Deal Diary Part 1: Finding Deals in Estate Cases

Bison Real, Inc. works with estates that are in active probate. We are a Wisconsin company that researches active probate cases in 30 of the more populated counties in the state. Like many other states, Wisconsin records all court filings, including probate cases, in a "Consolidated Court Automation Program" (also known as "CCAP"). When a new probate case is filed, the CCAP records report the name and address of the person who passed away, the name and address of the person who will administer the estate, and possibly the names and addresses of the estate's heirs. 

The Initial Screening: Separating the Wheat from the Chaff

Many real estate investment educators recommend contacting everyone listed in a CCAP record via snail mail and social media to express an interest in purchasing a house that may be in the estate. We use a more targeted approach.

Information in CCAP records allow us to eliminate roughly two-thirds of all probate cases that are filed around the state. We won't contact the estate if we determine that a living spouse or other heir still resides in the property. We also eliminate estate cases that are filed by banks or lenders, as those cases generally cross over into foreclosures that we do not want to deal with.

Our screening process makes our research more manageable. In Milwaukee County, for example, approximately 200 new probate cases are filed every month. Our screening cuts that number down to 30 to 40 viable leads. Statewide, we find between 150 to 200 good leads in probate cases every month.

Converting the Lead to a Deal

We send our first contact letter to the estate's administrators within 4 to 6 weeks after the estate cases are first opened. At that point in the process, many administrators do not yet have full authority and approval from the probate court to actively manage the estate. Nonetheless, we believe that we gain an advantage when we create an initial contact. We send follow-up letters every 6 to 8 weeks while the estate case remains pending, at which point the administrators will have obtained the required approvals.

When an estate administrator contacts us, we collect information about the house that the estate owns via a simple intake interview. If the house matches the criteria we have established for ourselves, we schedule an appointment to see it.

Debunking a Common Fallacy: Estates Do Not Create Windfalls

Contrary to images created by popular culture, when a person passes away, his or her heirs do not gather for a tearful meeting in a lawyer's office to learn if they have been granted sudden riches. Rather, the designated estate administrator will devote an inordinate amount of time and effort and the estate itself will face some heavy costs before any property is distributed. Many of the administrators that we deal with have remarked that they just want to get the matter closed, and that they are tired of shoveling snow, cutting grass, and clearing out years of accumulated possessions that are often left in a house.

Houses that have been owned by the same person for 40 or more years are typically dated, and frequently require substantial repairs. This is most often the case when the owner has been living on a fixed income and has not had the financial ability to properly maintain the house. 

Those houses are the ideal match for our program. The estates come to understand that  the house will not fetch top dollar, even in a hot market. We offer a fair price along with an explanation of how much money we intend to spend to renovate the house. We are also able to close a purchase for cash within 30 days of execution of the purchase contract, which allows the estate to close and which removes further maintenance burdens from the administrator. 

In Part 2: How We Found and Negotiated Our Most Recent Deal

We currently have a house under contract in southeast Wisconsin. Our initial contact with the administrator came in January, but delays that are common to estate administration precluded us from signing a contract until May. If we did this on a one- or two-off basis, we would spend far more time and effort on any one deal than the deal is actually worth. Doing this as a business, however, creates the real value and justifies the time we spend to get a deal under contract. We will describe the contract negotiations for this deal in our next blog entry.