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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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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