Does anybody have experience buying reale estate from heirs?

Question

Hi,

I am new to real estate investing and need some advice.  I have been driving around and taking notes of houses that are vacant/distressed.  One house I found, I looked up the owner information and it was an elderly couple that passed a few years ago (they had taken a reverse mortgage and  the house is starting to go into the foreclosure process)  then after doing lots and lots of research I was able to find one of the children in another state, he had known about the property but doesnt really care about it, said "he is willing to work with me if he will get some money or can sell it to me" then he told me "i have been gettting lots of calls from real estate people, I want you to know I have 2 siblings and I have not spoken to one in 10 years or so, and the other in 4 years, and none of us have any contact information of eachother"

My question is, can I do a deal with just this one hier, or do I need to find all three?   How does this work? Any advice is greatly appreciated, this house needs a lot of work, but this might be my first "real estate deal"

Thank you!

Account Closed · Answer

@Isaac ElThe bad news is that this probably isn't going to be your first deal. This is complicated and is going to take a lot of knowledgeable work. There may be a serious bargain lurking in this. There probably isn't.All three siblings would have an interest in the house if the parents died without a will.

The heir you contacted sounds like a classic opportunistic grifter. Sure, he's willing to profit from the sale of his parent's property but he's not willing to pay the existing liens on it. Wouldn't we all like to be paid for doing nothing but having the right parents?

Here's the basic scenario: you call up the reverse mortgage company and state that you have an interest in the house. Get to the right person to talk to about it. I believe the easiest scenario in something like this is to let the reverse mortgage company take possession of the house at the auction and sell it to you later as a REO with a title insurance policy. That way when one of the other kids pops right up out of the woodwork and demands that the foreclosure sale be set aside, you're not screwed.

But this is a mortgage foreclosure in Queens County, New York. I'd know how to handle this if it were in Allegheny County, Pennsylvania. You need to find someone who knows the laws and court procedures where you are -- that's sometimes an attorney, but more frequently someone who specializes in buying properties like this, a wholesaler who focuses on auction buys. Of course, if you bring this foreclosure to their attention, you're basically alerting your more capable competitors that there's a deal to be had here.

Again, this probably isn't going to be your first deal, and if it is, it won't be a bargain. You're going to need plenty of specialized local knowledge to make this sale happen and not bite you in the butt. But if you treat it as a learning opportunity, there's a chance that you'll learn a lot that can be applied to the next property with a dead owner and grifter kids you'll find.

Lynn McGeein · Answer

Just wanted to add that also it's my understanding that with reverse mortgages, the lender has to follow some specific procedures for sale after notifying heirs and allowing them required time to purchase if desired.  Also, I believe they need to offer it for sale within a certain percentage of appraised value for x amount of time, not just sell it to a lower offer before trying to get best value.  Anything received over the balance of the loan would go to the estate.  So you'd likely be waiting for that process and hoping it didn't sell near appraisal first as well unless the heirs bought out the lender,  which doesn't seem likely in your scenario.

It's easier to purchase from an estate when you are dealing without a reverse mortgage involved and the heirs are in agreement to sell.  Even then, it can be difficult.  Last year, I brought a buyer where the widow (recently married and not willed any portion of family home) almost tanked the sale as she apparently hired an attorney and said she'd contest the sale and the will unless the heirs paid her a portion of the sale, so the kids ultimately agreed to pay her off as they would have lost all the equity in the home if they fought her as it was foreclosing soon as they couldn't afford to make payments.  So even when you think you have all the heirs on board and working with the administrator for the estate, things can pop up.

Jeff Copeland · Answer

Your first question needs to be "Is there any equity in the house?".

How much is owed on the reverse mortgage foreclosure (and any other mortgages/liens), and how much is the house worth as it currently sits? Unless the difference is a big positive number, you could be wasting your time.

You can look up the recorded mortgage(s) in the public records and get a very rough idea of what the balances might be.

Or better yet, get a title company to run a title search & lien search for a small fee (this is probably your best & safest option).

You could also try getting the heir you're in contact with to fill out an authorization form allowing you to talk to the lender (or have them call the lender themselves and ask for a payoff statement). Of course, if they are not on the mortgage, you may not have any luck. But, then again, you might get lucky and get someone at the mortgage company that's actually helpful (a rarity, but not a flat-out impossibility).

Just keep in mind, knowing the primary mortgage balance doesn't tell you anything about additional mortgage/heloc balances, or liens from code enforcement, utilities, etc. (Which is why the title/lien search option is your best bet).

