What are Probate Leads?
Probate leads are potential seller clients who inherit properties they often want to sell quickly after going through the probate process (the legal process of transferring the assets of a deceased person to heirs). Since many heirs live out of state, or are otherwise not prepared to maintain the property, they often look to sell quickly.
If you’re looking for a lender to purchase a lead, LendingHome is our top pick because they offer loan amounts up to 90% loan-to-value (LTV), up to 75% after-repair-value (ARV), and have interest rates starting as low as 7.5%. Further, LendingHome charges only a small amount of lending fees (between 1.5% – 2.5%), and they conduct their own appraisals at no additional cost to the borrower. These terms make them a good option for small businesses.
Introduction to Finding Probate Leads
For most new real estate investors, locating, pitching, and closing probate leads sounds right up there with root canal as a way to spend an afternoon. You may even think probate investors are like ambulance chasing lawyers-except they actually chase hearses! The last thing you want to do is bother a grieving widow to make a buck, so probate investing is just not worth it…That is until you start reading about the jaw dropping deals many investors who specialize in probate leads are pulling in.
Like most great real estate lead generation strategies, the hardest part is getting started. That’s why we put together this guide. In this article we’ll tell you everything you need to know to start locating, pitching and closing probate properties the right way. No hearse chasing required.
Why Probate Leads & Probate Properties Are so Attractive for Investors
When it comes to real estate investing, lead generation is always a road block for new investors. They may have the cash, they may have the knowledge, they may have a great contractor, but when it comes to actually finding leads, most new investors are at a loss. How on earth do you manage to buy properties for less than they’re really worth? The answer is actually surprisingly simple.
Probates Sell Below Market Value More Often Than any Other Lead Source
In order to buy probate properties or any property for below market value, one of four basic conditions must be met:
1. The owner should want or need to sell the property quickly
2. The owner should live out of state and not have the time, energy, or money to maintain the property
3. If they’re not in or close to the foreclosure process, the owner shouldn’t be underwater on their mortgage
4. The owner shouldn’t need the home as their primary residence
While pre foreclosures and short sales meet the first condition and absentee owners the second two, probate leads often meet all three conditions. For example, someone who unexpectedly inherits a home from a deceased relative is often unprepared for the financial burden of owning and maintaining a second home, often lives out of state, and rarely needs the home as a primary residence. Even better, since the mortgages of deceased people are often paid off, they own the property free and clear. That means any profit from selling the home will be seen as a windfall.
Here’s real estate investor and founder of the always amazing Flipnerd.com, Mike Hambright on the allure of probate properties for investors:
“As a real estate investor, you may be able to help a family that lost a loved one move on with their life by buying their property ‘as is’. If the home needs work, dealing with costly and burdensome repairs just after losing a loved one is a pain that most would prefer to avoid. For some, a quick, no hassle sale, even at a significant discount to market value, is worth the trade off. If done properly, this is a win-win for both seller and cash buyer.”
“As a real estate investor, you may be able to help a family that lost a loved one move on with their life by buying their property ‘as is’. If the home needs work, dealing with costly and burdensome repairs just after losing a loved one is a pain that most would prefer to avoid. For some, a quick, no hassle sale, even at a significant discount to market value, is worth the trade off. If done properly, this is a win-win for both seller and cash buyer.”Louisville probate expert and real estate investing coach Sharon Vornholt sums it up in just 14 words:
“They don’t want the house; they just want the money sitting in the house.”Starting to get excited yet? Okay. Next, let’s take a look at how you can track down probate leads on your own.
5 Best Ways to Find Probate Leads
Now that you have a better idea of the probate opportunities available to you, let’s go over the best ways to find probate leads. While the strategy you choose is going to depend mostly on what state and county you live in, these strategies will work in all 50 states.
1. Locate and Search Your Local Probate Listings
Depending on what area you’re planning on investing in, probates may be listed in the local newspaper, on the internet, or you may have to go to the court to pull the records yourself. If you want to start investing in probates, you’re going to want to get leads early in the probate process.
2. Check Online for Probate Leads in Your County
If you want to see if your county lists probates online right now, you can always check the Public Record Center website which lists counties who have online probate or other court records.
If the county has probate records online, then you will generally need to know the name of the deceased in order to search for the records. A good place to find out the name of the deceased is to check local obituaries. An obituary can also sometimes give you clues to the status of the deceased property. For example, if the obituary mentions the deceased is survived by a spouse, then chances are the title to the property will transfer to them.
From there you need to figure out if they owned property. You can do this using your local tax assessor’s website.
Since new probates happen every day in some counties, once you’ve figured out the process for your county, you’ll want to periodically check for updates and new probates.
3. Call or Visit Your Local Probate Court
If your county doesn’t list probates online, then your next step is to call or head down to your local probate court and speak with the clerk. Depending on your county, you may be able to get a list of all probates or you may have to dig a little deeper. You also might need to pay a small fee for photocopying.
