Investing in probates can be one of the most profitable niches in residential real estate investing by far, but the reality is that it can also be difficult (at least initially) and time consuming. There is a lot of work that goes into locating your prospects, executing your direct mail campaigns and following up on all your leads….but there is an easier way for those of you who may not have the time or resources to market for probate real estate deals on your own.
Although we do a ton (and I mean a ton) of marketing within my house buying business that is directed towards probate estates and their attorney’s, we also keep a close watch on RMLS to find & track probate listings. You may think that the only deals you can find on RMLS are Short Sales and REO’s…..but I can assure you that is not the case. While most investors are searching RMLS on a daily basis for great REO & Short Sale prospects, that leaves the door wide open for you to easily snag some great probate deals that are flying under your competitions radar.
It is the case that no matter how much we market probates, no matter how solid our sales pitch and how much repore we build with a seller, sometimes greed and uneducated opinions will cause probate beneficiaries to ultimately reject our offers and list the properties with a realtor in hopes of getting a much higher price for the property. There are sometimes when listing an inherited property with a realtor is a good idea because it will most likely allow you to get more money for it….however I have seen more times than I can count beneficiaries list major fixer/outdated properties with a realtor because they and the realtor feel (at least initially) that the market will give them much more than the property is really worth (i.e full retail price). There are a few reasons why this happens, so lets go through them quickly so that you can better understand of the inner workings of a sellers mind when it comes to probate properties…..First off most sellers think that their property doesn’t need as much work as you know it does. This happens quite a bit mainly because most people just don’t know all that much about houses, construction and updating. Second they think that if the property is worth 200K fixed up and it needs 50K in work, then they should easily be able to sell it for 150K. And finally the third reason is because some Realtors actually believe the previous two items as well when they take on these types of listings.
Its almost funny at times how a Realtors opinion of value is like the holly grail to sellers in probate situations…..at least until their opinions are proven wrong once the market speaks. Now I am not trying to be too hard on Realtors, but the reality is being able to put a real value of worth on a fixer property with any degree of accuracy takes a lot of real estate education and experience. It just so happens a lot of the time Realtors have a slightly different kind of real estate education and experience than what is needed for valuating these types of properties.
So how do we make the best out of these types of situations once a probate seller hands the keys over to their local listing agent? Well there is definately a system to it, but the whole idea behind it is to let the market speak so that the sellers get to a place mentally of being dejected and frustrated with the market, the house and their listing agent who swore they could get them more money for the property by listing it with them. keep in mind that whenever a fixer type property is listed on RMLS it becomes available for every beginning house flipper and live in rehabber to see….and with that will come a flurry of initial activity that almost always wastes the sellers time and ends with a buyer backing out of the deal because they eventually figure out that they are paying too much for the property. Sometimes this even happens multiple times, which is something that I love to see when qualifying listed probate prospects.
We will actually identify probate listings as they are listed on RMLS (with the help of our realtor partners) and then track them and watch for longer time on market, price reductions and sale fails. The key is to put in an offer when the seller is probably frustrated, but hasn’t reduced the price in RMLS so everyone can see their frustration. We have purchased a number of estates off RMLS this year for substantially less that what the list price was at the time they accepted our offers. If they had just reduced the price to what they accepted from us they probably would have had 10 offers each time…..but they are so frustrated at that point they just don’t care anymore, and instead they just want the property sold and they want their money asap (which is what we provide for them)! So to recap, the key to getting a great probate deal on RMLS is to make discounted offers when the sellers are motivated & frustrated, but have yet to make a big price drop for everyone to see. This way you are not competing with a bunch of other investors who noticed the deal because of the aggressively discounted list price.
So for those of you who dont want to market for probate deals directly you can now use this strategy to get your hands on some great probate deals straight off the RMLS…..And for those of you who already market for probates I suggest you add this strategy to your probate investing tactics in order to increase your deal flow. Just remember that on the other end of every probate deal is a seller who is eagerly awaiting their inheritance, and once that wait gets too long for some of them they will take a large discount just to get their hands on something fast. The key for you as an investor is to harness the power of that last statement and use it when looking for probate prospects to make offers on.
I hope the information in this article helps with your probate investing endeavours! We want to hear from you……so leave a comment and let us know about your success buying probate deals off the RMLS!