Investor · Joliet, IL · Member since 2013 · 59 posts · 32 votes
I assume the loan would just become the debt of the estate. Would it then have to be paid off in order for the heirs to close the estate through probate? Or is there a way around this?
I am not an attorney and every state is different for probate.
On a wrap, you have a contract with your seller. Because he/she passes, the contract should continue to his estate. You will continue to make payments. The contract will end when the deceased is completely paid off, not at his death. When you do finish paying off the deceased, you will have to get a release of lien from the estate. It would be good to keep in contact with them about loan balance and how many more years they are going to get payments. If you have some cash, you would ask the estate if they would like to continue with payments for the rest of the loan or a discounted cash amount right now. You may be able to get a 10%, 20% or maybe larger discount from the seller's estate.
On a sub-to, it is your house, you just happen to have a loan in his name. If you are not making payments to the seller, they are out of the situation to begin with. There is no need to do anything else.
My understanding is that the original note would still be considered debt of the estate in either scenario (since the loan is not being assumed). Assuming the estate has assets, I am wondering if this would have to be paid off in order for probate to be completed.