4. Build Working Relationships with Local Estate Planning or Probate Attorneys
Another great way to get probate leads is to befriend local probate or an estate planning attorney who handles a large volume of probates in your county. While public records are great, getting the inside scoop is even better.
Though as an attorney herself she may be a bit biased, Atlanta Attorney Laura French agrees that this a great way to stay in the loop and score probate leads from the source:
While many probate attorneys will have established relationships with a local real estate agent or investor, you never know. Maybe their favorite agent or investor just retired. Maybe their agent or investor is on vacation for a month and they desperately need someone to buy or list a hot property. Worst case scenario, you get your name out there as a local real estate investor.
5. Buy Probate Leads Online
As with all real estate lead generation there are services that allow you to save the time and headaches of lead generation for a price. In the world of probate investing, there are quite a few companies that offer probate leads without the legwork. Here’s a quick rundown of two of the most popular probate lead services.
Before you even think about buying leads, you need to familiarize yourself with the process in your county. If you can quickly and easily get leads from online records, then it might not make sense to buy them. However, if your county requires a trip to the courthouse, then buying leads will save you lot’s of time. For most investors the time saving alone will be enough to get them a great ROI from just one or two closed deals per year.
The probate records you find should have the name of the deceased, and the name of the executor (appointed in the will of the deceased to settle their estate), their probate attorney, and the name and address of the deceased.
US Probate Leads
Overview:
US Probate Leads claims to offer leads for all counties in the United States. They’ve also been in business for 12 years and have a great reputation in the industry.
Pricing:
Charges $150 per month for 25 leads, $200 per month for 50 leads, $300 for 100 leads, or all leads in a county for a custom price.
US Probate Leads also offers great probate education for new investors. For example here’s a deep dive interview with US Probate Leads founder Leon McKenzie on the FlipNerd show:
All The Leads
Overview:
Offers probate leads and divorce, foreclosure, relocation, and they also integrate with vulcan dialer and include a CRM.
Pricing:
All The Leads does not publish pricing information. Give them a call to check pricing and availability in your county.
3 Ways to Purchase a Probate Property
Now that you know a bit more about the benefits of working probates as well as how to get leads, let’s look at the three ways you can purchase probate properties.
1. From the Estate’s Executor
When someone passes away, there are two main ways their assets get distributed. If they have a will, the executor of the estate will distribute the assets to the heirs named in the will. If they die without a will (intestate), then the court decides how to settle the estate and distribute their assets.
In some states, if the executor is female, they are called an executrix. Other states simply use the term personal representative.
Why Executors Sometimes Need to Sell Probate Properties
Since the executor is in charge of settling the decedent’s estate, that means they are also responsible for settling any debts the decedent may have. Even if the decedent passed away debt free, a will may dictate that cash or other assets need to be distributed evenly among heirs. Sometimes, that means selling the decedent’s property to settle debts or distribute cash or assets evenly among the heirs.
Why Executors Often Sell Properties Under Market Value
Often, executors named in a will had a personal or close professional relationship with the decedent. That means that they are likely going through a grieving process themselves, or under pressure to help grieving heirs quickly settle the estate. Also, let’s face it, neither the executor nor the heirs paid the mortgage for the home every month, so any cash received from the sale is usually seen as a windfall. Finally, the odds of an executor being a real estate professional are remote. All of these factors mean that the executor may not be willing to go through the time, effort, and money it takes to get top dollar for the decedent’s property.
How to Buy Properties From the Estate’s Executor
While the process varies from state to state or even county to county, the general game plan here is to get in touch with the executor, usually through their probate attorney. The best way to pitch an executor is to send a simple, professional letter inquiring about the property and offering to buy the home quickly. We’ll go over this in more detail later in the article.
Once the executor accepts your offer, in some probate systems like Los Angeles, the court must approve the sale. This is important because it proves to the court that the executor is fulfilling his or her fiduciary duty to the heirs, also known as the beneficiaries.
Since many probate court systems are backed up, it may take four to six weeks to have your court confirmation hearing to approve the sale. On the day of the confirmation hearing, members of the public are also allowed to bid on the home, but can only do so in minimum amounts starting at 5% over the accepted offer.
While this may seem like a competitive system and it can be, in a lot of cases few people show up to bid for low priced properties. That means that your accepted offer will likely be approved.
Using Direct Mail to Pitch Executors and Beneficiaries
Direct mail is one of the best strategies to pitch executors or beneficiaries of an estate. Once you’ve found out there is a property to be sold, you just need to send a professional letter to the executor and heirs expressing your interest in purchasing it.
Simply send a professional letter to the executor (via their probate attorney in some cases) outlining why they should choose to sell the property to you. You might mention your experience working in the local community, your experience in investing, and the fact that you can close quickly with no contingencies. Offering to pay for professional clean out services is another strategy that may be appealing to the executor or heirs. If you’re lucky enough to be able to offer all cash or have access to a hard money lender, you can mention that as well.
