Why Are Probate Properties Desirable?
Jonathan Khorsandi on Dec 21, 2022 posted in Probate Real Estate
With a looming recession ahead of us in 2023, it will be crucial to make intelligent investing decisions emphasizing tangible assets. Property has and always will fill those criteria, making probate real estate one of the safest and most valuable assets in any modern investor's portfolio. But, of course, if you're an active real estate agent or investor, you're likely already familiar with probate properties.
What Makes Probate Properties Recession-Friendly
Real estate always retains value because the land is a finite resource, and there will always be a need for places to live. So while the value of real estate may go up and down depending on the economy, it will never be worthless. This makes it a more stable investment than stocks, which history has shown time and again can become utterly worthless if a company dissolves and goes bankrupt.
Day traders and stock gamblers might make money in the short term, but that's why it's known as 'short' money. Likewise, real estate is a long-term investment for long-term and stable wealth retention. Sometimes, beneficiaries of a probate property need the financial stimulus afforded by a quick sale during times of economic uncertainty.
To understand why probate properties are increasingly relevant, it's pertinent to understand what probate real estate properties are.
What Separates Probate Properties from Other Real Estate
Probate real estate is property owned at the time of death. However, the state instead administers property not bequeathed in someone's will through probate court. This happens when someone dies intestate or without having specified what should happen to their property after death. The probate registrar will then distribute the deceased's assets and provide probate notices to all interested parties, informing them about their rights and responsibilities.
A few important factors make probate properties vastly different than traditional ones:
- The court is often involved
- You’ll be hard-pressed to find more motivated sellers…anywhere
- Properties are often vacant
- You won’t need expensive marketing…sellers are ready to sell NOW
What Happens to a House When the Owner Dies
Two important things can happen when the owner of a house dies:
There might be no Last Will and Testament
Properties of people who die intestate (without leaving a will) or without an heir to their house usually go through probate. The state is put in charge of selling the property. Probate sales are often Below Market Value (BMV), making them an excellent opportunity for investors to find an inexpensive but valuable property or for real estate agents to find a property that is priced to sell quickly.
The property is passed to the Heirs
Depending on the situation, a deceased relative's property might still be available. The heirs of the deceased often inherit the property, but sometimes they view it as a burden. For example, maintaining another home can be costly, and heirs often want to quickly get rid of the inherited property.
However, sometimes the probate process can take months to years to finalize, during which time the property often sits vacant. Because of this, many people see probate as a hassle and are willing to sell below market value to get rid of it more quickly.
Why Choose Probate Properties?
Although there are many other forms of real estate investing, like tax liens and wholesale, probate properties remain a cutting-edge investment for the real estate investor. Here's why: Probate properties are usually sold below market value so that you can get a great deal, make improvements, and flip it in a more robust market for excellent ROI.
Additionally, probates typically have a shorter escrow period than traditional sales, so you can close on the property and start generating passive income quickly.
Finally, probate real estate can often be a great deal for buyers, as the owners are typically motivated to sell quickly, and there is often little or no competition from other buyers. The logical conclusion is that you're more likely to get the property if you make an offer.
How Uncertain is the 2023 Real Estate Market
The recent COVID crisis has been challenging for many, with job losses and pay cuts leaving uncertainty about the future. However, this downturn provides a unique opportunity for those in the market for probate properties. As beneficiaries look for ways to generate income during tough economic times, selling inherited property at a discount may become an attractive option. The proceeds from the sale of probate property could be the cushion a family needs to make it through an impending economic downturn.
The end of the year, or Q1, is a great time to buy and nurture probate leads since it's no myth that the rates of deceased tend to spike between Christmas and New Year. Once you have your marketing in order, this process becomes easy. Plus, ProbateData does most of the heavy lifting for you. Nevertheless, there are always gems waiting to be uncovered - and you can help families who need to offload their property.
How to Be Successful with Probate Real Estate
Suppose you don't use a probate lead source like ProbateData or try to break into the probate market alone. In that case, you might encounter one potential downside of probate properties - dealing with the probate court. There might be a long wait - sometimes, it typically takes several months. And, depending on whether or not the deceased left a will, it could take even longer - sometimes years. It's much faster working with a probate lead company to find available probate properties that are not caught up in legal paperwork.
Probates typically have a shorter escrow period than traditional sales, so closings happen faster, and real estate investors can often generate income more quickly. In addition, there are usually fewer bidders on probate properties, so they are less competitive and can yield a better deal.
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