In this episode of The FortuneBuilders Real Estate Investing Show, host Jeff Rutkowski shares the strategies he uses to find and convert probate leads for real estate deals. Probate leads are those who inherit properties from a relative who has recently passed away.
Oftentimes, these properties can be a burden to the inheritor, creating a need to sell the home quickly and avoid the lingering costs. This presents an opportunity for real estate investors to create a win-win situation with these sellers and acquire the property quickly and at a discount. Jeff explains the probate process and how to find these leads to start working towards your next real estate deal.
Listen to the Podcast here:
How to Find and Convert Probate Leads for Real Estate Deals
Alright, welcome, everyone to this week’s episode of the Fortune Builders real estate investing Show. I’m your host, Jeff Rutkowski. I’m pumped for today’s episode because I’m going to be talking about probably my favorite lead class in terms of finding motivated sellers with distressed properties that we as investors can buy and hold, fix and flip, whatever it is our hearts desire. That is the lead class of probate leads. Definitely a lead class, especially in the first 10 years of my career, that I had a very good amount of success with continually finding deals.
So I want to introduce that to you. I want to talk about why I believe every investor should be going after probate leads in some capacity. I want to talk a little bit also about the seller’s perspective and what they’re going through, so we can more effectively communicate with them as we’re negotiating, and we’re looking to lock up properties. Also, tell you how to find the leads. That’s an important piece. Nothing else matters if we don’t know how to find them.
Word of the Week
But first, let’s get into our Word of the weekend, since we’re going to be talking probates, the word of the week this week is in an estate. And the simple definition of an estate is basically anything and everything a person owns at the time of their passing. So that could include real estate. That could include businesses, jewelry, cars, clothing, everything, and everything that they own at the time of their passing. How you settle a probate case, in terms of going through the court, is basically assigning or selling every part of that estate to somebody else. So that is in an estate. That is really the main crux of probates and that’s what we’re going to get into today. Let’s go.
What Makes Probate Leads Great?
Right now in our country, for every one foreclosure opportunity, there are almost three probate opportunities. Foreclosures are lower now like we said, so maybe that’s not too exciting. But, it gets better. We currently as you’re listening to this podcast have about $4 trillion running through the probate court system. So in total, all of the estates being filed: $4 trillion. Now, 80% of the money filings of that 4 trillion include real estate. Not all of them, but 80% of them include real estate.
So if you’re not excited yet, get excited now, because 60% of the filings that contain real estate, that real estate is owned, free and clear. I mean, I should be getting some oohs and ahhs right now. The reason why that’s so exciting and so appealing to us, as real estate investors, is
“When property is owned free and clear, it opens up a lot of creative financing opportunities for us”
the investor. Maybe subject to (if there’s high equity). If it’s free and clear, owner financing, there’s obviously a lot of things you can do and ways you could structure deals that you couldn’t do if the property was fully encumbered.
So 60% of the probate filings that include real estate, that real estate is free and clear. They’re always going to be around because as I said, people are always passing on, people are always moving on.
I have found in my personal experience that these leads are often the ultimately motivated sellers and unemotional sellers, in some cases. So obviously, there’s emotion, because somebody they love passed away. But in many cases, in my experience, there’s not a personal connection to the property. Maybe a loved one passed away, now there’s this property in West Virginia and they live in California. Now it just becomes a headache. It’s free and clear. It’s dated, it needs to be updated. Maybe it’s sitting there vacant, and it’s now a burden because it’s just going to be costing taxes and insurance for the person inheriting that property or managing the estate.
So I found in many cases, probate leads will discount at a pretty low price just to move the property. Now, when you’re talking about settling an estate, which is the essence of probates, (again, an estate is our Word of the Week) which is everything and anything a person owns at the time of their passing, including real estate.
Many, many times, you know, we see these estate sales as we’re driving around the neighborhood. They’re selling furniture, they’re selling clothes and things like that. You can relatively move fairly quickly. But in most cases, the piece of real estate or pieces of real estate is the last thing to be sold to actually close the estate.
Now, closing the estate, everybody that passes away ultimately is leaving their stuff to somebody else who’s going to inherit that. If they didn’t have a will in place, and they didn’t pick who they want to inherit their estate, the court is going to go through a process to basically determine that. Whoever is inheriting or benefiting from the estate, cannot touch a single penny of it until the total estate is settled. Also, probate attorneys that are required for probate, but mostly used aren’t paid either until the estate is settled.
So a lot of times everything is done, and they just have this piece of real estate that’s holding everything up. They’re just saying “Alright, let’s just discount this thing. Let’s just move it so we can get paid, we could get all of this stuff taken care of”. So I found it to be motivated for that reason.
