5 Reasons Why Probates are A Great Niche to Invest In

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Probates can be a great niche to work in. Here are 5 reasons I love probate investing:

1. The heirs are almost always motivated sellers.

People that have inherited a property can be some of the most motivated sellers of all. They rarely want to keep the property. Typically they just want one thing; the cash that is sitting in the property. Once they decide to sell, they move quickly.

I have found these properties usually fall in to one of two categories. Some are nice properties that will be listed on the MLS. The second group, are properties that are in need of a lot of repairs and updates. These are the ones that the heirs will be most motivated to sell to an investor.

One thing to keep in mind is that even the properties that are initially listed, may or may not sell. Heirs often have an unrealistic idea of what they can get for the property. It’s not unusual for me to get a call after the property has been listed for 6 or 8 months. If they aren’t willing to sell at the price I can offer at that time, I always ask if I can keep them on my list; if I can be their “plan B” if the house doesn’t sell. Not one person has ever said no, and I have actually bought a number of houses after they have been listed 15-18 months without selling so you want to keep these folks on your list.

Related:Determining Exactly What the Seller Wants: A Probate Case Study

2. You are often able to get deep discounts on probate properties.

Folks will be willing to accept a deep discount for a number of reasons. Here are just a few:

  • The house needs a lot of work, and they either can’t afford to do the work or they just don’t want to do it.
  • There may be a mortgage on the property. Even if the total amount of the mortgage isn’t a lot, often they simply can’t afford a second mortgage payment. It’s not unusual for the property to have a lot of equity even if there is a mortgage or HELOC (home equity line of credit).
  • One of more of the heirs has an immediate financial need and wants quick cash to solve their problem.

There are so many reasons they will happily sell the property “as is” for a deep discount, but the bottom line for them is that they just want to be done with the estate, put that cash in their pocket and move on with their life.

3. Probates are perfect for “drip” direct mail campaigns.

These folks don’t usually have a time constraint like you would have with a foreclosure, and they all start the process of working on the estate on different time tables. Some executors will be Johnny on the spot and get started soon after the person is deceased. But I have found that often they don’t even begin until a year or more has passed. It is just too painful or too overwhelming for the families.

You can set up your direct mail campaigns so that you have sequential mailings that go out over time. I usually send about 5 mail pieces (one a month), check the database to see if any have sold and start the process over again. I will check again at the one year mark to see the status of the properties. You will probably be surprised at the number of houses that are still not sold. I bought one just last week that had been sitting for more than a year. Now that the family has “decided” to sell, they are quickly finishing the cleanout.

Related: Probate Investing and Your Mindset

4. You can greatly increase the odds that you will get the deal just by simply asking the executor or PR this one question:

“What can I do to help this process along; to make this process easier for you”?

Simply by asking this one question and providing them with a solution will often seal the deal. Most of the time they will tell you that cleaning out the house has been the hard part for them. This job is extremely difficult for most people. If you have ever done it, you know what I’m talking about especially if this was a close relative like their mom or dad. Their possessions represent their life; they were their “treasures”. Having to dispose of all of these things by having a yard sale or donating them can be “gut wrenching”.

If you can finish this job for them once the family has taken everything they want, they will be so appreciative.

5. There is less competition in the niche of probates.

The information needed for probates is easy to get in my area, but I know that isn’t the case in some areas. Here’s the thing; you can turn that into an advantage for you.

Most people are lazy; they simply won’t put forth the effort to go to the courthouse or do some of the other things necessary to work in this niche. Turn this into an advantage for you.

Find out what the process is in your area then figure out how you can outsource this job. Find someone that wants to learn the business, or a person that is looking for part-time work that wants to work on “their schedule”. Think about it this way; if you can get even one deal each quarter and make $5000-$10,000 on each one of those deals, wouldn’t that still be very lucrative for you?

