I am often contacted by potential clients who have inherited a property that is in pre-foreclosure or already in the foreclosure process in the court system. What do you do to protect your rights as the new owner of this property? Do you keep it, or do you walk away? The answer isn’t a simple one. It all depends on whether you want to keep, liquidate (sell) the property, or just walk away. Here are some possible scenarios.
If you inherited property either by Will or without a Will, there may still be a mortgage attached to the property. Even though you are not on the note or mortgage, that mortgage is attached to the property as a lien. If you don’t pay the mortgage, then the property will be foreclosed on by the lender. If you want to keep the property, you will likely have to file a probate to determine ownership of the property and you will either need to pay off the mortgage completely, refinance with a new lender, or you will have to assume the mortgage. The first two could be easy as long as you have the financing to do so. However, to assume the mortgage, it can take much longer, and the lender has to agree to let you take over the mortgage. Sometimes an assumption of mortgage is only available if the mortgage payments are up to date. Other times the lender can treat it like a loan modification and put you in place of the deceased party. Each lender has its own rules when it comes to this.
Next, if you don’t want to keep the property you can simply sell it. This will generally also require some form of probate to determine ownership of the property, or at least an executor or personal representative of the estate. Once one of those has been established, the property can be sold off and anything extra from the proceeds from the sale go to you or divided among the heirs. Just remember, ownership needs to be determined first. You can’t sell the property unless you have been determined to be the owner or executor/personal representative of the estate.
Next, you can simply walk away from the property. Generally speaking, if you are not a borrower listed on the Note and Mortgage to the property, you should not be held liable to that. Many times the lender will file a lawsuit against heirs to a deceased party and they have the right to do so. But you can have yourself removed from the case by recording what is called a “disclaimer of interest”. Florida Statute 739.104(3) gives very specific rules for disclaiming interest in real property. It states, “To be effective, a disclaimer must be in writing, declare the writing as a disclaimer, describe the interest or power disclaimed, and be signed by the person making the disclaimer and witnessed and acknowledged in the manner provided for deeds of real estate to be recorded in this state.”
Once this disclaimer has been recorded with the County Clerk of Court for the county the property is located in, you can deliver a copy of the recorded disclaimer to the plaintiff’s counsel and generally they will remove you from the case. However, if you are the executor or the personal representative of the estate, you cannot do this because the estate of the deceased party is liable for the debt in the mortgage. The lender always has the right to come after an estate (if there is one).
Lastly, if the property gets sold at a foreclosure auction and you didn’t know about it until after, there might be surplus funds available to you as an heir to the decease party. This means that the property was sold for more than what was owed and there are excess funds after paying off the mortgage lender, Homeowner’s association, or other subordinate lienholders. These funds then belong to the heirs. This is a specialty of mine and I help former homeowners and heirs of former homeowners retrieve hundreds of thousands of dollars in surplus funds each year.
If you have inherited a property that is currently in foreclosure or might be in foreclosure soon, please give me a call for a free consultation to discuss your options. I handle Foreclosure Defense, Disclaimers of Interest, and Foreclosure and Tax Deed Surplus in every County in the State of Florida. I will be happy to discuss what the best scenario is for you depending on if you want to keep the property, sell the property, or simply walk away. And if you have Florida Foreclosure or Tax Deed Surplus funds coming to you, I am happy to discuss that as well.