The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: MrCleanShaven on June 19, 2020, 01:30:56 AM
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Hey mustachians,
First off I just want to say stay safe everyone. The unfortunate reason I am creating this thread is that the coronavirus took my mother. She was 79 years old and fought hard in the hospital for a month but couldn't pull through. She got covid-pneumonia and the damage it did to her lungs was just too much. Obviously you never thing it's coming and our own fault for not getting things put in place ahead of time for the unexpected. We are still pretty much in a state of shock and it doesn't seem real.
We now find ourselves in the position of the house. Mom had recently done a cash out refi to pay off a few credit cards and take advantage of lower interest rates. The house appraised out at around 205k and she has a 150k mortgage on the home. My sister was named executor of the estate but no specific directions were laid out in the will. My sister and I have a good relationship and there are no issues. We are on the same page and actually will continue to live in the property in the immediate future. I have spoken to a few people about this because the situation is this. We can afford the expenses we will face but neither of us would qualify for the mortgage. So can we just continue to pay the mortgage that is already in place? Can they legally force us out since we wouldn't qualify for the loan? Can they force us to sell? If we keep paying the mortgage will we be fine? Do we have to alert them to the situation? Will they put our names on the deed and/or mortgage or will they make us actually refi or sell the property? I have spoken to various friends in the mortgage/title/real estate business and also a couple of attorneys and keep getting differing opinions so figured I'd ask here.
Thanks in advance for any opinions, advice!
MCS
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First off sorry for your loss.
Secondly, I want to make it clear that I'm not a lawyer and even if I was a lot of these issues might be state specific. However, I have bought and sold a few places and recently was the executor to a complex Estate so here are my two cents.
You need to get an attorney to handle the Estate and they can explain everything. My thoughts are that you don't have the deed, the bank does, but once a property changes possession the mortgage will need to be paid in full. Currently, the Estate will continue to own the property until probate is finalized but it will need to continue to make payments. I'm assuming your mother is dividing everything equally between your sister and yourself. If that's true and there are few other assets. Then your sister will either need to sell the house and divide the remaining proceeds after the mortgage is paid off or you can apply for a new mortgage and transfer it to your names. Go talk to a few banks/lenders. Maybe you can get a mortgage for the $150k with no down payment based on your equity in the property. I don't know how two people will own a property and make decisions related to ownership but I'm sure it can be done. If neither of you can get mortgage than you will have to sell. You might be able to extend probate for a year or two while you live in it but I don't think there is anyway around eventually selling.
Get a decent attorney that has handled estates before. This isn't complicated and he should be able to answer all your questions easily.
Ants
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I am so sorry about your mom.
Your sister as the executrix needs to hire/consult an estate & probate attorney ASAP, and do things right. They will instruct her for the laws in your state and may be able to help get you both where you want to be in so far as owning the home together in your own names.
Why are you so sure you and sibling won't qualify for a mortgage? If you are both employed, have halfway decent credit or have assets to pay, then you need to at least try to get a mortgage before assuming you won't. But if you can't get a loan to pay off the current mortgage, then the house needs to be sold, or you will need to find assets to pay it off elsewhere.
Just a note about being a executor: Not doing her appointed job - acting as the legally responsible entity for settling your mother's estate - means your sister is failing her legal duty, and she could be found in contempt of court. She can be fined, wages garnished to pay back the estate, and in extreme cases, face jail time. The last is not likely, but she needs to understand the level of what she has promised and do it legally. She must pay off all debts - like the mortgage - as long as there are assets there to do so as part of her responsibilities. (I know this sounds harsh, and I am not intending it to sound cruel, but it is a very real serious concern that you both should be aware of – I absolutely want things to work out for you both)
As far as the living in the house with it being in your mother's name/mortgage, no you can't keep up with that indefinitely. While it might be possible to drag things out for a year or two if all heirs conspire to do so, ultimately you need things paid/settled and transferred to the heirs and close out everything and file the estate taxes. The longer the estate drags on, the worse and more complicated it's going to be. Keeping up with accounts/taxes, forms and policies and property (and insurance!) isn't fun even when it's your own stuff.
