Will foreclosure effect owner of recently inheritted home.

Question

I am in negotiations with an owner (son of deceased) who has recently inherited a home through a living trust. Before the original owners (parents) passed away they had fallen behind on their mortgage. Now the property is in the hands of their son (the trustee). It is a few months away from foreclosure auction.

If it forecloses will that affect the son (trustee)? Is he legally the new owner of the home? As far as I understand the property did not go through the probate process because it was owned in a trust. There is little to no equity in the home. Would it be beneficial for him to sell before foreclosure (via short sale)?  Or would the foreclosure have no effect on him?

Wayne Brooks · Answer

The trustee/son has no liability so there is very little incentive for him to bother with a short sale.

Ron S. · Answer

little to no equity? Tell the trustee to walk away and let the foreclosure process do its thing. they have no liability from the loan.

Brett Goldsmith · Answer

Has no liabilities on the loan. Not sure if he has liabilities if someone hurts themselves on the home if he is now the owner. Benefits would be to liquidate an underwater asset from the estate and to get this off the mental plate of the family. Some care about "doing the right thing" for the deceased owners and others see no benefit.

Christopher Phillips · Answer

@Sean Dougherty

If the trustee wants to sell it as a shortsale, they'll have to get an agent and list it on the market. That's a bank requirement. Unless the trustee wants to show up to the closing table with cash for the difference.

If the estate has to go through probate, that will delay the ability to list the property.

If the trustee isn't making payments, the property will never make it through a lengthy shortsale.

If this was a reverse mortgage, the trustee will only have a year to figure something out or else the bank will just take the home.

Sean Dougherty · Answer

If I can get trustee to agree to a short sale, will that be a possibility with the lenders. I say death certainly qualifies you for a hardship. Do lenders standardly do short sale in the situation owner has passed? What paper work would lender require in this situation? No tax returns or income docs available for deceased. What would be the process?

Christopher Phillips · Answer

@Sean Dougherty

This happens a lot with reverse mortgages. Only the estate is impacted by the foreclosure, not the heirs.

The sale of the property will go to pay off the mortgage.

Will foreclosure effect owner of recently inheritted home.

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