Working Probate

Posted on August 7, 2014 by

What is Probate? Probate is a vehicle to create inventory. A common misperception is that probate is automatically a good deal, but putting a contract on a probate property is the same as putting any other property under contract.

Finding probate properties is the same as finding foreclosures, divorces, and tax liens. Spending time building or purchasing databases and then marketing directly to them allows us to have more probate properties to select from.

These are the factors that affect whether or not a probate is a good or bad deal:

  1. The purchase price in relationship to the after- repair value
  2. Appreciation
  3. Cash sale or owner financing
  4. Condition
  5. Type of property

In today’s current real estate market, appreciation is happening at such a rate that paying current market value has its advantages. Here are some things to consider:

  • If the estate needs cash, the probability that this opportunity is a deal drops to 20%. Chances are that this will not be profitable.
  • If the estate asks for all cash, this limits the creative deal structuring. Typically, estates ask for all cash due to a large number of heirs. Most of the heirs are hoping that the seller will die earlier so they can get their cash fast. Many times, one of the heirs, often the executor, is broke and cannot contribute to monthly payments, utilities, taxes, insurance, and upkeep on the property.
  • If the owner/estate is financing all or part of the purchase price, the probability of creative deal structuring dramatically increases along with the profit. We are thus able to keep the cost down.
  • If the property is older, and probate properties generally are, it may not have been updated or cared for, has personal items in it, and does not show very well. A probate property in this condition is a hard property to sell on the open market.
  • If the property is upside down, the best opportunity is a short sale because the

lender cannot collect any deficiencies against the estate. For investors, this over

leveraged property is not a good value or profitable.

  • The ideal probate purchase price to after-repair value is $.60 on the dollar. An example is a property for which the repair value is $100,000, and the contract price is less than $60,000 minus the repairs.

In today’s real estate market, there is appreciation on houses that are clean, neat and in above average condition. They are selling rapidly. There is not enough inventory on the market. If we purchase a probate property at 60% of the after repair value, and the housing prices go up 10%, then our profit also increases. Houses that are in a middle income and above are ripe for this profit strategy.

Remember This: We cannot the control the circumstances outside of our business’s control such as whether or not a property appreciates. From my experience, properties located in the war zone and low income areas will not have much appreciation.

The WOW Factor: As with other properties that you will consider, the potential number of profitable probate deals rises dramatically when there is a WOW Factor from the curb. Properties that have a WOW Factor will sell in a shorter period of time and at a slightly higher market price. Most retail buyers make the buying decision on a property before they get out of the car. They only go inside to verify that they want it. WOW Factors include a level lot, curb appeal, neighbors in close proximity, and style of house. Split foyer homes are slower to sell and sell at a lower price. Homes that are below the road level are slower to sell. Homes that are on a major thoroughfare are selling at a lower price (10%). Popular architectural style will sell a home quickly. Fantastic landscaping will sell a home fast and at a higher price.

Considerations: When real estate professionals consider a potential opportunity, they evaluate the cost and profit of getting involved. By due diligence, we can limit the amount of risk that we have when purchasing a property. Understand that in a wholesale deal we are not doing the due diligence, but allowing the buyers to evaluate the risk. As investors, we get paid more when we have the ability to do creative deal structuring, find properties, and put them under contract at a great value. Once you have a marketing machine in place, the probate property will come along.

Now What? You will evaluate your next probate deal just like any other potentially profitable real estate transaction. Great deals/opportunities come along because we make them. When you have excellent negotiation skills, people skills, self discipline, and emotional control, your business will soar to the next level. By continuing our education partnership and being realistic with the current resources that we have, you and I will succeed together.

I have helped people to be successful.
I have seen them as they grow and achieve their success.
I have talked to them years later and know that our work together has brought them their dreams.
I want to help you to do the same.

I am looking forward to meeting you and helping you to achieve success!

Russ HinerRuss Hiner is an active real estate investor, coach and mentor. Russ is currently the leader of the Atlanta REIA Creative Deal Structuring Group and Atlanta REIA Mastermind Group. Russ also teaches several workshops throughout the year on a variety of real estate investing topics such as Negotiations, Wholesaling 101, Wholesaling 401, Real Estate 101, Property Management and more.

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