I have found that real estate investing is a lot like other businesses; it’s pretty simple but it’s not always easy. If you are the guy or gal that is a “1%‘er”; that person that always does the thing that others won’t do, you will have success that those other people will never have.

I would love to hear about your challenges and successes with probate investing.

Photo: benchilada

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About Author

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

37 Comments

  1. John Thedford on

    Thank you Sharon. This is one area I would like to know more about. I lost out on that that I had a 1st against. The family got 102K for the property. It needed about 25K in rehab and the value would have been 165K-175K. I had asked my attorney to make an offer on it and then found out the heirs had already received a contract on it. Do you suggest marketing directly to the families or to the estate representative?

    • John –

      You need to market to and make offers directly to the executor or PR. Just make the offer like you would normally do. You don’t need an attorney to make the offer for you. Attorneys rarely do anything but get in the way. Sorry, but it’s true. They usually aren’t investors, and often tell folks not to accept our “low ball offers”.

      Sharon

  2. Great info Sharon. We have had great success with Estates for all the reason you list above. I like your magic question: “What can I do to help this process along; to make this process easier for you”? I will be making sure we use this. Thanks for the article. Enjoyable as always.

  3. Great post! I am mailing absentee owners and their is definitely a lot of competition. I am starting to look for sellers who are a little harder to find. I did a little research and my county doesn’t publish probate records online for public. However I think I can get access for $75.00 a year. Thanks for your help!

  4. karen rittenhouse

    Another reason heirs sell is that they often live out of state and don’t have a way to oversee or care for the property.

    One of our favorite things about buying probate is that these properties often have no mortgage and the heirs are willing to owner finance to create their own income stream and avoid a huge tax bill.

    Thanks for the post, Sharon.

    • Karen –

      Probates that are absentee owners are the very best leads of all, for all of the reasons you stated. I’m glad you are having success with this strategy too.

      Sharon

  5. I am having challenges with deceased owners leaving behind homes that are underwater. Heirs have no funds to open probate and so the houses just sit vacant for months and years. The lien holder may want to short sale the asset, but without a PR to legally sign documents, we are stuck in neutral. Who truly has the incentive and funds to open probate in these situations? I’m starting to look in the mirror!

    • Jenny –

      If you are new at RE investing, the last place I would start is with short sales. There are plenty of free and clear homes out there that are probates. Just move on.

      You are looking for the houses that need work. Short sales are hard. And if you decide to go that route, I would suggest you partner with someone that has negotiated a lot of short sales. Go for the easy deals first. Houses that are underwater will be much harder and after a whole lot of work, you may not get it in the end.

      Sharon

  6. Hello Sharon,

    I read your post with great interest. I have been a teacher for many years and am now moving into becoming a full time real estate investor. I am looking to working as a wholesaler and focusing on the probate market in Miami, Florida. If you don’t mind gining advice, what are the top five things I should do to get started?

  7. John – There is a ton of info here and on my blog.

    You have to concentrate on marketing; that is your big thing. You won’t have any leads without marketing, I would study that first.

    There is an active wholesaler in your area named Chris Bruce. I did an “Escaping the 9 to 5″ interview with him a while back. I’m sure Chris would appreciate you reaching out.

    Sharon

  8. The problem with probates, at least in my jurisdiction, is that after the heirs accept your offer, there is a mandatory public hearing at which your bid is presented so that other potential buyers have a chance to outbid you. You do all the work vetting the deal and selling the sellers on it, and it’s all for nothing. There is always someone who can live with lower margins, or is stupid enough to try to. What do you all do about this? Thanks for your input!

  9. Great article Sharon. I have a full time former wholesaler who I did business with now part of my team full time as acquisition manager. He does a lot of these mailings and I told him you were a great resource to learn from as well. He is great and bringing lots of deals but we all can learn from each other. A day doesn’t go by where I don’t learn something in this business. Sometimes from problems but just the same learning to solve them is learning. His name is Bill Roberts and I told him to check you out. Thanks again for being a GREAT WHOLESALER.

