.
Probates are public record, which means you have a right to access them. Some people prefer to take this route instead of purchasing an organized list of probate properties. It’s simply a matter of convenience in most cases. Probate records from the courthouse are always up-to-date, which does make them slightly more reliable than lists you purchase from third-party sources. It may also mean you have less competition because you aren’t using the same list as another probate investor in your area.
Whether you compile the list yourself or purchase it from a vendor, you should eventually have several contact listings. The more information you can have for each individual the better. The wealth of information available at the courthouse is another advantage of building your own list. From there, it’s time to begin marketing to those people.
The Marketing Process
The party currently in charge of the property is known as the executor of the estate. You should learn who this person is using the list you compiled in the previous step. You will need to mail directly to this person if you ever want to begin negotiations. The executor has completed say over the future of the property and does not require approval from anyone else.
That being said, this is likely an emotional time for the executor. If the deceased was a close enough family member or friend to leave them a home, then they may be very upset by their passing. Attempting to enter into negotiations at a time like this is very tricky but is part of the job as a probate investor.
Investors tend to take one of two approaches when sending mail to the executor. The first consists of an apologetic “sorry for your loss” letter. The second approach is a more generic statement describing the property and a notice of its availability. It’s generally believed that the second approach works better, but that decision is entirely up to you.
It’s also a good idea to send a second letter directly to the property in question. This is an important step because the executor may be very busy dealing with the loss of a loved one. However, there is usually someone who is interested in the property or at least checking the mail there. They may send your contact information to the executor when they are ready to sell the property. By mailing the executor as well as the property you increase your chances of making contact.
The first time you mail an executor as well as the property it should be a professional white letter that is customized to that situation. Refrain from using mass-produced letters at this point. However, you may contact them again every few months afterward using a different approach. Many investors use postcard marketing to attempt contacting executors multiple times a year after their first white letter.
You cannot be afraid to mail an executor five or six times. Some investors stop after only their first letter. They forget that an executor has a lot going on emotionally in addition to their responsibilities. In many cases, they may not reach out to sell the property for several months. If you combine recognizable branding with your postcard marketing, then they will remember your brand and you will be the person they contact when they want to sell the property.
A Slow Process
Probate real estate is not a fast market. Not only may it take up to a year to begin negotiations with an executor, but you will need to finalize the deal in a probate court hearing. Courts are known for their extremely slow and unreliable schedules. You may find yourself waiting several more months before the deal can be closed.
You’ll also need a plan for once you secure a particular property. Are you going to refurbish the home? Do you have buyers in mind? Will it be a rental property? Many investors sell the homes to “rehabbers” without making any changes themselves. The deal they receive by working in the probate market is so significant that they don’t need to fix the home to make a profit. The rehabber will then make repairs and sell the home at an even higher price.
If you take time to learn about the probate process and to properly market to executors, probate real estate investing has the potential for a very high return. But remember, it is a slow-moving market and the people involved tend to be very emotional. Patience and empathy are good qualities to have.