If you’re in the business of rehabbing homes for profit or retaining them as rentals, you want access to as many properties as possible. Buying an estate sale house can be a worthwhile avenue to secure real estate below market value with less competition and fewer needed repairs.
For some, estate sale homes are ideal properties for fix-and-flip investing. With any luck, you may even find a great deal on a long-term addition to your real estate portfolio.
Why Estate Sales Can Be a Good Deal for Real Estate Investors
Relatives of an individual who passed away often hold estate sales, and they may be eager to sell or unsure what to do with an additional, outdated home. With little emotional attachment to the property, many beneficiaries will list the home below market value to avoid the ongoing expenses of taxes, utilities, and insurance.
If the seller is forced to hold an estate sale to settle debts, the more quickly the deal closes, the sooner they can move on. For real estate investors, this can be exactly the type of seller motivation that leads to profitable deals.
Risks of Buying an Estate Sale House for Real Estate Investors
Deals for probate real estate might be attractive, but they don’t come without risk. The sales process takes a long time—often lasting for months—and the closing date can shift. Multiple beneficiaries may also need to agree on the sale price, which sometimes lengthens the process.
The required 10 percent deposit for a probate sale may not be refundable, which is a gamble that not all investors are willing to make. Additionally, unlike a typical sale that allows the purchase to be contingent on the results of a property inspection, the only reasons you can get your deposit back when buying an estate sale house are if someone outbids you at auction or if the court rejects the offer.
Find out why hard money is becoming the go-to choice for funding fix-and-flip loans. ➤
3 Tips for Buying an Estate Sale House
The ongoing shortage of housing inventory has increased competition. Investors that widen the net to include probate properties could uncover profitable deals they wouldn’t find in traditional real estate listings.
If you’re considering buying an estate sale house, read these tips before you dive in.
1. Find viable properties.
Build a good relationship with a local real estate agent who specializes in probate listings. They often look just like other listings, so you might not be able to tell which homes are in probate from your typical search methods.
If you’re looking in specific areas, contact the local probate court to get information about the most recent cases. You can find open estates to determine whether they include property. If you see properties of interest, contact the executor or the seller to ask who the listing agent is. You can also ask if a listing price has been determined or to be notified when one is.
One of the best ways to find these scenarios is to look within your sphere of influence. Unfortunately, probate and estate sale situations may turn up around you. As a real estate professional, you can offer your help in purchasing or partnering up on these properties. This is often the easiest way to break into the probate world.
2. Inspect any properties you’re considering.
Be mindful that lower pricing could reflect underlying issues, so it’s important to conduct a thorough home inspection—including code compliance—to determine what needs to be fixed or upgraded before you buy a probate property.
A property might need major repairs or have unknown issues because the one person aware of them can no longer disclose them. When possible, work with a knowledgeable contractor to get an understanding of what work will be required and the associated costs before you make an offer.
3. Understand the probate sale requirements.
Properties sold through probate court require a 10 percent deposit. This might limit the number of offers you can make, so prioritize the best properties.
After you make an offer, whoever is authorized to sell can accept or counter it, much like in a traditional property sale. However, the court must approve the sale and set a sale date. The property is then publicly advertised for 30 days at the offer price. After this waiting period, the buyer must go to a court hearing to prove that they have secured appropriate financing and close the sale, but there is no guarantee that the deal will close.
At the court hearing, an auction takes place in which the opening bid is set above the offer price, usually at a specified rate depending on the state or region. If other parties place bids, the successful bidder must immediately provide a 10 percent deposit to confirm the sale. In the absence of competing bids, the sale will typically be confirmed at the offer price.
Secure Your Loan Through Socotra Capital
Socotra Capital is a direct private lender experienced in navigating estate sale home purchases. Our loans close quickly and focus on equity—not the condition of the home. We can even provide prequalification letters to assist in getting probate properties into a contract.
If you’re buying an estate sale house, you need access to fast funding. Ask us about our Turbo Close program for fix-and-flip loans. We have the financing options and resources to help you invest with confidence. Read The Borrower's Guide: Fix-and-Flip Hard Money Loans to learn more.