    • That’s great to know Mike. It looks like your business is growing by leaps and bounds.I’m just like you; I still learn every day. In fact, I still get really stoked at getting to know something new.

      Sharon

    • Jason Brooks on

      Hey Mike and Sharon,

      I have actually been doing some digging and I have some experience pulling these leads here in Mass. The process is a daunting one for sure but it basically goes like this. You go to the county courthouse, go to the probate department (this is also the child support area, can be quite the show sometimes) you then need to utilize an antiquated computer database to search the probates, I have gotten better at filtering by certain criteria. Once you find a good list of these dockets, you write down the docket number, go to a phone on a desk, enter the docket number into the phone, and you are given the case number. Once you have the case number you can pull the case file and look to find out if real property was involved in the case. If so, you write down Executor/Executrix contact information and I am collecting beneficiary information as well. This will ensure that if I run into an executor who is maybe not motivated to do anything I can contact the beneficiaries in the case as they may be more motivated and able to create urgency due to their own financial needs. I am in the process of developing some shortcuts that I believe will cut my time in half or a quarter. I am also taking the names of attorneys and their contact information and developing a campaign to mail to them, or direct calls to them to potentially generate leads. I have found a few bugs in the system but it is a process I intend to learn and master. I am also devouring your blog Sharon as we speak. Great information!

      • Sharon Vornholt

        Hey Jason –

        Once you have your process down pat, try to find a way to outsource that work. Find a grad student or stay at home mom. You only need one good deal to pay someone part time for a year. You can look at my posts on my blog about VA’s and outsourcing to see how to put together a “task packet” for someone (this works the same for any employee or part time worker). Get a system for doing the work, put it all down and you will have it.

        Once you do that you will be ready in the future when you can hand it off to someone. You have to really learn the process first though. Then use that time you have freed up to market for more deals.

        Be sure to get both the name and address of the executor and the decedent. You need both. Notice attorney names that keep coming up. Those are attorneys that do a lot of work with probates, then market to those guys.

        It sounds like you are well on your way!

        Sharon

  10. This is an area I haven’t heard much about. I tried searching Google for info on probates in my area. I didn’t have any luck, Any tips on search terms or listings of these? Newspaper, gov website, etc.?

    Thanks!

    • Every area is different Daniel. I would first call your local Probate Court and ask if the info is published anywhere.

      Here they are published in the newspaper, but in some areas you have to go to the courthouse. I would just call them and ask how you can get them.

      Sharon

  11. Thanks for your article, it has pricked my interest in investing in probates. I am just researching becoming an realestate investor and I’d like to think i’m part of that 1% who likes to be different. Besides there is soo much info here its very overwhelming, so a niche is deffinaltly something I need!

    Thanks,
    Emily

  12. Sharon,

    That is probably why I see so many RE agents advertising that they will sell your home in 60 days or buy it. You make money either way, and are prob the first person to know the sellers are becoming more motivated. Seems like it could be a conflict of interest.

  13. Adam –

    I would pay them per record they brought me (not per hour), then give them a bonus for any houses I was able to buy. That will encourage them to get all the information you need, and if they see that they can earn bonus money it will help keep them motivated.

    Sharon

  14. Very helpful article Sharon, thank you for the awesome tips!
    I’m getting out my first batch of direct mail to PRs this week; in my area, notices to creditors are published in the paper. The only piece of information missing is the Decedent’s address, but when I search on my county property appraiser’s website by Owner Name, I can find out that information (as long as the name isn’t John Smith or something very common). Is this a good approach to get started? I can access the cases at my courthouse but it’s not very feasible for me to get there as it’s over a half hour away and I can’t quit my job yet. :) Thank you again Sharon!
    Bethany

  15. Hi Bethany-

    I think that is a great way to do it. When you get someone like a “John Smith” you can also probably look at the wills online. If you have the executors name and address you can figure it out that way. Good luck.

    Sharon

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