How Real Estate Investors Use Probate Properties and Bypass Competition

Real estate investors know that the death of a property owner often presents logistical challenges for the next-of-kin, the probate court system, or both. Probate properties present a unique opportunity for investors to acquire a new asset while relieving the burden of property ownership from unwilling beneficiaries.

Let’s take a closer look at:

• How probate works
• How investors typically use the probate system
• The primary challenges of acquiring probate properties
• How you can get ahead of the competition with pre-probate properties

How Probate Works

Probate is the legal process of administering the estate of a recently deceased person. This includes legally transferring ownership of assets, such as real estate, to the beneficiary stated in the will or to the next of kin.

The process includes:

• Confirming the validity of a will, if one exists
• Deciding how to allocate the assets and liabilities of the deceased according to the will or to state intestate law if no legal will exists
• Officially transferring ownership of all assets and liabilities to the appropriate parties

How Investors Use Probate 

Investors use widely available probate data to identify new property owners who acquired their property through probate. In many cases, these new property owners do not intend to keep the property. Instead, they are looking to sell the property quickly to pay off the remaining debts of the deceased and accept the remainder as their inheritance.

Investors know that these property owners are often motivated sellers and will contact the owners of the probate properties to see what price and terms they can negotiate.

The Primary Challenges of Acquiring Probate Properties

While probate properties can be profitable investments, they can also be hard to acquire. This is because probate data is widely available, and many investors pursue probate leads. Your chances of being the first investor to find the lead and make a deal with the new owner are slim.

Another challenge is that real estate can often bypass the probate process. If a property is owned in joint tenancy, for example, ownership will automatically pass to the surviving owner(s) without going through probate. So investors may miss the opportunity to acquire the property from a remaining owner who intends to sell it immediately upon the death of the joint owner. 

How to Get Ahead of the Competition With Pre-Probate 

Instead of waiting, along with other investors, until the ownership of the property has been transferred from the deceased to the beneficiary through the probate process, you can get a headstart with pre-probate data.

Pre-probate is the period between the death of a property owner and the official transfer of title to the new owner. PropStream’s new Pre-Probate Data Filter cross-references county death records with property owner records to identify properties that are currently in this pre-probate period.   

With this information, you can find potential real estate investments before they are probated. This allows you to reach out to this market segment before other investors learn of the potential sale. You can also learn of opportunities to acquire properties that would bypass the probate process by passing directly to the new owners through joint tenancy or a living trust.

Naturally, pre-probate data is sensitive, and working with the estates of the recently deceased requires a delicate touch. For real estate investors who can navigate these difficult conversations, investing in probate properties can be a win for the investor and for the families who appreciate a quick sale.