When You Can’t Find Real Estate Leads, Look to Probate!
By Leon McKenzie
The real estate industry is changing. With more and more competition in the marketplace, challenges in getting a loan and cautious homeowners staying put, it can be nearly impossible to find property that you might be interested in purchasing for your real estate portfolio. Is there a solution? Is there a way to combat the real estate lead shortage that has permeated virtually the entire industry and has stalled your efforts at investing?
What new and experienced real estate investors are seeing in the market is a fundamental change that may last for the foreseeable future. Overall, the nation is experiencing a shortage in the amount of properties that are being put on the market, leading to a lack of leads. This is creating increased pricing on homes that are for sale and issues in trying to build and acquire a real estate portfolio.
Why a Shortage in Real Estate?
The shortage in real estate leads that is occurring in most areas of the United States is due to issues in the lending industry that started several years ago and that continue today. With it becoming more and more difficult to qualify for a mortgage, homeowners are holding onto their homes instead of buying and moving because they have no other option. Homeowners that want to expand their homes are simply adding on or remodeling to avoid the issues with lenders and the hassles in moving. This is leading to a painful shortage in the real estate market. The Philadelphia Inquirer agrees, “. . . Some observers believe they are seeing the emerging signs of a housing shortage. . . Predicting how much housing is needed involves a complex calculus that weighs hard statistics (new-home starts, sales of previously owned homes) against a certain amount of demographic tea-leaf reading (household-formation forecasts). Thus, there isn’t complete consensus on what will be enough.”[1]
As mentioned, while the overall interest rate is the lowest it has been in years, there are few people with good enough credit to purchase a home. When someone does decide to sell their home it is usually because they have to move for a job relocation or for another pressing matter, such as medical treatment or because they need to downsize – or they are in the enviable position of having good enough credit that they were able to secure a preapproval on a new loan to purchase a bigger home.
How does this create a shortage? Since lending is tight, fewer people can afford to put their homes on the market. That means that the availability of homes has decreased. To add to the shortfall, the slow economy has led to a construction slowdown, which means that fewer homes are being built to accommodate new communities and homes that are being torn down. Overall, this has led to a painful real estate shortage for much of the nation. The Sacramento Business Journal reported that, “One analysis of the region’s housing market thinks there’s just not enough for sale. Again. A shortage of inventory is driving everything in the residential market from pricing to rental affordability, according to Zillow. One reason for that is a lingering hangover for the building industry from the housing bust of the last decade, said Svenja Gudell, senior director of research with Zillow. Though the economy began to recover three years ago, housing construction is still lagging, she said. In 2012 and 2013, only 159 new home permits were issued for every 1,000 new residents, according to Zillow.”[2]
The overall lack of new homes available and the persistent challenge in getting a loan is creating issues for investors as they try to navigate few options and high prices.
Housing Shortage Equals Inflated Prices
Most economists will tell you that the biggest drivers in the market are supply and demand. As you can imagine, decreased supply in the housing market means that pricing has skyrocketed, something that real estate investors simply cannot afford when they are looking for business opportunities. The Sacramento Business Journal reported that, “For both renters and homeowners, Sacramento is now defined by Zillow as one of the 10 least affordable metro areas in the country. Mortgage payments here take up 26 percent of income, compared to 15.3 percent nationally. Though the percentage is lower than Sacramento’s historic mortgage payment percentage of 29.5 percent, Zillow noted buyers at the moment also tend to have lower median incomes.”[3]
These historically high prices mean that people who are making less money have to spend more of the income that they do have on a home. Realtor Magazine reported on the decreased inventory across the country and the increased prices, saying, “The inventory of existing homes is at its lowest level in seven years, while newly constructed home inventory has hit a 50-year low mark. Falling inventory is causing home prices to shoot up higher and faster than most analysts anticipated. The national median price of transacted homes was up 9.5 percent in August. Other price measures, like Case-Shiller and the Federal Housing Finance Agency price index, which look at price changes in sales of the same properties over time, have been rising as well, at double-digit annualized rates in recent months. Of course, not all markets are this robust. Phoenix is looking to notch a 25 percent gain for the year, while Chicago is just emerging from negative territory.”[4]
Surviving the Shortage as a Real Estate Investor through Probates
If you are interested in continuing to work in real estate, then you know something has to change. Real estate investors have a limited amount of options when facing a market like this. Some investors have simply moved on to other business opportunities, while others have succumbed to the increased prices, which have hurt their business and their balance sheets. But, there is a segment of real estate investors who have found a profitable way to deal with the challenges of the housing shortage by finding a new source of leads.