Something else you haven't thought of: you can't count on insurance on a house owned by a deceased person, so that right there is a HUGE deal. The current insurance policy is in your mother's name, so the existing policy is no longer valid. It MUST be rewritten for the estate/current occupants. You could be in for a very nasty surprise if you had serious home damage/someone sued you and the executor did not take care of this. This is why it's vital for the executor to do their job: if the house got damaged 6 months from now and your sister did not actually get the insurance updated, then you would be on the hook for the costs of repairs. And if the mortgage company discovered that the house wasn't legally insured, or they discovered that the actual owner died years ago - the could swoop in and sue you for fraud, and/or foreclose on you. There are tons of nasty things that could happen if you don't get things legally squared away.
I get that you both are in mourning. You just lost your mother. It would be fine for your sister to just keep up with the basic bills for a month or two until she can work up to dealing with hiring an estate lawyer. But she needs to do the job, and if she can't or won't be able to deal with all of this, then you should help her find someone that can act as a guide so you can get this settled as painlessly as possible.
ETA: you're out of debt according to your post from earlier this year, have a not shabby credit score (above 700) and some emergency funds. The only thing that may impact a good price on a mortgage is your lower than average income (at least you do report/pay taxes) and potentially your sister's credit score/debts. If your sister has decent credit and at least ~30k income (roughly what you stated yours is) then you do stand a VERY good chance of getting a mortgage enough to pay off the $150k your mom took out on the property. If it was a recent refinance, then the appraisal is still good, so there's some decent equity there.
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I am so sorry for your loss.
I know it's going to sound insensitive, but you are asking for help, so I'm going to just blurt out my questions.
I'm going to guess that you and your sister are somewhere in your late forties to mid-fifties - is that correct?
Were you both living in your mother's house at the time of her death?
If not, what are the existing living arrangements for you and your sister?
Have either of you been married before or have any other dependents?
Why do neither of you have good credit scores?
If you can answer those questions, it would be helpful. Also everything that @Frankies Girl says is always worth your full attention. And Ant's voice of experience is also a song full of good advice.
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My deepest sympathy on your loss.
Echoing that the executor needs to see a lawyer. One other thought: If you and your sister will inherit financial assets as well as the house, you might be able to use them to pay the mortgage down enough to need a smaller (and easier to qualify for) mortgage.
Best wishes. It's a hard job at a hard time.
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If the mortgage is owned by Fannie Mae or Freddie Mac, generally children of a deceased borrower can assume the mortgage without qualifying if they take title and occupy the property.
However, you could just continue to make the mortgage payments. Generally, lenders don't pay much attention to this. This can cause a problem at tax time, as the 1098 will come in her name. There is a way to report this, but I can't recall what it is right now. An accountant can explain this. I went through this in California, where I inherited a property that was subsequently rented. If you don't occupy the property you can assume the loan if you qualify.
Both Fannie and Freddie have web pages that allow you to check to see if they own the loan. Find out who services the loan (mortgage statement) and call them to find out what the process is.
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I am so sorry for your loss.
I know it's going to sound insensitive, but you are asking for help, so I'm going to just blurt out my questions.
I'm going to guess that you and your sister are somewhere in your late forties to mid-fifties - is that correct?
Yes I am 47 and she is 56
Were you both living in your mother's house at the time of her death?
Yes we all live together
If not, what are the existing living arrangements for you and your sister?
Have either of you been married before or have any other dependents?
I am single and my sister is currently married and has 3 children (2 of which are grown and out of the house the other is 17 and lives with us)
Why do neither of you have good credit scores?
I just had a bankruptcy and she just works a part-time job. Her husband does have a good job and said he would do whatever we need to help out.
If you can answer those questions, it would be helpful. Also everything that @Frankies Girl says is always worth your full attention. And Ant's voice of experience is also a song full of good advice.
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If the mortgage is owned by Fannie Mae or Freddie Mac, generally children of a deceased borrower can assume the mortgage without qualifying if they take title and occupy the property.
However, you could just continue to make the mortgage payments. Generally, lenders don't pay much attention to this. This can cause a problem at tax time, as the 1098 will come in her name. There is a way to report this, but I can't recall what it is right now. An accountant can explain this. I went through this in California, where I inherited a property that was subsequently rented. If you don't occupy the property you can assume the loan if you qualify.
Both Fannie and Freddie have web pages that allow you to check to see if they own the loan. Find out who services the loan (mortgage statement) and call them to find out what the process is.
Thanks I will check on that.
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First off sorry for your loss.
Secondly, I want to make it clear that I'm not a lawyer and even if I was a lot of these issues might be state specific. However, I have bought and sold a few places and recently was the executor to a complex Estate so here are my two cents.
