Are Probate Properties the Best Deals in Real Estate?
Jonathan Khorsandi on Dec 21, 2022 posted in Probate Real Estate
Probate real estate can offer home buyers, investors, and agents excellent opportunities. The nature of probate real estate sales is one of urgency to settle an estate, and real estate is usually the most significant portion of the estate. Therefore, there is usually a high degree of motivation to sell any real property in the estate, especially if there are outstanding loans against it.
Probate real estate is a better deal for buyers than conventional sales
The main reason buying probate real estate turns out to be a better deal than conventional real estate is because probate real estate usually sells under market value. This is because the heirs of the property are looking for resolution and closure during a difficult time, and they rarely seek to maximize the value of the estate or the property.
There is also the factor of less competition when buying a property that is going through probate. Many buyers are turned off by the process and the time needed to be assured they are purchasing the house.
Buyers usually have to make an offer, have it accepted subject to court approval, and then wait for the confirmation hearing before they know they have a house under contract. Even when the court hearing takes place, they could be outbid at the last moment by someone else who showed up for the hearing. This is unnerving for many people who don't want to go through this process.
Probate real estate is a recession-proof market segment
Homes that must sell through probate are impervious to recession, economic downturn, high-interest rates, and low demand. None of those factors play a role when a probate property can or can't be sold. When someone passes away and leaves an estate that needs to settle, it needs to settle. It's the law.
For buyers, this is excellent news. Consider the current economic environment where home sales are slowing down and stalling in some areas. If a piece of real estate is part of an estate that needs to settle, they have to price the property low enough to get it sold fast. That means you could make an offer on what may already be a property that is listed below the competition.
To be clear, a probate property has to sell at a minimum percentage of the appraised value of the property. In addition, most states will require that the winning offer be at least 90% of the property's appraised value.
Regardless of the country's economic environment or the world, people, unfortunately, pass away. Therefore, any real estate in the deceased's estate has to sell regardless of the economy.
Why would real estate agents want to pursue probate leads over conventional real estate leads?
Real estate agents can find that probate real estate is one of the most profitable and simplest ways to make a great living in their career; here are some reasons why:
There is a constant source of leads
Every year, nearly three million people die in the United States, and 96% of those are over 35. If we factor in the fact that the US has a 65% homeownership rate, that means that roughly 7,500 people who own a home die every day.
The daily mortality rate creates many potential homes that need to sell. As a result, real estate agents could tap into this market, which is much more urgent than practically any other lead source.
There is less competition for probate homes
Only some real estate agents focus their business on probate sales. There is a good possibility that most realize the tremendous potential available in this market. There is also the fact that you have to have a specialized skill to handle probate, and many agents may not want to acquire that skill.
You can build systems for an efficient business with ease
One of the most significant advantages real estate agents will find when specializing in probate sales is the simplicity of the business once you have a system.
The biggest challenge for any real estate agent is getting leads. If you specialize in probate and set up a network of attorneys that can refer your business, you have a source of leads that will keep giving you leads. Attorneys like working with trusted agents to take good care of their clients. If you, as an agent, excel at service, you don't have to worry about prospecting for business every day as most agents do.
You can also build a Standard Operating Procedure system to run your business and hire people to take care of many of the work agents do. Unfortunately, most agents need help to systematize their business because they are all over the place regarding the sales in which they are involved.
If you have a handful of attorneys sending you business, you can train assistants to take care of intake, drafting listing agreements, setting up the property to be on the market, marketing, etc. You can have other people do 70% or more of the tasks most agents handle themselves because most sales are ad hoc processes for most agents. This would give you the leverage and opportunity to grow your business or work less while still making a great living in Real Estate.
What to do next?
Are you ready to look further into the great opportunities offered by probate real estate? Whether you are looking to find a home for yourself, an investor looking for good deals, or a real estate agent looking for a more predictable source of business, this is something you should consider.
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