Okay, it’s time to join the kids and play “good news, bad news.” The good news is that you got a phone call from your great uncle’s attorney. You have an inheritance!
The bad news is that it’s a condo. In Florida. And he bought it in 2006. And it’s mortgaged to the hilt. Oh, yeah, with a sub-prime loan.
You can’t refinance; the place is worth about half of what’s owed. You don’t want to move to Florida. And rental income wouldn’t come close to cracking the nut on that home loan.You can’t afford this.
Are you stuck with the property?
Good news. You are not. In most states, an estate’s assets are sold off to repay creditors and anything left over is distributed according to the decedent’s will or state law if there isn’t a will. Unless you are listed as a co-borrower or co-signer on a loan, you as an heir cannot be held responsible for its repayment.
Bad news. We die.
Good news. Our debts die with us.
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hilarious. doesn’t apply to me but a good read anyway.
Gina,
This entry describes exactly the position I’m in.
My father died without a will, leaving my disabled brother and myself two properties. Upon his death, one was already in default and in the short sale process. As administrator, I managed to short sale that one at the beginning of the probate process.
Now, as I’m closing the estate, I’m finding that his primary residence (which we’ve rented through probate) is mortgaged to the hilt, is worth nowhere near the loan, and we can’t continue to rent it out and make a dent in the loan.
If I’m reading correctly, after probate closes, I can try and short sale the property with no impact to my credit?
Thanks.
Yes. You are not on the mortgage, therefore your credit is not impacted. You may also offer the lender a deed-in-lieu of foreclosure and save yourself the hassle of selling.