Profits In Probate Real Estate - Part 4 20.
You should include a business card (perhaps one with magnetic
backing) and a selection of testimonials from other administrators with
whom you’ve done business (when you’ve acquired them).
Your subsequent letters should repeat the theme that you are ready
to provide your service when he or she needs it. The administrator faces
deadlines and as they get closer your offer will begin to look very inviting.
LET’S MAKE A DEAL
If you will stick to collecting probate addresses and mailing letters on
a regular schedule…you WILL find estates willing to sell at bargain prices.
The real secret is you must keep at it. There seems to be a lag time
between when you start mailing and when the positive responses begin.
If you are determined and keep mailing you will be handsomely
rewarded.
You can make the same kinds of deals with the executor of an estate
as you can with an ordinary property seller. Remember you never want to
pay more than 50% or 70% of the property’s value. You may pay slightly
more if the family will give you very good terms
Determine the value of the home by checking the asking price of
similar properties you see for sale in the neighborhood. With your
computer do a Google.com Internet search for “Home Values”. You will
find a number of Web sites that offer comparable real estate values. Many
are free.
Another way is to stop into a real estate office in the area and ask
what they feel the value may be. Or… for a reasonable fee a real estate
appraiser will drive by the home and give you a verbal “opinion of value”.
Once you have settled on what you feel the market value of the home
is you must calculate the cost of any fix-up that will have to be done.
Subtract those costs from the home’s market value and use the result to
determine your offer.
Example: The value of the home is $95,000, but will need $3,000 of fix-up
costs. That reduces the value of the house to $92,000. Financing and
closing cost amount to $2,000.
21.
That brings the home's value down to $90,000. In this case your goal
might be to pay 70% of a property’s value, so your offer would be $63,000.
As always the offer that will be the most successful is all cash right
now. This can be a powerful offer under any circumstances and certainly in
most estates where a number of heirs are anxious to get their hands on the
money.
If you don’t have that kind of ready cash you may be able to find an
investor who is interested in a high return on his money. You find the
properties and he puts up the cash – you split the profits.
In this case you would sell the property shortly after taking title. After
a few deals with an investor you will have the funds to start doing deals of
your own as well as with the investor.
Once you begin getting some response to your mailings run some
classified ads seeking money or investors:
Partner needed for probate
real estate deals. If you have
the cash I can deliver PROFITS!
Another idea is to talk to a few mortgage brokers. Explain what you
are doing and ask if they can help you connect with “hard money lenders”.
Hard money lenders are expensive, but their criteria for making a loan are
based entirely on the property and not on you or your financial situation. Of
course, it helps if you have a good credit score, but it is not critical.
Use a hard money loan for properties that you can buy and then
quickly resell. These loans are expensive and of short duration. Build the
cost into your purchase price. The high cost of the loan is irrelevant when
compared to the speed with which the money can be available and your
profit opportunities in probate properties.
Find a hard moneylender and make arrangements for loans before
you need them. You don’t want a lucrative deal to fall through, because
you can’t close in time to satisfy the needs of the estate.
22.
Some estates may carry financing for you. Most often you will need a
cash down payment of some sort to expedite the deal. An estate that has
other assets that will quickly be turned into cash to pay taxes, expenses
and fees can accept this kind of offer. Perhaps the heir would rather have
monthly income rather than all the money at once.
For property that you plan to hold for rental income you could get an
“investor’s” real estate loan. Talk to a mortgage broker about terms and if
you can qualify. You’ll find that generally an investor’s loan carries an
interest rate about one to two percentage points higher than an owner-
occupied home borrower would pay. There will also be up front loan fees.
This is OK if you can get enough rent to cover your mortgage payment and
a little positive cash flow. You should be able to raise the rent a little every
year.
During negotiation your first offer should be based on some kind of
down payment with the heirs carrying back the balance. You are basing
your offer on a price at least 30% below market value The PR may be
satisfied with some cash now and payments for the remainder. If payments
are to go to more than one heir you might create a note to each of them, all
secured by just one mortgage/trust deed. That way they all would have
equal protection with the parallel notes.
Anytime heirs will carry back a note and mortgage be sure to make
the financing assumable. This will help you make a quick sale without your
buyer having to qualify for a new loan.
To flip the property even faster you could take just enough cash from
your new buyer to cover your cash investment and take your profit in a note
and mortgage. You could keep the note and collect the monthly payments
or sell it to a note broker at a discount for a quick profit.
You may find situations where the executor does not believe other
heirs should be trusted with their money in a lump sum and prefers an offer
that includes payments over a period of years. Here is where you create a
note for each heir. After you have title you have a wonderful opportunity to
get in touch with these heirs and offer to pay them off right now at a
discount. This makes them happy and increases your profit.
23.
The lesson here is to be alert to the needs of the people with whom
you are dealing. The better your understanding of the many ways to
structure a transaction the more opportunities you will find to profit. Keep
seeking knowledge through seminars and books. The cost will be returned
many times over. CFI's material on dealing in mortgage notes will be
helpful.