With rates as low as 7%, LTV 90%, ARV 75%, and 12 Month terms, LendingHome is our pick for the best hard money lender of 2017. Click the link below to learn more about how LendingHome can help you finance your next project.
You can also send the same letter to the deceased address. While this might seem pointless, keep in mind that the deceased’s loved ones will likely be collecting and reading their mail.
Once you’ve sent your letter, follow up is also very important. Remember, the probate process can take six to twelve months, and people often choose to sell even after receiving title to the property.
Sample Probate Letter
Here’s a quick sample of the type of letter you can send to an executor or heirs.
{Their name}
Dear {their name},
Through a public records search, I’ve recently found that you are the executor for the estate of {deceased name}. I understand that this is a difficult time and you are likely very busy, so I will be very brief.
As a local real estate investor and member of the {your local town} community for the past 25 years, I would like to inquire about purchasing the property in {the deceased person’s} estate.
In order to expedite the process for everyone involved, I can offer an all cash deal with no contingencies, and close as soon as the offer is accepted and confirmed by the court. In addition, my offer will include the services of a professional organizer and moving company to help sort through the memories and belongings remaining at the property.
If you’d like to talk further about the property or any real estate advice you may need, please call me on my cell phone number listed below at any time.
Cordially,
{Your name}
{555-555-5555}
Should You Send a Yellow Letter?
While yellow letters are great for pitching pre foreclosures and absentee owners, probates require more restraint. That said, hand addressing your envelopes or experimenting with different colored envelopes might increase your open rates.
2. From a Public Probate Sale in Court
When someone passes away without a will (known as being intestate), then the local probate court steps in and manages the probate process. In some cases, the court will decide to offer the property at a public probate sale. The court will also likely list property of someone who died intestate with a real estate agent, and hold a public probate sale in the court.
Why Probate Courts Often Sell Properties Closer to or at Market Value
One word. Competition. If the court lists the property with a real estate agent, then it will be marketed on the MLS like any other property for sale. While it’s true the incentive to get top dollar is lower than a typical sale, getting an amazing deal from a sale like this is unlikely. Considering that probate courts generally stipulate the home is sold “as is”, the odds of getting a great deal go down even more.
How to Purchase Properties at a Probate Sale in Court
This works something like an auction, where potential buyers go to the court to bid on the property. In the case of intestate properties, the court will often hire a Realtor to market the property for a certain amount of time before the court sale.
In order to purchase a property at a probate sale in court, you only need to show up and bid.
3. From the Heirs After They Receive Title
After making it through months of grieving and possibly a long, stressful probate process in court, the decedent’s heirs are finally given the title to the property. In many cases, they are ready to sell very soon after they do. Here’s why.
Why Heirs Often Sell Properties Under Market Value
While going through the grieving process, dealing with the maintenance and expense of the property was more than likely the last thing on their minds. Now that they finally have the keys, heirs very often decide to sell sooner rather than later.
They may have had plans to clean out the property and renovate it, hire a neighbor to mow the lawn, or drive down on weekends themselves to clean out the gutters. They may not have been prepared for maintenance costs or the difficulty of trying to screen tenants and rent the home remotely.
Spouses that survived the decedent may not be able to afford to maintain such a large home.
In all of these cases, they will more than likely want to sell the home quickly, and without the hassle and expense of hiring a real estate agent.
How to Purchase Properties After Title Passes to the Heirs
Purchasing properties that have been through the probate process and have passed on to heirs is very simple. If you’ve already sent a letter to the deceased’s address, then chances are someone in the family already knows who you are. All you need to do now is to follow up to stay top of mind when they’re finally ready to sell. You can continue to send more letters, or put them on a postcard campaign.
Expert Tip: Private or Hard Money Can Often Help You Seal the Deal
Although many of the scenarios above can have legal complications that delay the sale, once the sale is approved, you generally need to move quickly to compete with other investors. Having access private or hard money can be a big help here. If you plan to fix and flip the property, then you may need hard money.
— Adham Sbeih, CEO of Socotra Capital
“If you are looking to purchase probate properties, first and foremost, you have to be patient. It can often take a year or more for a probate sale to be approved. But once it’s approved, you have to be ready to move quickly. Having private money or hard money on hand is advisable in most cases, as probate homes often fall into disrepair, and will not qualify for conventional financing. It’s critical to have a good hard money lender that you can trust to work with you and move the deal forward.”Pitching and Closing Probate Leads: Tips from the Pros
Useful Probate Video Resources
Want to learn more about probate investing? Check out these videos to learn more about the art and science of purchasing probate properties.
Over on REI Club, Frank Chen did an eye opening video with probate legend Jim Banks. Plenty of great stuff to learn here from one of the masters.
Looking for more detail? Check out Mike Torres Ultimate Probate Real Estate System video presented by RE Tech Campus. Almost two hours of probate investing strategies.
The Bottom Line
Wait a few weeks and contact the next of kin (heirs) to inquire about the property. Be professional, courteous and as personal as possible. When you’re ready to pursue a lead, visit LendingHome for excellent rates.
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