Truth About Probate Deposits
One of the questions which comes up often from my probate clients, potential probate agents, and investors to be is the Probate Deposit. For the most part, the 10% deposit rule is only for the probate sales which are going through the court confirmation process. If you have been reading my blogs you should know by now that this is the last place we look for investment probate deals as we use the newer probate law which allows us to place any amount of deposit we want. Sounds better huh?
As a Probate Agent if you are dealing with end users (buyers who are looking to move in) and you go through the old probate court confirmation process than the buyer will need to place a 10% deposit in escrow with their offer. So let’s break this down. You have a FHA buyer, pre-approved, gold plated who has their 3.5% down but needs some closing help which is typical in today’s market. If we are buying a home at $300K their down is approx. $10K plus closing of around $14K for total needed of approx $24K. Most buyers have the down but not the closing so you could be dealing with a buyer who only has $10K and must have the seller closing cost credit.
If we have to place a 10% deposit up with their offer of $300K they will need $30K. So do you think this could be a problem? You bet it is so what happens, this typical buyer doesn’t look at a probate listing or yours or to make an offer through you as they just don’t have the money. So what has just happened is about 80% of the FHA buyers out there who would have to go through the court confirmation process to buy a probate home has just been wiped out and a smaller buyers pie is left to purchase your probate listing or you as a Probate Agent making a sale just can’t make it work.
For those agents who understand the probate law we use (this is what I teach) than for these FHA buyers with only the 3.5% down, we would still make the offer to this same house but add language to the offer which would pull the probate home out of the court confirmed sale process and into a typical sale process with minimum requirements. This also means a deposit which makes sense. I use 1% to 3% of the offer price so even a buyer with only 3.5% (FHA) down can do this. Probate Real Estate equates to more sales if you know what you are doing.
So when you understand the process and that you can take a court confirmation home out of that process, streamline it, do you think you will have more opportunities to place low down buyers into probate homes other agents don’t have a clue how to do. Also, many times we are just matching the buyer and the estate together representing both sides so we don’t even have the competition you see today on your local MLS. Almost everything in my market sells the first week with multiple offers so you who have been working with FHA buyers with limited cash (need closing help) I bet have been making many offers without and luck.
For investors this is not as big a deal with the 10% deposit because mine place 25% to 50% down and some deals (many more these days) are paying all cash to add to their bottom line. As a Probate Agent it’s your job to understand all these rules and short cuts and how they can enhance your clients offer or bring more net dollars to the estate. Probate Real Estate is a goldmine for those who understand how to make this niche work for them.
It may sound like too much information to understand and many of you will just carry on with your normal business as usual and not check out this niche but you are making a costly mistake. If your RE business isn’t paying you Six Figures right now you might want to check my system out. If you are making six figures then you should still check it out and double your yearly production and income, then use this money to set your retirement up.
Investors who have been chasing TS sales and REO’s should really look into Probate Investing as it is the sleeper of this industry and very few really understand the profits which are there