As you start your search for the perfect new home, you may have heard about an unfamiliar term: probate property. Whether you are a professional house flipper, real estate investor, or in search of a great deal for your own personal home, these properties can be an appealing choice. With significantly lower prices than comparable homes, you may be wondering if this is the right decision.
To help you answer this question, the experts with Temple View real estate investing share the pros and cons of buying a probate property.
What is probate property?
Simply put, probate properties are homes that were owned by someone who is now deceased. At the time of death, the home either went to a designated family member or heir listed in a will, or to the state (if no heir was listed). As Nolo explains, if owned by the state or by a family member who does not want the house, it will be sold as a probate property.
What are the benefits of buying a home in probate?
The first — and most attractive — benefit of buying a probate property is price. Whether being sold by the state or a relative, both parties will want to move the process along as quickly as possible. In the case of an individual, this is to avoid paying hefty taxes and other related expenses. To facilitate a fast sale, the home will often be listed under its value. Homebuyers looking to purchase a probate property can land far under budget because of this.
Another price-related benefit is the potential ROI. Those who are looking to purchase the house to use as a rental, or to flip, can end up getting a much better than average deal. If the property ends up being in good condition, the home can be sold (or rented out) for a much higher cost than what was paid.
What are the downsides?
Before you run out and try to purchase a home in probate, Tavss Fletcher points out a few important things to consider, along with the compelling pros are a few significant cons.
One of the more noteworthy downsides to buying probate is the possible condition and location of the property. When searching for homes in probate, you will have to be ok with living in the area that these select homes are located. Although this isn’t a problem for the most flexible of home buyers, it can be incredibly challenging to find something in your desired neighborhood (because these properties are relatively rare to find).
Also, the condition of these homes can be less-than-desirable. If the property wasn’t cared for routinely, you may be looking at expensive updates and repairs that can bust your budget. If you area real estate investor, this can cause you to lose money. You can avoid problems like this by having a thorough inspection before putting in an offer.
Additionally, because the property is being sold either by the state or by a relative of the deceased, there can be substantial legal fees and proceedings involved. This can add to your move-in timeline and to what you ultimately pay for the property.
Where should I start if I want to buy a probate property?
Individuals who have their hearts set on finding a great deal on a probate property shouldn’t get discouraged by the downsides of this type of purchase. The items listed above are simply things you should be aware of to avoid a costly situation.
While browsing probate homes in and around Northern Virginia, make sure that you know approximately what homes are going for in the local area. This can help you assess what deals are truly good, and which you can pass on.
Next, you’ll want to connect with a lender that understands your situation. If you’re buying investment property, Temple View can point you toward the ideal loan. This could be a loan for a dedicated rental, or a rehab loan that provides enough funds to help you update the property.
What should I do after I finalize my purchase?
The options here are myriad, but all depend on your intentions. If you plan to rent out this home, you’ll want to meet with contractors to start formulating a plan for making renovations and updates. Ideally, look for a reputable and trustworthy general contractor who can provide the necessary subcontractors so you’re not wasting time chasing down different experts.
If you intend to live in the home and it needs significant work, you want a timeline and a lifestyle plan. Again, you’ll want to connect with a reputable contractor, but you’ll also need to determine if you will live in the property during renovations. This can be tough if you have a growing family. A great alternative is to find a rental property with lease options that match your timeline. Currently, there are more than 500 available properties in the Alexandria area, which illustrates how easy it can be to find a temporary place to live until your new place is ready to go.
Buying a probate property can help you truly maximize your purchasing power. However, it’s always best to have a clear idea of what it takes to buy a probate property. With these tips to help, you should have no trouble making the right choice.