Probate Sales
Although property tax default sales only occur once or twice a year, our search for Probate properties to purchase is yearlong.Los Angeles County Probate Sales are held daily in various courts throughout Los Angeles County.  Typically, real property is sold at probate when a decedent passes away, and the fiduciary either has been directed to do so or the beneficiaries agree to sell in probate.  Probate sales resemble auction sales.  A deposit is made by the successful bidder of 10% of the first minimum overbid, and the remaining balance must be paid in escrow usually within 30-60 days.

The following are reasons why good deals can be found in probate:

1. Caveat Emptor.  Since all sales are “as-is,” there is no guarantee of what you may be purchasing.  What adds to the uncertainty is that due to time constraints, in many cases, it may be difficult to see the interior, investigate permits, etc.   
2. Sales are all cash, no loan contingencies allowed.
3. Probate still remains a mystery to many buyers, and can often be intimidating because the buyer must appear in court to make their overbid. 

Equity/Debt Structure
Unlike tax sales, there is debt carried in Probate transactions, which is usually 90% of the value of the Property.  The equity is represented by the 10% down payment and any capital for improvements and repairs made to the property. 

Investment Goals
Like property tax default sales, our objective for Probate acquisitions is to turn quick, modest returns.  The investment period for Probates is typically less than one year; in fact, in some cases the return is achieved in 6 months.  Despite such a short investment period, investors earn between 130-150% of their original investment, e.g., $50,000 invested should yield a return from $65,000 to $75,000. 

Should resale of the property fail to generate satisfactory profits, the property can be rented to generate income relief.  After debt service, there should be a Project cap rate return between 12-16%.  

Downloads
Probate Equity/Profit Flowchart (PDF)
Results From Prior Probate Acquisition