While many investors are only looking at the traditional segments of the market – single family, residential homes that are for sale by families who want to upgrade that are listed on the traditional MLS-style forums – there are other homes on the market that can be purchased at a significant discount. Properties owned as part of a probate are widely available and can be purchased for well less than comparable homes in the area. In fact, there are an estimated 100,000 probates entering the market each and every month throughout the United States.
Probate properties are those homes, apartments, multi-family homes and commercial sites that were previously owned by an individual who has passed. The local court then appoints an Executor to ensure that these homes and other properties are sold to take care of paying medical bills, funeral fees and other obligations.
Probates Provide Motivated Sellers
Once you start working in probates you will understand why Executors are motivated to sell their properties quickly and for a substantial – 30 percent to 50 percent off – of current market values. Each Executor is responsible to the court to ensure that the assets of the individual who has passed have been liquidated in order to meet financial obligations and provide an inheritance to the individuals left in the family.
Executors not only feel the pressure to sell because of the court, but they want to sell because of their own convenience. While some Executors can be a family attorney or an accountant, many times the Executor is a family member who has responsibilities of their own. They may even live out of state, and making repeated trips to show a home or apartment building can be nothing short of challenging. Executors also understand that, in addition to time constraints, the home their family member owned may not be fully updated. All of these conditions provide the opportunity for homes and other properties to be purchased for a fraction of the current market value.
Finding Probate Leads
Now that you understand the value of having access to probate properties in this challenging economy, you may be wondering how to get access to them. Many individuals who are starting a probate business decide that going to the local courthouse is the best way to look for opportunities in their area. This can take time, as you need to allow for travel to and from the courthouse as well as time evaluating filings to see if there are holdings within the probate appropriate for your business. As you can imagine, this can take away valuable time from your growing investment business, your family and the job you currently hold.
There is a better way. By using a professional probate lead service you can have up-to-date information and leads delivered right to your inbox on a weekly basis. With no more trips to the courthouse, no time wasted looking at complex filings that are hard to understand, you will have more time to go out and evaluate properties and opportunities. Unlike traditional leads in the current real estate market which can be nearly impossible to find and create the environment for high pricing, there are literally thousands of options for probate purchases each and every day.
Build a Vibrant Real Estate Investment Business with Probates
Having access to leads on a regular basis means that you will be able to find success in probate real estate investing. With time, patience and a carefully thought out business plan, you can be sure that having these leads will make an enormous difference in your ability to purchase homes and other properties as well as acquire them at a favorable price.
Probates are not limited to residential real estate, either. What you will find is that you can expand your investments to include apartment buildings, multi-family units, businesses, vacation homes and even purchase and resell personal property, including antiques, artwork and vehicles. The variety and opportunity with probates is endless because there is always a supply of leads available.
The Most Reliable Source
Are you looking for a reliable lead source for all of your probate investment needs? The experts at US Probate Leads offer the highest quality leads available on the market today. Our certified lead specialists visit every courthouse in the United States, constantly evaluating new probate filings and making those available to our investors. In addition to our premium lead service, we also offer services that can keep you informed on the newest trends in the market. Contact our office today to learn more about our lead service, monthly newsletter, e-books, seminars, webinars and even our individualized mentoring program. Contact us today to speak to one of our friendly, knowledgeable customer service representatives.
Sources:
[1] http://www.matrixrealestate.com/about-matrix/market-news/slowing-construction-could-lead-housing-shortage-experts-say
[2] http://www.bizjournals.com/sacramento/news/2015/03/30/inventory-shortage-is-hurting-sacramentos.html
[3] http://www.bizjournals.com/sacramento/news/2015/03/30/inventory-shortage-is-hurting-sacramentos.html
[4] http://realtormag.realtor.org/news-and-commentary/economy/article/2012/11/seeds-housing-shortage
