Subject to and Probate

12 Replies

I'm currently marketing to probate and have come across a lead that has a mortgage that is close to what the property is worth. The only question I asked was about the total of the remaining mortgage and was going to dig deeper to understand what the monthly payments might be. If the terms on the mortgage are good, is there an opportunity here if I wanted to buy and hold?

My question is if it's even possible to do a "subject to" for a mortgage where the person is passed away? Does anybody know what is required of the executor in this situation? Is there any opportunity for the executor to get the mortgage transferred without having to refinance?

The second part of the question is if there isn't any opportunity to do a subject to, does anybody have any other creative ideas for this? or should I throw this lead away?

The ARV likely worth somewhere between 70k and 80k and probably needs about 5k in renovations in order to rent. The remaining mortgage is right at 70k but I don't yet know the terms.

Can you buy a property in probate 'subject-to' the existing mortgage? Yes, absolutely. I've done it myself many, many times.

The only legal issue that I can see that would make this any different from a regular subject-to do is if your state requires secured estate debts to be satisfied prior to sale or distribution. We do not have that concern here in CA.

You'll need to get "someone" to provide you the decedent's SSN and sign an authorization to release information to provide the lender or loan servicer.

As to the opportunity that you've described, it better cash flow pretty well. If not why would you want it?

@Rick H. Thanks Rick. That is very helpful. I really doubt that this particular opportunity will be one that I will pursue but has been a question in the back of my mind as I deal with more and more probate leads. Knowing the legal issues with the "subject to" will help me as I get more leads that can be great cashflow.

Kyle, If the mortgage monthly payments are much less than rent I'd take that 100x over. The best part of this deal is that there's no rush to ever refi out like would be typical in a living debt owner who eventually wants the loan paid off. :) This is free cash flow!!

Like Rick said the estate needs to give you a power of autorney re this property so you can interact with the bank. The bank knows too well with a passed borrower too often the payments stop and they have to take back the property costing the bank thousands. Just send them a registered letter saying you will keep up the payments. Then follow normal sub-to steps, of moving into a trust, get a power of attorney, new insurance etc etc.

The P.R. is unable to give a P.O.A. since the decedent is dead. The correct document is the authorization to release information.

Make extra copies and send only copies. Send via FedEx. Lenders and servicers respond better as it's industry norm now.

Don't tell the lender or servicer your intentions. Get the info and follow thru with your plan. That's it.

Originally posted by @Rick H. :

Can you buy a property in probate 'subject-to' the existing mortgage? Yes, absolutely. I've done it myself many, many times.

The only legal issue that I can see that would make this any different from a regular subject-to do is if your state requires secured estate debts to be satisfied prior to sale or distribution. We do not have that concern here in CA.

You'll need to get "someone" to provide you the decedent's SSN and sign an authorization to release information to provide the lender or loan servicer.

As to the opportunity that you've described, it better cash flow pretty well. If not why would you want it?

 If Georgia does require the secured estate debts to be satisfied first, I'm assuming the main risks are adding time to the deal and the potential that the total estate might have a negative balance?

Sorry, Kyle, it may be obvious to others but I don't understand your question.

@Rick H.  Do you happen to know what GA requires?

Kyle I don't. But a lot of sales happen from the family (heirs) not out of the probate lawyers office... Just guessing since I've not been in this situation. I'd just ask questions and see where it leads. Most probates need extensive repairs and a retail sale to pay off existing debt is difficult. So families let the property go back to the bank. Why let that happen is all I ask? There may be issues that I'm not aware of as is being inferred.

you can also perform a shortsale, it's a pretty fast process since the hardship is, "the borrower is dead".

@Rick H.  What would the authorization to release information do for Kyle? I am in a very similar situation. 

Lets you find out the loan balance, and amount of arrears to bring it current.

I want to be able to communicate with the mortgage lender/servicer directly. The authorization to release information permit them to speak to me directly as if I were the borrower, whether they're living or deceased.

Things I may want from lender:

1) information regarding loan balance, rate, term, etc.

2) information regarding loan status, next payment due, amounts in any tax or insurance escrow collection account

3) Change mailing address to my address

4) Obtain copy of note or other docs in file, because there may be a prepay penalty

Irrespective of the profit play you are anticipating, information is key to making intelligent, informed decisions.

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