Can a house in Probate still be Foreclosed on?
In short, Yes! Even if a house is in probate, the bank can foreclose. Death does not release the obligation to pay the mortgage payment. Yet, for whatever reason, a lot of people who lose a family member, forget about these kinds of obligations until they realize it’s too late and lose out on property or assets that could have been theirs.
In other words, if you have a family member who lives in a house and still has a mortgage payment, they are obligated to make that payment even after death or foreclosure can happen. Now, there may be cases where the home is not worth what is owed, so in these cases, most family members just let it go to auction and the bank can take back the property. There are better alternatives to this, like a short sale, however, in most cases, family members are just unaware that they have to keep paying on the loans, or they didn’t even know there was one.
The fact still remains that those house payments can’t be missed or there is a definite risk of foreclosure. It also makes a difference too who’s name is on title.
All too often, family members don’t discuss these kinds of obligations with each other because I guess they figure in due time, everything will work itself out. However, probate can be a very messy and expensive process, especially one where there is no will involved. So in the long run, it’s very advantageous to plan ahead in the event of death, so that your loved ones are taken care of and they’re not stressed out trying to sort it out on their own. People of all ages die, not just the elderly, so it doesn’t matter how old you are, it’s important to think about some sort of estate planning to avoid going through Probate.
What exactly is Probate?
Probate – the official proving of a will. A legal process in which a will is reviewed to determine whether it is valid and authentic. It’s a process that determines what assets are available to be distributed amongst the family members or beneficiaries. An executor is usually appointed if there isn’t one. The executor is the person who was appointed by the family member to carry out the terms of their will. They are also responsible for the mortgage payments if there are any.
Probate can be challenging, especially when the deceased family member does not have a will. And when the estate is large, it can become a nightmare and can cause serious problems between family members. This is when attorney’s become involved and then it can become costly because everyone wants their piece of the pie, so to speak.
Depending on the will and size of the estate, the probate process can take a very long time, several months at the least and even last up to a year if the estate is large enough. Some of these estates are extremely valuable, so every effort is made by the courts to make sure all assets are accounted for and family members get what is rightfully theirs.
On homes which are kept by the family members, usually a quit claim deed is recorded so that interest in the property has now become theirs. Mortgages are usually re-structured or refinanced by the new owners.
Can I save my inherited home from Foreclosure?
The answer is Yes!
Let’s say you find out that you are about to inherit a piece of property from your late Grandfather and you found out that when he died, no one kept up on the mortgage payments. He owned the home for 30+ years and there is substantial equity in the home. The foreclosure process has started and a foreclosure date has even been set. What can you do to save the home from foreclosure?
First you need to contact the lender and let them know what’s going on. If you have the ability either from your own pocket or even the estate, to make up the back payments, it’s worth trying to work something out with the bank to you can re-instate the loan.
If you have good credit, you can try to get a loan yourself and payoff the existing lender, therefore creating a new mortgage note.
If none of these are an option, you need to find a partner or co-signer to help you come up with enough money to keep it. Again, we are assuming this property has a ton of equity in it. The last you want to do is let it go to foreclosure because that would be a huge mistake.
There are investors out there looking for deals like this. You just have to work something out with them to make it worth their while.
Can we stop Probate?
If you die without a properly written living trust, your family will have to probate all of your assets that require your signature to transfer. Probate is what you pay the attorney and it typically takes about 10% of the estate.
If you own property in more than one state, there will have to be a probate in each state where there is property. One state (your residence state usually) will be the state where the primary probate is conducted, and the probates in the other states will be ancillary probates. If you hold property in a trust, there will be no probate.