Probate Real Estate Investing: How to Score Great Deals Through Probate

Looking for the next great addition to your investment property portfolio? Start seeing dead people.

Well, not literally. That would be real creepy. But your local probate court, which settles the affairs of your recently departed neighbors, could harbor eye-popping deals on single- and small-multifamily investment properties.

Probate properties often sell for well under fair market value. They may need to be sold quickly to settle other estate debts, or the heirs may simply be unable or unwilling to deal with the property.
The rub? Buying real estate out of probate is more complicated, risky, and time-consuming than buying directly from a living homeowner. It often involves a competitive bidding process, always comes with fewer warranties than traditional sales, and can take six months or longer from property identification to settlement.

If that’s not enough to scare you — and if you’re a seasoned real estate investor, that’s probably the case — then keep reading for the skinny on scoring great deals on real estate through probate.

What Are Probate Properties?

A probate property is any piece of real estate sold through the probate process. That’s the legal process by which a special court (known as a probate court) oversees the winding-down of dead folks’ legal and financial affairs.

Generally speaking, assets enter probate when there isn’t a direct beneficiary or legal co-owner to assume ownership. So the checking or savings account on which your spouse is named beneficiary won’t go through probate when you die. Nor will the primary residence you own together as joint tenants with rights of survivorship — or the primary residence held in trust for a minor child, for that matter.

But that leaves a lot of properties eligible for probate. Often, the deceased owner is older, single, and owns the house outright. They will it to their adult children, or die without a will but with obvious heirs (usually, again, their adult children).

Those heirs have lives of their own, though. And probably places to live. They don’t need to move into their parent’s house and don’t want the headache of managing it as an investment. They want to get rid of it.

That’s where you come in.

How to Find Probate Properties

Finding top-shelf probate properties takes some work. Some sell on the open market, with listing agents and staging and open houses and all the rest. Without doing any due diligence, you’d never know the difference.

These “hidden in plain sight” probate properties are easier to find and are often priced to sell, but it’s rare to find amazing deals among them. Extracting real value in probate real estate takes more work.

Here’s a general step-by-step overview of the process. Bear in mind that probate courts are state entities that may operate differently depending on your location, so do your own research before diving in headfirst.

1. Find Your Local Probate Court

Probate cases appear in the public record. That’s bad news for families who don’t want their affairs to be public but great news for real estate investors looking for below-market deals.

Head down to your local probate court or search online if its records are digitized — some still aren’t. If you’re looking for investment properties farther afield, rule out behind-the-times courts unless you’re willing to travel.

Note that states often have separate probate courts for each county. For example, when you search online for “California probate court,” the first hit is actually the Sacramento County probate court. So make sure you’re looking in the right place.

2. Locate Active Probate Cases Involving Real Estate

Search the court for active cases involving real estate. Well-run probate courts should allow you to filter searches by terms like “house,” “land,” “rental property,” or “real estate.” In this scenario, “property” is useless as a filter term because it’ll return false hits for all kinds of personal property.

Eventually, most of these properties will hit the open market, with all the buyer-on-buyer competition that comes with. Your mission: to find opportunities before they reach that stage.

3. Make a List of Properties That Meet Your Criteria

The MLS, probate listings are not. They’re far less detailed than the property listings you’re accustomed to perusing, and may include little more than an address, legal description, and brief summary of improvements.

So you may need to do some research on the spot using Google Maps, local assessors’ and recorders’ records, and consumer databases like Zillow. This assumes you’re early enough that the property isn’t yet listed on the MLS — which is a good thing, because once a property hits the open market, you’re competing with every other buyer out there.

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4. Contact the Executors or Named Heirs

Every estate has an executor, whether court-appointed or specified in the will. It’s the executor’s job to dispose of the estate’s assets, including any real estate.

For each property, reach out to this person and let them know you’re interested in making an offer. Technically, the court is the seller, but the executor is the actual point person.

