Why do investors target probate homes?
- Properties in probate are perfect for investors, because they’re possibly in need of serious updates and repairs, and the Personal Representative doesn’t have the time or money to spend making it ready to sell on the retail market, making it lucrative for real estate investors to buy these homes below the market value.
- A Personal Representative cannot sell estate property without either an order permitting the sale or an order determining homestead status of real property.
• Real Estate Investors – probate leads represent the very best residential real estate-related lead source available today. Within 4-6 months of the probate filing, 40% of the properties found will be sold.
- Realtors will find that many of the residential properties in probate will be listed within the first year after the filing.
- Wide Range Of Properties – Commercial, Acreage, Duplexes, Condominiums, Apartment buildings, Strip malls, Office buildings, Ranchland, Farms. These are not rundown foreclosures, bankruptcies, or condemned properties that are complex deals and need costly repairs. These can be beautiful homes with no mortgage or debt attached, making them some of the cleanest and easiest of all real estate to buy low and sell high quickly.
What is probate?
Probate is the legal procedure in which the probate court assumes jurisdiction over the assets of someone who has died. The court supervises the payment of debts, taxes, and probate fees, then supervises the distribution of the remainder to the person(s) named in a will, or to the heirs if there is no will.
Florida probate law varies depending on the type of property. It is important to get guidance from an experienced Florida Real Estate Probate and Homestead Property Attorney.
A Florida probate can include:
- Proving to the Florida probate court that the deceased person’s will is valid.
- Identifying and preparing an inventory of the deceased person’s property.
- Determining the value of the deceased person’s property.
- Paying all debts and any taxes due.
- Distributing the remaining property as the will or the law directs.
- Attorney and court fees which are typically paid from estate assets.
PERSONAL REPRESENTATIVES are under no obligation to use the same law firm that wrote the will. Nearly all probate procedures in Florida involve paperwork drafted and filed by probate lawyers. Unlike some other states, Florida law generally does not allow “do-it-yourself” probate except in some cases involving very small bank accounts, refund checks, or similar assets.
Types of Probate Administration in Florida:
- Formal Probate Administration – The Normal Probate Process
This is Florida’s traditional form of probate administration. It requires APPROXIMATELY 12 months to complete. It is usually used for complicated issues such as challenges to the Will, disputes between beneficiaries or heirs, or supervision of the Personal Representative.
The following is an over-simplified description:
The process starts with a petition for administration and the appointment of one or more personal representatives (executors). After that, a Notice to Creditors is published in a local newspaper, and creditors generally have three months in which to file their claims.
Once the period of time for creditor claims has passed, the personal representative can pay the debts (in a certain order) and distribute the remaining estate. Once all debts are paid and the remainder of the estate has been distributed, a petition for discharge is filed, and the Florida estate is closed upon entry of an order of discharge.
While this may sound simple, probate is a fairly complex system of required and optional tasks by the personal representative, the attorney and sometimes a tax consultant (often a CPA). Of course, the simpler the assets and the deceased’s plan of distribution, the simpler the Florida probate will be.
- Summary Probate Process for Small Estates
The state also provides a “short form” of probate for certain smaller or older estates, which is quicker and cheaper than the “formal administration” used for most Florida probate administrations.
Summary probate administration is available for estates with “non-exempt” property of less than $75,000 and the decedent has no outstanding unpaid debts, or in cases where the decedent passed more than 2 years ago. The value of “homestead” real property is not counted in totaling the value of the estate, nor is any other proposed exempt property. Summary administration can also be used in any size estate if the deceased has been dead FOR more than two years. Summary administration does not work in certain cases, such as those with minor or missing heirs, or where the assets or debts of the deceased are unknown.
FLORIDA HOMESTEAD PROPERTY PROBATE RULES
If the deceased’s real estate is considered their “homestead,” the state of Florida applies certain unique rules to the transfer of the property. The homestead property exemption was created to protect families from being displaced from their home; however, there are many special rules to this probate property law.
Home features that boost the selling price and number of days on the market.
In a study done by Zillow, Home Features that Sell, 4.6 million home sales across the country were analyzed in 2017 and 2018 for sales price and number of days listed on Zillow. The analysis stated that the for-sale listings mentioning certain home features sold for more and were on the market less time than those homes that did not list these certain features.
What are these features you ask? Well having luxurious items such as a steam oven or shower, heated floors, or a wine cellar can boost your home sales price up to 34 percent more. The Director of Economic Research at Zillow, Skylar Olsen, notes that “If you have these features, flaunt them.”
These types of luxurious features that are mentioned in property listings are appealing to first-home buyers and sell for more than expected. This type of trend seems to reflect the type of lifestyle that a millennial homeowner or a young family are trying to live by or achieve, according to Zillow.
Another luxurious home feature that bumped up pricing on a home and was included on the listing was an outdoor kitchen. A home with this feature sold for 24.5 percent more than a listing of a home that did not. Outdoor dining goes well with this feature, a pergola. When mentioned in a listing, the home sold 11 days faster and for 7.2 percent more money. Other items that gave homes a boost in prices and less days on the market are waterfall countertops, open shelving, exposed brick, and subway tile.
Zillow does point out that they are not “saying you should build or add these things to your home just to help it sell. However, listings that mention these features do sell for more—sometimes a lot more.”
At the National Building Museum in Washington, D.C., Fannie Mae exhibited “Making Room: Housing for A Changing America” as it highlighted many of the issues that face today’s shortage of quality affordable housing. In a blog by Maria Evans, VP for Sustainable Communities at Fannie Mae, she notes that “When affordable housing is part of a mixed-income community with good schools, health and wellness opportunities, and good-paying jobs, it is much easier for those communities to address longstanding disparities in educational or health outcomes of low-income residents.”
It was noted at the exhibit that the housing industry has failed to keep up with the ever changing demographics. The demographics show that 11.63 percent of the total housing stock was for single adults who preferred one bedroom homes. Three and four bedroom homes made up 39.82 and 16.66 percent of the housing stock with two bedrooms composing 26.54 percent.
This thought provoking idea is now one of the many projects that Fannie Mae has launched under the Sustainable Communities Innovative Challenge. Under this challenge, Fannie Mae makes a $10 million commitment to generate affordable housing solutions to sustainable communities that provide residents integrated opportunities for employment, health and wellness, and education. Anyone inside or outside the housing industry can submit their ideas and innovations. One example that has come out of this challenge is the West Denver Renaissance Collaborative that came up with the idea of an accessory dwelling unit(ADU) program where a detached residence approximately 450-870 square feet is placed in the backyard of primary homes and can serve as a rental unit, creating a new source of income for the homeowner. This ADU not only raises the property value but also adds to the affordable housing supply that is very much needed.