But let me start by giving you a simple definition of what the probate process is. The probate defined is a legal process of transferring the assets of someone who has passed away to their heirs and loved ones. Why do you think our government in the United States of America has set up this process? If I had a way to interact with you, I know you’d be saying “for taxes, for money”. And you’re absolutely right. The government makes a lot of money. It’s a huge multi-trillion dollar revenue stream for the federal government year over year, over a year. It’s amazing to me how much taxes we pay while we’re breathing but it’s even more amazing how much you could have to pay in taxes when you pass on.
So this is something that’s been in place since the 1800s. It’s not going anywhere, and it’s very costly. I remember when I started studying this about 12 years ago and I read a bunch of books on it. I went to some seminars and things like that. I remember this one book. Everything in the probate process is legal, legal records, everything that we’re going to be getting into today. You go down to town hall, you can pull the leads, you can see the inventory of assets, all of these different things.
This book I was reading had Elvis Presley’s basically probate public probate records. And long story short is when Elvis (don’t quote me on the exact number, I’m in the ballpark though). But when he passed on his estate was valued at somewhere around $13.7 million. After his estate went through the process from start to finish, basically in taxes and legal fees and attorneys, his estate paid out just over $7 million.
So more than 50% of the value of his estate, has gone off the top taxes, legal fees, attorneys, etc. That’s why you and I want to have a living trust. Those of you that are Mastery Students, to get some quick information on how your state or your county operates, (teaching probates is a difficult topic to teach just for the reason that operates slightly different almost in every state. And then in every state, there’s county to county differences).
So for FortuneBuilders students, we created a tool called the state reference guide. You just hop into the mastery site, you go to under tools and resources, you click on the state, the county that you’re in, and it gives you the rundown of exactly how the probate process operates in your area: what the tax ramifications are, what the paperwork process is. This is good information to have as you’re going to be working with sellers that are going to be looking for this information.
When we’re talking about probates, we’re talking about five different parties that we need to understand. We have the person that passed on that left behind an estate. Maybe that person passed away and they left a will. I’ll talk about what needs to happen to basically prove that that will is legitimate. Maybe somebody passed away without leaving a will, then it goes into a court process called intestate where basically the court determines who the beneficiaries of the estate should be. They appoint an executor, things along those lines. We’ll get into that.
So you have the deceased, you have the heirs and the loved ones, those that are going to be benefiting from the estate. And then you have the executor. The executor is kind of the point guard of a basketball team where they’re basically managing everything in the estate. They’re calling the shots in terms of “Sell this, assign that”. They’re working with the probate court, the probate attorney. There are things that do require the probates for approval that they have to go through and things like that.
We have a probate attorney which is not required to settle an estate. Most people do leverage an attorney. It’s easier, and they know what they’re doing. And most Americans do that. And then finally, you have the probate court and the judge. And really the judge’s main role is to honor the wishes of the person that passed away. If they left a will, to basically prove that will and then make sure that everything that the person that passed away, all the things that they wanted to get in certain people’s hands, that it gets into their hands.
From the Seller’s Perspective
So from a seller’s perspective, there are differences in all 50 states, but I’ll give you four steps right now that will be consistent no matter what state you’re operating in, no matter what state you’re doing business in. And these are the steps that a seller would have to go through after somebody they love passed away. And these four steps will be congruent and all 50 states.
Step 1
And step one is called “proving a will and appointing an executor”. So step one, if the person that passed away has a will, there’s a process that the court systems will go through to prove that will. Make a determination that yes, this is in fact, the legitimate will of this person. And we’re going to use this as the blueprint to settle this estate. Also, those people that have left a will normally appoint an executor saying “I want this person to basically manage, you know, settling my estate when I pass away”. And if they did do that, and in that person is in the will they’ll come before the judge, and basically say “Yes, I’m ready, willing, and able to serve in this capacity”.
If they’re not willing to do it, then the court will go through the process of assigning another executor. So that’d be step number one. Also in step number one, the executor will be opening up a bank account on behalf of the estate. And then from that point forward, everything that’s sold or liquidated will all be funneled into that bank account. Any expenses that have to be paid during the duration taxes, insurance, things like that will be paid from this master bank account.
And then once the whole process is complete, the estate has been settled all assets have been assigned to the person that passed away, wanted them to go through or liquidate it then funds will be dispersed from that bank account. So step one: proving the will appoint executor, opening a bank account. Those are the three main action items that are happening during step one.
Step 2
Step two is now you’re going to put together an inventory of the estate’s assets. So this is everything that the person owns, all the real estate, and we’re putting ballpark values on these assets. In some cases, executors will get maybe a broker’s price opinion, a value, may be an appraisal, most likely, probably just an estimate of value. And basically just putting a dollar amount that “okay, ballpark, you know, this is kind of what this stuff is worth”.
