NUTS & BOLTS
PROBATE LAW
CASE STUDY IN COMPLICATIONS: A REAL-LIFE PROBATE PROPERTY H ere is an example of a complicated but ultimately profitable inherited-property deal that I encountered in my practice: A real estate investor was buying a property from the grandson of the original owner. This grandson was disabled and needed the funds from the sale of the house to pay for his care. His step-grandfather had died and left the property to him in his will, which had been probated. It was after probate the challenges began. Because the step grandfather and grandmother owned the property together and she had died 25 years earlier with- out a will, her interest in the property had to be dealt with, which meant the Texas Intes- tate Succession laws had to be followed. When she died, her husband and her only son were alive and thus were her heirs. Because she had no will, an affida- vit of heirship for her was required. Unfortunately, her only son died with- out a will after she died, so an affidavit of heirship for her son was also required. This son had 5 children. Three of the five children signed a deed to the disabled brother so It was the responsibility of his only heir to act in his place to deed the property to his uncle, the disabled man who was trying to sell it. This heir was a 16-year-old boy who could not legally sign the deed, so the court was in- volved for the mother to get permission to sign the deed. In the end, the investor was able to purchase the prop- erty and the owner obtained the funds needed for his care. The investor sold the property a couple of months later for a good profit, even after paying the fees for all of the legal work done by our firm. he could sell the property, but the fourth of five had died without a will a month before the closing. Thus, an affidavit of heirship was required for him, the 3rd in this single real estate transaction.
3 Offer assistance with resolution of legal issues that are involved with property transfer.
STEP #3 WORK YOUR WAY THROUGH THE PURCHASE PROCESS
Every state has slightly different probate laws, so make sure that you work with a lawyer familiar with your state’s legisla- tion and able to work in that state. Since my practice is located in Texas, I will use Texas as an example, but you should work with a local real estate attorney for your specific deals. In Texas, the Texas Estates Code (Effective January 1, 2014) governs all things regarding the transfer of deceased individuals’ properties, whether through validation of a will by the court or through intestacy, which means that the person who died did not issue binding legal direction regarding the property, usually because they did not leave a will or left an incomplete one. If there is a will, then once it is submitted to the Probate Court, a hearing date will be set, usually 30 days out. Following the hearing, the Probate Court Judge will have its clerk issue Letters Testamentary to the Executor. This authorizes the Executor to Act under the will, including the power to sell the property. The most common situation arises, however, when there is no will. In the investor niche ($50,000-$150,000 home values), a very small percentage of owners have a will. If there is no will in Texas, the Texas Estates Code specifically sets out who the heirs of the deceased individual are based upon the family situation of the deceased and the nature of the property (separate property or community property). When there is no will, generally title companies require that an Affidavit of Heirship be signed by the family member selling the property in Texas. This Affidavit sets forth the details of the deceased owner’s life and fam- ily situation, i.e., birth, marriage, children and death. This Affidavit must be corroborated by two disinterested persons who knew the deceased for at least 10 years. Probate deals, like many other non-traditional real estate trans- actions, have their challenges. They are often time consuming. The buyer, you, will often deal with multiple sellers, usually the family members. It is also quite common to encounter title issues which must be resolved, and that can be a bit complicated as well although most investors rely on their attorneys to help them navigate that issue. If your goal is to make a lot of money on single real estate transactions, probate properties may be a great market for you. It’s a way for you to make a lucrative profit on inherited properties! •
3 Steps to Making Money on Inherited Properties WORKING PROFITABLY WITH BUYERS WHO ALMOST ALWAYS WANT TO SELL.
by Gaylene Rogers Lonergan
E
ver wonder why the term “probate properties” pops up so often in real estate investing circles? It’s because even if an investor finds probate properties too intimidating to deal with, they know that there is serious profit potential in the inherit- ed-property sector. Here are a few key facts: • 80 percent of all properties left to the family after a death get sold within one year. • People who inherit property almost always want to sell. • Generally, heirs do not want to invest money to make these properties attractive to retail buyers and therefore are often more willing to sell at wholesale. Probate is the legal process of administering the estate of a deceased person, resolving all claims against the estate, and distributing the deceased persons property. It is one of the most lucrative niches in real estate investing. However, it can also be complicated, which is why many investors decide without even fully understanding the process to focus their efforts elsewhere. This is a mistake, because even after hiring
legal aid and dealing with the complications, you can still often walk away with a hefty paycheck that makes your efforts completely worthwhile.
3 SIMPLE STEPS (BUT LOTS OF FINE PRINT)
STEP #1 FIND THE DEALS You may want to use these resources to begin the process. 1 Real Estate/Title Attorneys 2 Accountants and other professional executors
3 Wills and Estates Attorneys 4 Commercially produced lists 5 Obituaries
1 Promote benefits used to marketing other wholesale properties, including a quick close, the buyer paying all fees, and cash transaction. 2 Remember this can be an emotional transaction for the heirs, so be sensitive to their needs.
This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. The Lonergan Law Firm, PLLC, will represent you only af- ter being retained and that agreement is made inwriting. Gaylene Rogers Lonergan may be reached at Escrow2@gmail.com.
STEP #2 MARKET TO THE ESTATE This means reach out to heirs, also known as the estate, about selling you their inherited property.
96 | think realty magazine :: january 2018
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