An estate executor is a fiduciary, which means they must act in their clients’ (the heirs’) best interests. They probably won’t accept the first offer just to be done with it, and in any case they’ll likely need either the heirs’ or court’s consent (or both) to proceed.

That said, if they receive multiple serious offers before the property officially hits the market, they could negotiate directly with the buyers and avoid the trouble of listing on the open market.

Often the executor is an heir named in the will or (if there’s no will) entitled by the law of descent. This can make things less complicated, particularly when the executor is also the sole heir.

5. Check Other Sources

Probate records are your best source of early probate property leads, but they’re not the only option. You can cast a wider net by searching local newspapers and news sites for:

• • Recent obituaries
  • Off-MLS property listings
  • Public auction and estate sale notices, which may include real estate auctions

Recent obituaries offer the earliest exposure, allowing you to reach heirs (using skip tracing tools or other people-finding resources) before the probate case is filed.

If that approach feels too grubby for you, fret not. To avoid the hassle and expense of a traditional agent-led listing process, executors often self-market probate properties in local media or tap professional auctioneers to dispose of them.

How to Buy a Probate Property

Once you find the perfect probate property, the real fun begins.

Exactly what happens next, and in what order, depends on where the property is located and how it’s being sold. The process generally unfolds as follows:

• 1. Inspect the property (if possible). Probate properties generally sell as-is, with only limited seller assurances and no buyer contingencies. So unlike a traditional property purchase, you’ll want to get the property inspected before you make an offer. If that’s possible — if not, do as much due diligence as you can.
  2. Make an offer. Whatever you think is fair, but be realistic. You’ll probably have competition.
  3. Negotiate with the agent or executor. This part of the process should be familiar as well, though it doesn’t happen in all cases. If the executor tapped a licensed agent to market the property, you’ll negotiate through them. Otherwise, you’ll negotiate directly with the estate’s representative.
  4. Wait for court approval. The probate court may need to sign off on your offer before it’s made official.
  5. Put down a 10% deposit. Once the estate representative accepts your offer, you’ll need to deposit 10% of the purchase price. Unlike earnest money, this deposit is usually nonrefundable.
  6. Submit an overbid(s) if necessary. If your offer isn’t accepted outright and there are other interested bidders, the probate court may supervise an overbidding process. Basically, this is a private auction where you duke it out with other potential buyers. May the highest bid win!
  7. Satisfy the court’s due diligence process. Even after all this, a probate judge needs to sign off on the sale. You may be asked to verify funding — cash or financing — as part of the court’s due diligence process.
  8. Finalize the sales contract and be patient. Depending on how complicated the estate is, how quickly the court can move, and how early in the process the property is sold, you could be looking at six more months to close. A year or longer isn’t out of the question. But if you’re truly getting a great deal, it’s worth the wait.

How to Get a Better Deal on a Probate Property

Investors love probate properties because they cost significantly lower than fair market value. And those who really do well in this niche know a few tricks to turn a good deal into a great one.

• • Get to know local probate attorneys. Probate attorneys are invaluable resources for probate real estate investors. Network with them! This is the same principle as networking with real estate agents who specialize in investment property.
  • Make contact early. Reach heirs and executors early, ideally before the probate case hits the docket. Even if you can’t circumvent the probate process, making it clear that you’re a serious investor willing to close the transaction could give you an edge in bidding.
  • Have a game plan. While remaining opportunistic, have a probate property strategy. At the highest level, you should know whether you plan to buy and hold or fix and flip the propert(ies) you buy. High-conviction prospects have an edge during a competitive bidding process, and having a solid plan reduces the risk of delays and overruns once you own the property too.
  • Focus on motivated heirs. The ideal probate seller is a single heir with no emotional attachment to the property and no desire to fix it up or hold onto it once probate closes. They want to offload the property ASAP, and you can help.
  • Give preference to estates with valid wills and few heirs. Be wary of probate complexities. These include intestate estates (meaning the owner died without a will), a large number of heirs, disagreement between heirs, and properties owned by multiple unrelated tenants in common (which brings the other owners into conflict with the heirs). You’ll have an easier time dealing with a small number of heirs who get along well.

