What Should I Do with Inherited House Worth Less than Mortgage?

Attorney Thomas B. Burton answers a reader's question about what to do with an #inherited house that she received upon her sister's death when the house itself is worth less than the balance on the outstanding mortgage. Attorney Burton discusses how a mortgage works with an inherited property and gives the reader some tips on things to consider when evaluating her options.


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#inheritance #mortgage #house #realestate #inheritedrealestate


Transcript of Video: What Should I Do With Inherited House Worth Less Than Mortgage?

Today's question comes from Milwaukee

Wisconsin and the writer asked the

following what should I do

with my dead sister's house my older

sister died in June

she didn't have a husband or children

she didn't have a will

she left a house the problem with the

house is it's only worth twenty three

thousand dollars and the mortgage is

twenty six thousand

the house has mold in certain areas a

huge tree fell in the yard during a

storm

and a fence in the yard on both sides

the wires are hanging where the tree

fell

the mortgage company has refused to talk

to me unless I assume the debt

I found out that the mortgage company

decided to charge off the mortgage

I am the sister and heir to the property

what does a charge off mean

I'm afraid to transfer the house into my

name because my sister owed so many

bills what are my options

okay so first of all I'm sorry to hear

about

the passing of your sister you're

correct that if you

inherit the home you take it subject to

the mortgage since the mortgage is the

secured interest

on the property so I would obtain an

accurate assessment of the fair market

value of the property

if it's really true that it's worth less

than the mortgage

then it may not be worth it to you to

try to obtain the house through a

probate process

because in essence it's what they call

underwater if the house is worth less

than the mortgage

you may be better off walking away and

not spending the time

and money on attorney's fees and court

costs

however if your sister left you any

other assets outside the house then it

might be worth

opening a probate and then getting the

house and later try to sell the house

but like I said you'd have to go through

a great deal of effort to do this so if

there's really no other assets

I'm not sure it's personally worth it to

you

I would also talk to an experienced

probate attorney about your options

sometimes there's

a simplified probate we can do if the

total assets are less than fifty

thousand dollars

but this house is going to be a

complicating factor

in terms of the charge off I don't

believe this means they're forgiving the

loan

instead it means they don't view it as a

profit center and they may

be seeking to sell it to a third party

so you can look online google that

definition of charge off there's some

good explanations but I don't think

it's rare that it means they're just going to

walk away it probably means they're

giving up on collecting it and they're

going to sell it to a third-party debt

collector so again I think the answer to

your question comes down to what is the

house actually worth

if it's really worth less than the

mortgage you may be better off walking

away

so that you don't like you said

get attached to any of these other

liabilities because if you do open a

probate and your sister owed a lot of

other bills

the creditors will come to collect for

those bills as well

so you would want to make sure the total

assets exceed the debts

but the good news about death is your

debts die with you

so again I'm sorry about your sister but

if she's gone

they can't collect against her anymore

so great question and thank you for asking!

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Transcript and captions provided for ease of access for the hearing impaired.

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