Home Buying in California>Question Details

Scaredstraig…, Home Buyer in California

Mom died, house way upside down.

Asked by Scaredstraight68, California Mon Mar 22, 2010

My mom died and owes a lot on a house. I think she owes 450,000 and the house is only worth about 350,000. In her will she left the house to me but there hasn't been any payment made in a few months. Should I try to save it or let it go?

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I'm sorry for your loss.

You question is best to be answered by dicussing the details (your financial capacity, the inheritence - house, other assets, etc) with a qualified CPA and a probate legal counsel.

You may want to "start" by contacting the following sites for initial FREE legal advisory:
1. http://publiccounsel.org/
2. http://www.abanet.org/legalservices/findlegalhelp/main.cfm?id=CA
3. http://apalc.org/

A house is a long term investment. So while it may be upside down now, 7-10 years from now, its value may be in a better position. You didn't provide any details about the house...so if the house is in a "highly desireable" neighborhood and IF YOU CAN afford a modified lower monthly payment (due to the borrower's death - you can request the lender for a hardship loan modification), then I would suggest you to consider keeping the house. Ask yourself this - do you like the house? Do you like the location? Are you renting now...because there are positive tax benefits and wealth building in homeownership. If the house is in a great neighborhood, can you afford buying into this neighborhood on your own, later, without the inheritence?

Assumming your current financial capacity is sufficient to cover a modified mortgage, the lender may modify the current mortgage and provide a forbearance, which means the current total past due amount is "added" to the loan balance and the loan term may be extended to a 40-year term, if needed to, to ensure the modified monthly payment is equal to a max. 31% of your total income.

The local and national economies will get better, albeit slow, but they will improve then in turn the real estate market will also recover eventually.
2 votes Thank Flag Link Tue Mar 23, 2010
What would you do with the property if you could save it?
1 vote Thank Flag Link Mon Mar 22, 2010
Dear Scared,
This is a special circumstance the bank can foreclose on the property and try to sell it for the most possible. You might also be able to negotiate a short sale with the bank once they understand the circumstances. As has been advised, this is a complicated case and I would recommend that you consult with an attorney. It's important that this foreclosure does NOT end up registered to you personally.
0 votes Thank Flag Link Tue Mar 23, 2010
Although you might have several options available, the real question is whether or not you'd have the time/energy/desire to implement them. Whether you'd like to keep the home or sell, please feel free to contact me if you'd like to discuss a few options from an investor's perspective. You don't want to let too much time pass by before you make a decision, otherwise, the liabilities of the estate could end up draining a lot of the value out of the estate.

I agree with Jenny that it's also a good idea for you to run all of this past a probate attorney and CPA.
0 votes Thank Flag Link Tue Mar 23, 2010
Can you afford to make the payments, rent it or live there to do that? Do you want to do that?

Owing more than what the house is worth is a big deal, but not necessarily a reason to give up a family home. Does the house mean something emotionally to you, that would make it worth it to you to find a way to keep it? If so, check out your options.

$100,000 is about $567 per month at an interest rate of 5.5% if that helps you put that in perspective.

Good luck with your decision, and best wishes to you.
0 votes Thank Flag Link Mon Mar 22, 2010
I am sorry to hear about your mom.

You may have options. There are a few variables.
Since the loan is about 20% upside down, negotiating with the lender for a Short Refinance may be a posability.
What that entails is going in and negotiating to get a new restructured loan around the current market value. This depends on a few things. Who the lender is, additional debt .
I work with several options depending on my clients credit, loan amount, and what they want their out come to be.
I love helping my clients keep their home if it makes sense for them and the investor/lender.
If you would like to discuss options feel free to give me a call.

I am sorry about your mom

JoAnna Jensen
Legal Assistant
Legal Realty
925 699 5041
0 votes Thank Flag Link Mon Mar 22, 2010
You inherit assets. You do not inherit liabilities.

An estate is worth so much. If the estate has no value the banks can get nothing.

The only issue would be if the estate was worth $600k and the liabilities were $587k you would find that those owed money would have a legal claim to it.

Check to see if the house has a recourse or non-recourse loan on it. If non-recourse just let it go and do not lose $100k of inheritance. I would talk to your probate lawyer to find out the legal ramifications regarding the house. They should explain it simply and quickly.
0 votes Thank Flag Link Mon Mar 22, 2010
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