Probate in foreclosure

5 Replies

BP I found an opportunity with a family that is in probate and the house is in foreclosure. There is good equity in the house. Does anybody have experience with this? I am reading the process of selling during probate and am starting to think the timelines won't work before the auction date. The contact is the executor. If we agree on a price any idea how long it would take the court to agree to the sale? I'm in Texas. Thanks for your help. Looking for any loophole to structure the deal so they don't lose their equity.

@Dakota Ferguson
If it goes to foreclosure and sells for more than what they owe on it they still get the equity. The most the lender can recover is what is owed to them (including penalties and legal fees)

Any balance above that goes to the property owner

Yes. If the amount owed to a lender is $50k and home sells for $80k the $30k balance goes to owner (assuming no other debts on property) 

Executor may want to liquidate some other assets of the estate in order to bring the mortgage current (or some other arrangement) and protect this asset from being sold for less than fair market value. He/she may actually have a duty to do so.

But @Chris Seveney is correct, if there is a foreclosure sale any surplus would go to the estate. I would factor in costs of sale, trustees fees, etc.

Originally posted by @Tom Gimer :

Executor may want to liquidate some other assets of the estate in order to bring the mortgage current (or some other arrangement) and protect this asset from being sold for less than fair market value. He/she may actually have a duty to do so.

But @Chris Seveney is correct, if there is a foreclosure sale any surplus would go to the estate. I would factor in costs of sale, trustees fees, etc.

 That's the angle I was going to suggest...liquidate whatever possible to reinstate the loan to give the estate time to settle the property and take the equity. if there is counsel representing the estate, maybe (stress maybe) they could file a TRO to get the sale put on hold to give time to liquidate the property. Counsel should be able to provide some compelling data to show the sale is pending  with bona fide buyers and that everyone will be made whole. I've seen that one work. Actually had that one used against me in one of my foreclosure sales. I fought it but in the end, I lost. Well...kind of lost. I lost my attempt to continue with the sale but when it did sell, still got my full balance and interest.

I wouldn't bank on the foreclosure sale bidding above total debt to give excess proceeds to the estate. It happens, but to use that as a strategy could leave a lot of meat on the bone if it doesn't get any third party bids. I use this strategy OFTEN when I'm in junior lien position and the senior goes to sale. I immediately bid to their total debt and then bid all the way up to my total debt on my junior with my second bid, effectively wiping out anyone next to me with a bunch of cashier's checks. Granted, I'm not making that bid unless the numbers work but when I get smarties saying, "Dude...you screwed up, why did you bid so high instead of waiting to see if anyone else bid"...I have to explain to them that once I bid to total debt, anything over that debt goes back to junior lien holders so, I'm bidding yeah, but just bidding to wipe everyone else out knowing everything else goes back to me.

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