Re: Estate Sale - Posted by Frank Chin
Posted by Frank Chin on January 27, 2002 at 08:20:16:
Let me first say I’m not an attorney or expert on estate sales. But because my dad was a second generation American, he helped many of our relatives through their mourning period as he spoke the language. This includes dealing with some estate matters, and being the executor in several cases.
First, find out who the executor of the estate is, if there’s a will. If not, there’s an administrator appointed by the probate court.
One thing about estate sales is that the family home is usually free and clear, but illiquid. In many cases, the home constitute the biggest portion of the estate.
Estate sales happen when the heirs have to liquidate to raise cash to pay funeral expenses, and estate taxes in most cases. So the easiest way out is to sell Real Estate cheap, pay the bills, and split the proceeds among the heirs. That’s why some investors check out estate sales to pick something up very cheap, ALL CASH.
The complication comes up when there are several siblings, and others. The dad of one of my tenants passed away several months ago and he was going to move into his dad’s home. As he was one of three siblings, he thought it was a simple matter that his brother and his sister would give him a note.
NO DICE. His siblings want the MONEY NOW. They got bills to pay and things to do, and they’re not going to wait 30 years for the money giving him a note.
After postponing his move for several months, I asked him what the problem was. He had trouble getting a conventional mortgage due to his credit in recent years.
So I explained to him that he can get a “no doc” mortgage based on his one third equity of the house. Based on that, his siblings gave him the go ahead to move into his dad’s house, and he should be closing on the house shortly.
I’m bringing this exmaple up because of the dynamics of dealing with multiple heirs plus the executor. These are usually impatient people who will sell cheap but need the cash now. They won’t do creative financing even with their own brother!!
If you can get it cheap enough, you might be able to get a hard money lender. But getting heir’s to carry a note would be extremely diificult.
Think about it, if they go the creative financing route, they could give you a note, and to avoid all the problems of having one of them dealing with you and split the monthly payment, and do that possibly for years, they’ll probably sell the note at a big discount. If they’re going to do all that, why not sell the place at half price for CASH to begin with.
So I think these are the considerations in estate sales.