While we all hope and plan to live out our days debt-free, the reality is that many people pass on when they’re in the midst of financial difficulty. In many cases, this means that the bank has started moving forward with the foreclosure process when the heirs become aware of the situation.
If you have inherited a property in foreclosure, don’t panic. You are not responsible for the mortgage payments (unless you were already a co-signer or co-owner), but you should take action to take control of the situation.
Your first step should be to contact the lender to tell them the homeowner has passed, find out how much is outstanding on the mortgage (you can and should request the loan documents if you do not have them), and discuss whether stopping or delaying foreclosure is possible.
In some cases, you’ll find the lender is very receptive to alternatives (foreclosure is a costly process for them), and sometimes you’ll find they aren’t. That said, if you’ve got the money to pay off the mortgage, they cannot refuse at any point in the foreclosure process. Let’s take a look at all your options.
As the inheritor, you have several options:
- Pay off the remaining mortgage with the deceased’s estate
- Motion to provide reasonable time to sell the property
- Borrow money to pay off the mortgage
- Assume the mortgage
- Sell the property
- Do nothing
The first option is often the best, provided the home is worth more than the mortgage remaining on the property. If the deceased’s estate is worth more than the amount owed on the property, you can pay off the mortgage and the home will be 100% yours to keep or sell.
If the deceased’s estate is worth more than the mortgage, but you do not have the available cash to pay off the mortgage (because the assets are jewelry, cars, stocks, and so on), reach out to the mortgage company and explain that you want to sell those assets and see if they will agree to wait (you will need to pay a monthly payment from you or the estate to keep them at bay, if they agree).
If you have no intention of keeping the home and the lender is not receptive to your appeal for them to delay the foreclosure process, you can request an injunction in court, which will temporarily stop the foreclosure process. This delay can provide you with time to sell the property on your terms, ensuring you don’t lose out on any equity in the property.
If you decide to go this route, work with a real estate attorney to ensure you’ve got the best chance of getting the injunction. You should also talk to them about proving that the lender gave proper notice of the foreclosure process if you are not sure they did so.
If you have time before the foreclosure process is complete, or the lender agrees to delay the foreclosure process, you can seek the money to pay off the outstanding amount elsewhere. This can be borrowing money from another source (which may be a good decision for you if the money owed is small and the house is valuable) or selling other assets.
If you decide to sell another asset, make sure it’s something you have some control over. For example, selling your own house with the goal of moving into the house that’s in the foreclosure process would be a gamble, unless you were absolutely sure you could sell your current home quickly.
If you are in good financial standing and believe you can qualify for the mortgage on the home, you can “assume” the mortgage, meaning you simply take on the current mortgage. Mortgage companies are generally very receptive to this option. This is a good option if you are currently renting, already own your current home outright, or are in the financial position to have two mortgages.
Note that not all mortgages are assumable, but if a lender will not allow you to assume the current mortgage they may allow you to set up a new mortgage to pay off the old, essentially providing you with the same outcome.
If the foreclosure process is in the very early stages, you can simply sell the property. You will need to do this quickly to stop the process (though often telling the lender you are going to sell it will give them reason to delay the foreclosure process), so consider selling to a cash home buyer like us. We buy homes for cash in as-is condition and can close in as little as 2-3 weeks. We’ve helped many people avoid foreclosure on their homes. To find out more about how we work, or to get an offer on your property, click here.
If you have no desire at all to have the property, or if you believe the property is worth less than the money owed on the mortgage, you can simply refuse to inherit the home and do nothing. The mortgage company will then sell the property, recoup its losses, and move on. If the proceeds from the property do more than cover the money they are owed, they will give the money to the estate.
Note that this is generally only a good idea if you believe the property is not worth as much as the mortgage, it’s not a good way to avoid selling the property yourself. Remember that the mortgage company is only interested in recouping their money, they aren’t interested in selling it for a good price. If they sell it, you will not make as much money from the sale as you would if you sold it and paid the mortgage off yourself.
Inheriting a home should feel like a blessing, but if the home is in foreclosure or disrepair, it can feel like a curse. Fortunately, we’re here to help you make the right decision for you, and can help you sell the house quickly (or another property) so you can get the lender out of the picture as soon as possible. To find out more about how we buy houses quickly for others facing foreclosure, and can do the same for you, click here.