Relationships within families can be varied and unusual. Be careful
not to take sides. Your role should be that of the “good guy” who is there to
help and be a friend to all. You stand ready to make a quick deal for the
property and allow the estate to close as soon as possible.
You are providing a service, because you have been smart enough to
search out this opportunity and satisfy their needs. In most cases you will
be dealing only with the PR and attorney, so contact with other family
members will not be necessary and should be avoided if possible.
The System At A Glance
1. Find “Notice of Death” in the legal section of newspaper.
2. Check names of deceased against property owner records at
Assessor’s Office.
3. For the deceased that own property - mail letters to the PR.
4. When PR responds determine value of property, fix-up costs and how
much you will offer. Call PA and set up appointment to discuss your offer.
5. Follow up in any way appropriate.
Yes, there are attorneys involved in probate and sometimes they will
make your life difficult. Some will recognize that you are offering to buy
property at a figure well below full value and will advise against the sale.
Don’t fight it. Be gentle and business like in all situations.
In your conversations with the PR you made it clear that this is your
business and the offers you make include your profit. You are entitled to
make a profit for the service you provide…. a fast sale and/or fast cash!
24.
Many of these PRs just want to fulfill their responsibilities as quickly
as possible and get on with their lives. They will appreciate that you are
there to help them get things wrapped up as quickly as possible. Even
those who think they will try and sell things themselves may soon realize
that it is time consuming and inconvenient. That’s when they will
reestablish contact with you.
If you choose to offer to buy anything or everything in the estate
including furniture, collectables, cars etc., you must have a plan for
converting the personal property into cash.
The administrator was required to prepare an inventory of everything
in the estate. You may discuss that list and explain you are prepared to
make offers on anything or everything on the list. Administrators may
accept this offer with thanks, especially those who live out of the area.
Basically you will be buying property from the estate at wholesale
prices, then arranging for others to sell it and pay you a percentage of the
profits.
You can forge an agreement with a company that does estate sales.
They actually advertise that an estate sale will be held on a certain date at
a certain address and sell the contents of a home from the home. Many of
these companies are well established and have a nice list of buyers that
they will notify. They have a set percentage of the proceeds that they will
pay to you. Check the Yellow Pages.
Another alternative is to work with an auction house. They are eager
to find a supply of furniture and related items. If you are a regular supplier
many will even send a truck and crew to transfer the goods from the home
to the auction house. They take a percentage of the sale proceeds. Check
the Yellow Pages.
In many areas there are some good quality consignment furniture
stores where you can place furniture. It will take longer to sell the items,
but you can often get the highest price selling in these stores.
There are price guides for cars and boats. They are easy to sell if
you buy low so that you can resell a little below book value.
25.
You should use a bill of sale when you buy and sell cars. State specific
forms are available from:
http://www.findlegalforms.com/xcart/customer/home.php?cat=259
You will find the forms for boats at:
http://www.findlegalforms.com/xcart/customer/home.php?cat=464
It takes a little time to become comfortable buying personal property,
but many administrators will be grateful if you will just come in and buy
everything, so they can get back to their normal lives. Often they live out of
state and will be very happy with your offer.
Get a automobile price guide at one of the major books stores and
that makes pricing cars easy.
Attend some of the weekly sales at local auction houses and get a
feel for what house furniture and good are selling for.
Start watching newspaper classified ads for estate sales. They are
usually held on weekends. Get up early a few weekend mornings and
learn how things are priced. The professional buyers get there early and
you must be there early to see the kind of item that is sold first and has
special value.
If an estate is going to be tied up for an extended period of time
suggest that the PR contact: http://www.heiradvance.com
Heir Advance Company will give heirs cash now for any inheritance
they will legally be entitled to when the probate closes. The company will
pay you a commission for referring the heirs. You’ll find detail at their Web
site.
Yes, you number one goal is to buy real estate. You’ll find plenty of
that. The personal property opportunities will just be dropped into your lap.
Why pass them up?
26.
You will have the opportunity to buy:
• Homes
• Vacation homes
• Lots & acreage
• Cars
• Boats
• RVs
• Time shares
• Notes & cash flows
• Furniture
• Appliances
• Clothes & personal belongings
• Collectables
• Etc.
There can be profit in every category. In most cases, after you’ve made
a few contacts, you earn your profit with just a few phone calls.
Wrap Up
Understand that not every estate you contact will be prepared to sell
property at a deep discount – but some will! People pass away every
day. You have a never-ending supply of prospects. If you will learn the
basics of probate law in your state and establish a good direct mail
marketing system you will find yourself in a field of opportunity where there
are few competitors.
Some situations can become very complex. That’s when it pays to
buy an hour of time for advice from an attorney who specializes in probate
work. You pay once and use that information over and over.
You don’t have to know everything! If the PR wants to get it done he
will talk to his probate attorney and learn how to do it.
Be persistent. It takes fifty no’s before you get to a yes.
This system is like a machine. You keep cranking and cranking and
soon money starts coming out the other end. This document and accompanying materials are designed to provide authoritative information in regard to the subject matter covered in it. It is for illustration purposes only and presented with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. |