And then we’re going to bring that inventory before the judge, say, “Judge, this is all the stuff the person has, at the time of passing, these are the estimated values, we’re going to move forward and sell these items. And these items are going to be passed on to this person”. So that’s step number two: simply taking an inventory of the assets, all assets, including real estate, and then placing estimated values on those items.
Step 3
Step three is now we begin to distribute or liquidate those assets. So if there’s a rental property that was part of the estate, and in the person’s, well, let’s just say it was my will, and I say “I want this property to go to my daughter, Juliana”. Then at this point, that asset will be distributed and transferred to my daughter, Juliana. So that would be an inherited property. She would be (if you pull another list, which is very closely related to a probate list) is an inherited property list.
So Juliana wouldn’t show up as a probate lead. But she would show up as an inherited property lead because she just inherited that property from, in this case, her father’s estate. So one thing (I’m getting a little ahead of myself) is when you’re pulling probate lists, as I’m going to talk about later, pulling inherited property lists is also a very valuable list to do as well. And then if any of the assets are not being distributed to a person, then they’re going to be put up for sale. That’s when these properties will hit the market. Or, if we have a connection with the executor, (which we should prior to that happening) then we should already have an offer in place ready to go. I’ll talk about what happens with that offer.
Step 4
Step number four is settling the estate. So everything in the person’s estate must be either distributed or liquidated. Everything that was liquidated and sold, that all are sitting in a master bank account. Off the top taxes are being paid, attorneys are being paid, legal fees are being paid. Whatever is left is going to the beneficiaries of the estate.
So again, that’s why you and I should have a living will or living trust. So we don’t have to deal with that. In my mind, that’s why we should be going after them. I talked about that. It’s a consistent lead flow, motivated sellers. 80% of the filings include real estate, 60% of them are free and clear. And then we just walk through the four steps that are consistent in all 50 states that the sellers will go through that we can be aware of.
How to Find Probate Leads
So I want to get into how to find the leads. So to find the list you have about four different options here. We can buy the list of course. Realflow is where I get my probate list. There’s also, USProbateLeads.com (a source that I’ve used before) USLeadList.com is also very good, not technically probate leads.
They are inherited property leads, which as I mentioned a moment ago, are very closely related. So, RealFlow includes probate leads and many other types of leads as well. USprobateleads.com, and USLeadList are probably my top three recommendations. You just swipe the credit card, you have the leads, it’s a beautiful thing.
Probate Leads are Public Records
But one thing to know is that probate leads are public records. So when you swipe that credit card, what you’re paying for is the convenience of them being brought to you. And that’s how I like to do it. But when I got started in the business, I didn’t have the ability to just swipe some credit cards and pay for the lead. So I would go down to town hall and I would manually pull the list every Monday. I’ll talk a little bit about how to do this here in a moment.
Another way of finding them is also through print and online newspaper ads. In most states, it’s a requirement that before an estate gets us in a state gets settled, they post an advertisement in a local publication, or an online newsletter that basically says something to the effect, like, “Hey, if anybody feels they have any claims against this estate, you have 60 days or whatever to come forward and speak. Contact this person or contact that attorney”. So that’s a probate lead sitting out there.
So one, we could swipe the credit card and we could purchase them. Two, we can manually pull the list. Three, we could look in online or printed publications. Four we network and we develop relationships with probate attorneys, that we’ll be handling it. You got to remember the four steps that we talked through. Step number one: you’re basically setting up, you’re getting ready to go. Step number two: you’re doing an inventory of assets. It’s not until step number three that the properties get listed for sale.
So really, where we want to come in as investors is in step one and step two, while the property hasn’t hit the market yet. We want to get in front of that seller and get offers in front of them. Even if they can’t sell yet, have that offer ready to go. So when it does get to step number three you bring that offer before the probate court for approval.
And typically, just to give some context, again, this is different in all 50 states, but the average estate in the average probate process takes about nine to 12 months to settle. Nine to 12 months. And typically, from day one to the point where the properties can be put up for sale usually is anywhere between 30 days and 90 days. 30 days and 90 days. So we have the opportunity right on day one, the day that the probate filing is filed, that becomes public record.
So we have at least 30 days to get in front of these leads, build some rapport, build some relationships, get an offer, locked and loaded, ready to go for them. Help them along the way, guide them in the areas that they need help with based on what we’re learning here today. And then be ready to go and perform when they’re ready to sell it. So I’m not going to go through step by step how to go to town hall and pull the leads.