If there's no equity, there's no deal, and you can move on to something more productive.

If there is significant equity, then you can consider employing some of the suggestions from others about tracking down the remaining heirs, working with an attorney, etc.

Abel Curiel · Answer

Hey @Isaac El,

I'm also in Queens and your post really caught my eye. Sounds like a tough deal especially since it seems you'd have to do even MORE investigative work to find pieces to the puzzle. I've dealt with a partition situation with sellers before and its a huge pain.

On another note, if you're actively seeking properties like this and would need some advice moving forward, I'd love to connect you with an excellent attorney my team uses.

Best,

Abel

Joshua Hardy · Answer

@Isaac El if you believe the deal good enough you could use an online service to do a 'skiptrace' which is what private investigators do to find out addresses/phone numbers of people.  I don't know a lot about probate, but it would seem like after the death the property would go through the probate courts (if it was held in their personal names, not in a trust or a corp) and then the heirs would be put on title.  It is my understanding that in order to take Title, you must have everybody who is currently on Title (or their power of attorney's) sign over on the transfer.

Tom Gimer · Answer

If there are truly 3 heirs, doing a deal with 1 of them is pointless unless you want 33% of a house which about to be foreclosed.

Obviously you don't want that. So essentially this sounds like a lot of work and no eventual payoff.

David Huff · Answer

I would advise you not to do the deal with just this one heir...you need to get legal counsel but I am thinking that the other heirs could come back later and object.

Isaac El · Answer

Account Closed  - Hi James, this has been super helpful and informative.  Yes it is very complicated and with the post on here from you and others, it is started to make a little more sense.  So the way I look at it is like this, and I appreciate you pointing me in the right direction.  I am not going to spend all my time on this "deal" like I have the last 2 weeks.  My plan now is I am going to try a little more, mainly to find the other 2 siblings (not spend a ton of time) but find them and see if they are all interested in selling?

I did try to call the reverse mortgage company - but they really wouldn't speak to me, I will try and call again and see if I can get further.  I have been going to foreclosure auctions for a few months now, which has been giving me some knowledge, see what other buyers are paying (which I have noticed at auction, at least here in NY most of the auction prices are pretty high, compared to what investors are paying when they buy a deal directly).  But I am thinking if this goes to auction the upset price will be too high and like you said it will go back to the bank as an REO.  What I have noticed here in NY (and saw some other posts here similar to it) is that once it goes to REO, it goes to agents that already have a relationship with the bank (obviously) but  those guys give the deals to buyers they have been working with.  For example, I see REO listed, call the day its listed, and every single time I get the exact same response "ohh we are already in contract"  So I was hoping to buy this if it was possible before any of that.

The other reason I am very interested in learning more about this is, I have been "driving for dollars" as I read in the Bigger Pockets book and listened to on podcasts, and have been taking note on the distressed/vacant properties, and I have seen already a good number of them have them same situation as I initially mentioned.  So your right, this probably won't be my first deal, but I guess I should still work it a little for the learning experience?

Your right I have been hesitant to bring it to any real estate pro I have been seeing at auction or something, because they probably already have experience and will know exactly how to do this, and it took me some convincing even with this 1 heir that I found to even work with me, he told me "I get calls from real estate agents and brokers all the time" and I told him "look I am not an agent or broker, and I wont waste my time, I'll be upfront and work with you" so he is willing to try it out, but I see what your saying need to get all kids on board.

This might be a super stupid question, if I ran title on the property would it show all the heirs, like he is saying there is 3 siblings total, but what if there is really 4?

Kind of exciting, this is my longest post, appreciate all the advice!

Tom Gimer · Answer

A couple more important issues to resolve:

1. how is property titled? If tenancy by the entireties or joint tenancy, only need to figure out the order of death.  Last to die --> that's the estate that needs to be opened. Heir would open an intestate estate in the county where the property is located.

2. If tenants in common (less likely but possible if two spouses on title divorced), 2 estates would need to be opened.

Once equity position is determined and the deal is "worth it" your boy would likely want to hire a probate attorney to assist with all of this.

Isaac El · Answer

@Tom Gimer ok that gives me a lot more information , so now I am trying to connect all the dots.

These two people passed, they didn't leave a will, and there is a reverse mortgage, the sibling cant get any info he is not on the mortgage, and can not locate other siblings

what is the step to connect him to become the PR?, or how does he prove he is their heir? (he is out of state) and I dont mind doing any leg work to get him whatever paperwork he needs or locate whatever is needed.

Does anybody have experience buying reale estate from heirs?

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