You need to get an attorney to handle the Estate and they can explain everything. My thoughts are that you don't have the deed, the bank does, but once a property changes possession the mortgage will need to be paid in full. Currently, the Estate will continue to own the property until probate is finalized but it will need to continue to make payments. I'm assuming your mother is dividing everything equally between your sister and yourself. If that's true and there are few other assets. Then your sister will either need to sell the house and divide the remaining proceeds after the mortgage is paid off or you can apply for a new mortgage and transfer it to your names. Go talk to a few banks/lenders. Maybe you can get a mortgage for the $150k with no down payment based on your equity in the property. I don't know how two people will own a property and make decisions related to ownership but I'm sure it can be done. If neither of you can get mortgage than you will have to sell. You might be able to extend probate for a year or two while you live in it but I don't think there is anyway around eventually selling.
Get a decent attorney that has handled estates before. This isn't complicated and he should be able to answer all your questions easily.
Ants
Thank you
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I am so sorry about your mom.
Your sister as the executrix needs to hire/consult an estate & probate attorney ASAP, and do things right. They will instruct her for the laws in your state and may be able to help get you both where you want to be in so far as owning the home together in your own names.
Why are you so sure you and sibling won't qualify for a mortgage? If you are both employed, have halfway decent credit or have assets to pay, then you need to at least try to get a mortgage before assuming you won't. But if you can't get a loan to pay off the current mortgage, then the house needs to be sold, or you will need to find assets to pay it off elsewhere.
Just a note about being a executor: Not doing her appointed job - acting as the legally responsible entity for settling your mother's estate - means your sister is failing her legal duty, and she could be found in contempt of court. She can be fined, wages garnished to pay back the estate, and in extreme cases, face jail time. The last is not likely, but she needs to understand the level of what she has promised and do it legally. She must pay off all debts - like the mortgage - as long as there are assets there to do so as part of her responsibilities. (I know this sounds harsh, and I am not intending it to sound cruel, but it is a very real serious concern that you both should be aware of – I absolutely want things to work out for you both)
As far as the living in the house with it being in your mother's name/mortgage, no you can't keep up with that indefinitely. While it might be possible to drag things out for a year or two if all heirs conspire to do so, ultimately you need things paid/settled and transferred to the heirs and close out everything and file the estate taxes. The longer the estate drags on, the worse and more complicated it's going to be. Keeping up with accounts/taxes, forms and policies and property (and insurance!) isn't fun even when it's your own stuff.
Something else you haven't thought of: you can't count on insurance on a house owned by a deceased person, so that right there is a HUGE deal. The current insurance policy is in your mother's name, so the existing policy is no longer valid. It MUST be rewritten for the estate/current occupants. You could be in for a very nasty surprise if you had serious home damage/someone sued you and the executor did not take care of this. This is why it's vital for the executor to do their job: if the house got damaged 6 months from now and your sister did not actually get the insurance updated, then you would be on the hook for the costs of repairs. And if the mortgage company discovered that the house wasn't legally insured, or they discovered that the actual owner died years ago - the could swoop in and sue you for fraud, and/or foreclose on you. There are tons of nasty things that could happen if you don't get things legally squared away.
I get that you both are in mourning. You just lost your mother. It would be fine for your sister to just keep up with the basic bills for a month or two until she can work up to dealing with hiring an estate lawyer. But she needs to do the job, and if she can't or won't be able to deal with all of this, then you should help her find someone that can act as a guide so you can get this settled as painlessly as possible.
ETA: you're out of debt according to your post from earlier this year, have a not shabby credit score (above 700) and some emergency funds. The only thing that may impact a good price on a mortgage is your lower than average income (at least you do report/pay taxes) and potentially your sister's credit score/debts. If your sister has decent credit and at least ~30k income (roughly what you stated yours is) then you do stand a VERY good chance of getting a mortgage enough to pay off the $150k your mom took out on the property. If it was a recent refinance, then the appraisal is still good, so there's some decent equity there.
Thank you I am totally out of debt but I had to file for bankruptcy which felt like a total waste after I had paid off all credit card debt. The SBA came after us for the amount owed from when they forclosed on the business and sold the property for much less than it was worth. My only choice was BK. So my credit is shot for now. Sis works a part time job and doesn't make much money. Her husband has a good job though and said he would sign for it. We all live together myself, sister and her husband + her 17 yo child. It's a 5 bedroom/2 bath home. We can easily afford the bills but our income isn't the best on paper. Especially with me playing poker for a living I don't think the banks like that.