When someone inherits a property, they have one of two real options to consider: keep the property or sell it. Often beneficiaries have a desire to liquidate inherited property rather than try to manage it. If the sale is happening in the probate process, this called a probate sale. Here are three tips of a winning probate investing strategy in Chicago.
Market to Out-of-State Beneficiaries
When you get a list of probate sales in an area, properties are listed along with the address of the trustee, executor or beneficiary. This poses a great opportunity to make someone’s life easier by offering to buy the probate property when the new owner is out of state.
Beneficiaries and executors have to deal with a lot, especially if the deceased person is a close member of the family. There are a million things to do including dealing with bills, bank accounts, and funeral arrangements. Dealing with the home is one of the more daunting tasks, especially when there are years and years of personal and family items in the home.
Not only is this an overwhelming chore, but also it can be quite emotional to deal with the loss while going through a lifetime of memories. This task can be much more difficult logistically when the executor or beneficiary doesn’t live within a reasonable distance of the property.
As an investor, reaching out to these individuals makes a lot of sense. For those considering selling, the process becomes easier. The beneficiaries still need to sort through the personal items, but once that component is done, knowing there is a buyer ready on hand might just be the closure sought.
Offer the Right Price
Executors and trustees have a fiduciary responsibility to get as much for the property as possible. As a result, don’t expect to get the property for a steal just because someone is in a hurry to close an estate out. The reality is the probate process takes time regardless and an executor or trustee can be held liable by the beneficiaries and courts for selling the home for too little.
Make an offer at the market price or even slightly above if you feel there is an opportunity to fix and flip for higher numbers. You’ll be taken much more seriously for providing a real offer right off the bat rather than low-balling the price. In most cases, if the executor or trustee feels there is a better price they can get, they will decline the offer and list the property.
On the other hand, if you are able to probe and determine if there are other issues with the estate such as a large tax liability coming due quickly for the overall estate, the executor might need to liquidate quickly to meet the financial needs. In cases like this, you might be able to get the property for a discounted price so the beneficiaries don’t default on estate taxes.
Purchase “As Is”
An executor and trustee have enough on their plate and don’t want to deal with fixing a home up to prepare it for sale. This is an added cost plus the time and management of getting it done. It doesn’t make sense in most cases.
Make their life easier by making sure you place an “as is” offer. This means you understand there are issues with the property and most likely considerable repairs from what you can gather upon initial inspections but you aren’t going to seek repairs or credits in the escrow process.
For many investors seeking to fix and flip, this is the normal strategy regardless. You conduct your normal inspection before you make an offer, knowing from experience the approximate amount of work required.