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• • Work with a real estate attorney who knows probate. Unless you’re a real estate attorney yourself, retain a qualified lawyer who’s deeply familiar with probate real estate. They’ll help you spot and avoid potential pitfalls and deal-breakers.
  • Be willing to wait. Even under ideal circumstances, probate property sales take longer to settle than traditional sales. Larger estates and those marred by disagreements between heirs (which may lead to litigation) can take longer. Be willing to wait for a truly great deal — or cut bait if not. 
  • Pay for a professional inspection. If you can. You may not be able to get into the property before bids are due, and if that’s the case, make the drive-by as thorough as possible. Remember, this is in all likelihood an as-is transaction, and you’ll probably forfeit your deposit if you back out after the court approves the sale. 
  • Price out repairs and improvements. Some probate properties are move-in ready, if dated. Others need work as fixer-uppers — maybe a lot of it. Working off the results of your inspection (if done) and any other information you can gather, set a rough repair/improvement budget to get a more accurate picture of your all-in costs.
  • Research the local market (thoroughly). Even with a sales price well below market, you need to be confident you can turn a comfortable profit on a flip or rental after accounting for carrying costs and any work that needs to be done. Double down on the market research if you’re buying in another county or state. 
  • Make your first offer count. See above, of course, but know that a serious first offer can often thin the field of would-be competitors. Some probate investors take a “spray and pray” approach, making lots of lowball offers.
  • Get title insurance (even if you’re paying cash). As with foreclosure properties, it’s not uncommon for title issues to pop up after probate sales close. With no seller warranties, those are entirely your responsibility without title insurance.
  • Set your top dollar. Don’t let FOMO drive up your bids. If you’re not the only offer, know exactly how much you’re willing to pay. Walk away once that limit is breached.

Case Study: Sharon Vornholt’s Probate Investing Strategy

No one knows probate real estate investing like Sharon Vornholt. She’s been doing it for over three decades, teaches courses on it, and coaches students through it. 

Our founder Brian Davis interviewed Sharon on her probate property investing strategy, so you can learn from the best:

Risks of Buying Probate Properties

While real estate investing always carries some risk, buying property out of probate has additional pitfalls. 

• Properties are generally sold as-is. Probate properties typically sell as-is, meaning the seller won’t make any requested repairs before close. This is why due diligence, including a professional home inspection if possible, is so important.
• You can lose your deposit if the sale falls through. Most probate transactions require upfront deposits from bidders, usually 10% of the offer price. That’s several times your standard earnest money deposit. If your offer is accepted, this deposit is likely nonrefundable.
• Sales can take many months to close. It can take months, even years, to take possession of a probate property after your offer is accepted. In the meantime, the market can change enough to spoil your investment thesis (or at least erode your expected return). 
• Conventional financing may not be available. Good luck getting a conventional mortgage on a probate property. You’ll likely need to use an creative financing arrangement — perhaps a private loan, a HELOC on a primary or secondary residence, or seller financing. That could mean accepting less leverage in the deal.
• Title issues can crop up after the sale. Probate properties transfer via administrator or executor deeds, which offer fewer protections against liens and counterparty claims than full warranty deeds. Title insurance is critical under these circumstances, and it could cost you more than a typical policy due to the increased risk.
• The competitive bidding process can get out of control. This is doubly true in the event of a live auction, where interested bidders gather in person and egos take hold. Remember to set your top dollar and hold to it.

Final Thoughts

Overall, probate properties aren’t as dicey as foreclosures. They aren’t as likely to have serious title issues, and though they’re generally sold as-is, they’re often in fine shape. 

But they still take time and skill to find, bid on, and close on probate properties. That’s why some investors build up a “probate practice” that focuses heavily on this type of real estate. 

It’s a tempting idea, and not nearly as volatile as a practice focused on foreclosures or short sales. Just be sure you understand this real estate investing niche before getting in too deep.♦

How do you plan to buy investment properties through probate? What questions do you still have about the probate property investing process?

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