Basically, you’re going to go to your high level, to your county, or your Town Hall. Typically there’ll be a probate office if it’s a big town. If there’s not a probate office you go to the clerk’s office and just ask who handles the probate filings. And then they will guide you to where they are and how to find them. Sometimes you just download them right from a computer. Sometimes you download some information out of a computer out of what they call a daybook. And then you go into the vault and you pull the records and you pull the leads manually one by one. The bottom line is you can do this yourself.
There’s no reason not to do it. And this always reminds me of Mr. Thomas Edison. I wrote this quote down here, it says that
“Opportunity is missed by most people because it’s dressed in overalls and it looks like work”
Is it time-consuming to go down to town hall and to pull these leads on a weekly basis? Yes, that’s why I strongly recommend investing. Invest in your business, invest in your marketing, buy the leads.
But when I did this in the beginning, I didn’t have the ability. So I would go down there every Monday I would pull whatever leads and by the way that if you’re doing this manually the first time you pull the leads, go back six months, pull back everything that’s in there six months, and then filter down by what cases still remain open and then filter down by what cases include real estate.
From there, you set up a rhythm. Maybe it’s once a week, once a month you’re going in. Then you’re just looking back the previous week, looking back the previous month, and you’re downloading all of the new leads that are open and contain real estate in there. So that’s the process, just get down to your town hall, they’ll walk you through it.
It’s funny too, every time I talk about this, it makes me think just about my personal experience. And I remember I always go down. People that work in town hall are supposed to be public servants. They’re supposed to be, sometimes that’s the case, sometimes it isn’t. I always remember I would go in and I would just not make eye contact with anybody, I go to the computer, I download the leads, I put it in an Excel doc, and then I go into the vault, and I would get out of there, and I’d be quiet. And I wouldn’t really engage with anybody.
One day I’m walking in and there is the sweet lady behind the counter. She says, “Excuse me”, I’m like, “Yeah”. She’s like, “I see you come in here every Monday, are you an appraiser? What are you doing?” I just shared with her my business, “I’m a residential real estate developer looking to buy and sell properties here locally and I just really discovered a niche I like of helping people in the probate situation get out of that”.
I remember her name was Anna. So she’s just like, “Oh, a lot of times we don’t have a whole lot to do here on Mondays. If you tell me what areas you’re looking at, I can have the list ready for you”. And I was like, “Oh my god, this is amazing”. So I chatted it up with her, and then I realized that I would always come in with a Dunkin Donuts coffee, one sugar, one cream. She loved that as well.
So every Monday I just roll in there with two small Dunkin donut coffees, one sugar, one cream, give one to Anna, chatted it up with her a little bit, get the leads and move on. So always remember, interact, you know, we should always be talking about our business always be, you know, connecting with people, and seeing how, you know, we can help them out, or they can help us out.
With that being said, just to kind of recap that is: you go pull the lead yourself, or you locate the publications. Typically in every town or county, there’s like one or two publications, where they place the ads in. The easiest way to discover it is just to call a probate attorney and ask them. Ask them what the process is, ask them to give you a little insight, and where they’re posting the notice is number two. And then number three is we purchase the leads.
And number four is you network with those probate attorneys. I remember sending letters to probate attorneys, month after month after month, not getting any responses, and leaving messages. Then finally getting a call one day where they’re like, “Hey, I’ve been getting your letters for a while, you know, we have this, this estate, it was just ready to close, but the property fell out of escrow, can you get us a quick offer?” And remember, attorneys typically aren’t getting paid until the estate closes. So they want that thing closed.
And once you get in with them once and you actually close and you perform, then they’re going to start feeding you deals. Even sometimes almost like pocket off-market listings. Not listings, but you understand what I’m saying. The big picture is, up until this point we went through why I think they’re a very attractive lead cross, what is high level? What are the four steps, what is the process the sellers are going to go through, and then how to find the leads?
Summary
That is probate leads. I appreciate your feedback. We’re definitely going to be getting into next week with JD. We’re going to be talking specifically about how CT Homes are handling their supply chain issues, how they’re getting ahead of that, and how they’re making sure that they have materials when they need them at their jobs. That’s a big request that you guys have wanted to hear about. So we will definitely bring that to you next week or the week after. It will be one of the next two episodes for sure. But I appreciate you guys, I appreciate you listening. Continue to share this podcast with as many people as possible. We’re still very new, like 26, 27 episodes, something like that.
Our mission is to empower your purpose through financial education. Share this with your friends, and continue to interact with us and myself on Facebook and YouTube, and let us know your questions and things that you’d like to see more of. One thing that will be getting into here in the next couple of weeks is how to buy your first rental property. That’s something I’ve got a lot of questions about and I’ve been working on a way to kind of teach and train on it via podcasts that could apply to everybody listening. So I’m excited about that. Excited for you. Have a great week and we’ll see you next week on the Fortune Builders real estate investing show. Talk to you soon.
