Hi BiggerPockets community! I am in the middle of a deal and wanted to ask you guys if everything is kosher in this particular transaction before proceeding.
My partner and I got our first wholesale lead by doing direct mail to open probate cases (we are in eastern PA outside of Philadelphia). We got a call from the PR on the estate who said he needs to sell the house since his late sister (the decedent) got into a "financial mess in the end". I ask if anything is owed on the property and he said yes, two mortgages. One for $130K, and another for $80K. Later that night, we also had found an IRS tax lien that when I asked the seller about he confirmed was about $50K in IRS tax liens.
The comps for this property show that it could be $310K - $326K if fixed up by a flipper. This number was from an experienced flipper himself. When he walked through the house, he estimated $50K in repairs. So with the current numbers if we say ARV of $310 and repairs cost of $50K, the formula of 70% ARV minus repair costs would equal $167K which is nothing near the liens on the house ($260K total from the $130 first mortgage, $80 second mortgage, and $50K IRS tax lien) which of course doesn't even include an assignment fee. The flipper is willing to work with the PR to help reduced the mortgages which he said would take months and to have the property go through probate. This is one potential avenue for the seller.
Another potential opportunity also came up. Someone at a small law firm that specializes in real estate said that they would take the house on a quit claim deed. They will pay $4K to the seller or $1K deposit plus $200/month for the next 30 months ($7K total if the seller takes the terms offer) if the seller basically just transfers the title to the law firm. (We would get $2K assignment fee from them). Essentially all the liens on the property would also be taken as well is what the law firm said.
Has anyone done a quit claim deed in a probate case before? I am wondering what is there to look out for. I have not done a prelimary title search on the property and the guy at the law firm doesn't plan to either. Because we don't have the prelimary title search, I don't want to make promises to the PR about what debts will be taken away from the estate by transferring away the title of the property. I don't want him to give away the title to property then find that the IRS tax lien still stayed in the estate. Is there a way to confirm what liens are on the property? Is a prelimary title search the only way? And an IRS tax lien is definitely filed against the property right? and if the title of the property changed hands, it goes with the property or does it try to find a way back to the person that it was for? I don't understand the full details of this transaction and just want to make sure I'm not promising anything to the PR that would be false. Is there anything else to look out for if going this route? Can the PR be sued for not paying off debts in the correct legal order? In the estate is a retirement account, checking account, medical bills, and property taxes.
