FAQ
Webster defines Probate as “the judicial determination of the validity of a will.” But, for our purposes, probate is the legal process that begins when a person dies. This is true whether or not they had a will.
The primary purpose of Probate is to ensure that creditors, or people who are owed money, are paid by the deceased’s estate. Then, once the estate has settled all the debts and liabilities, it is free to distribute the remaining assets to the legal heirs and others designated as beneficiaries.
Why buy property through Probate?
Probate offers buyers and investors many opportunities to find and purchase valuable assets at discounted prices, and often with very favorable terms.
Making money in Probate does not require any professional credentials, degrees or licenses. By putting the knowledge and techniques you acquire through the Rivers of Gold Probate Business System, you can decide how much time you want to devote and how much money you want to earn.
What kind of property can be acquired through Probate?
Anything that the deceased owned that was titled or required a signature to acquire must be legally disposed of through probate process. Typically, this includes Real Estate such as houses, apartment buildings, commercial and industrial property, as well as raw land. It also includes cars, trucks, boats, airplanes, checking accounts, stock certificates, investment accounts, and intellectual property such as copyrights, trademarks and patents. If a signature was required, that asset must go through probate.
It is also possible to acquire additional items of value that are part of an estate, such as art, antiques, jewelry, sporting equipment, and other collectible items.
Why is Probate a good way to find Property?
The Probate process involves the creation of an inventory of all assets of an estate, followed by the distribution of assets necessary to pay off all remaining debts the estate may owe. Often times the heirs to an estate will have to liquidate some of these assets in order to satisfy the debts and liabilities of the estate. Houses are frequently the largest repository of value in an estate and often need to be liquidated in order to settle the estate.
Even if the home doesn’t need to be sold to cover liabilities, the heirs will frequently sell the property in order to distribute the proceeds to multiple individuals. If house is out of date or in need of repair, especially if it’s located some distance from any of the heirs, they will frequently need to sell the property in order to move on with their lives. Situations like this provide an opportunity for investors to secure valuable property at substantial discounts to prevailing market rates.
Because of this, Probate properties provide an opportunity for investors to buy property at Wholesale rather than Retail rates. Typically, this results in a much greater Return on Investment (ROI) and far more profit when it comes time to sell.
How do you find Probate Properties?
The Rivers of Gold Probate Business System identifies six ways to find and purchase Probate Properties, then focuses on the one method that has proven to be the most effective. By using the Rivers of Gold system you can be sure the no else is going to be bidding against you because no one else even knows the property is For Sale.
Why would the heirs to an Estate sell a Property below fair market value?
That’s a really great question and there are many answers – or rather there are many factors that make it quite likely to find property below fair market value.
With personal property, it’s pretty obvious. A deceased man’s wife and children may not share his passion for hobbies like fishing, coin collecting or rebuilding old sports cars. They may have little or no interest in any of his “old stuff,” nor any appreciation of its real value to a collector. Similarly, a widowed husband and his children may have little or no interest in a collection of fine china or Lladro figurines. In that case, they may sell far below fair market value. The same may be true for antiques, jewelry and many other items.
When it comes to houses and real estate, there may be even more reasons. The estate may have to sell the property to pay off debts, or the heirs may want to sell the property so they can divide the proceeds.
If the property needs maintenance or repair before it can sold at fair market value, that usually means someone is going to have to invest time and money to make those repairs themselves or hire someone else to do so. All too often, it takes family members more time and money than was ever anticipated. If the heirs live some distance away, or in another part of the country, the process of renovating and preparing a house for sale becomes even more demanding.
Faced with those options and the potential windfall of cash from an immediate sale, most people will opt to sell – and will be willing to do so at a substantial discount. Remember, holding on to a vacant house in order to realize a bit more profit is not without cost or risks. There’s insurance, utilities, yard maintenance, and the ever-present risk of break-in or vandalism.
Furthermore, when a Probate Investor makes an offer directly to the estate, there’s generally no Real Estate Commission involved. This usually means a six percent savings for the estate. Even for a modest $100,000 property, that means an additional $6,000 for the heirs.
All this means that as a Probate Investor, your “below fair market value offer” may be the prefect solution for heirs hoping to get on with their lives and finally distribute the assets tied up in the estate.
In that case, everybody wins!
What about financing for Probate Properties?
If the property is in reasonably good shape, almost any kind of traditional financing should be available. However, there may be opportunities to employ more creative methods of financing.
If your intention is to buy, fix and sell the property, it may be possible to find a wealthy individual or group of investors looking for better rate of return than they may be able to find in more traditional investment vehicles. They may be willing to loan you all the money you need for the property simply to reap a higher rate of return than offered by their local bank or money market.
In addition, the heirs to the estate may be willing to finance the property with very favorable terms in order to make the deal work. This is especially true if the property has no mortgage and is owned free and clear. Depending on the terms of your agreement with the heirs, you may even be able to pass that very favorable financing onto your buyers for a quick resale.
Ken covers working with Bankers and creative financing options in depth during the 2-Day Intensive Workshop and on the Rivers of Gold DVD series.
Why should I care – or what’s the real advantage of buying property through Probate?
In a nutshell, when you buy property through the normal channels, using a Realtor, through the classifieds or from a FISBO (For Sale by Owner), you’re buying Retail. Sure there are some bargains to be found, but you’re purchasing a property that has been exposed to the entire market and by definition has been priced for sale at or near market.
With Probate properties, you have the opportunity to buy Wholesale, by bidding on a property that no else knows is for sale. When you find the right Probate property, you have the opportunity to provide a valuable service to the Estate by quickly and seamlessly liquidating their property in “as is” condition. You solve their problem by liquidating a property and in exchange you can typically negotiate a much more favorable price and/or far more favorable terms.
The bottom line is in return for your efforts, you are much more likely to find a property that you can acquire at 20, 30 or 40 percent below fair market value. That means you are far more likely to make a real profit when you go to sell no matter what the market conditions. It also means that you have a great deal more flexibility in the offers you consider and how fast you can close the sale.