Bad blood with an Auction Due date– Adventures in Probate/ Estate Purchases
One of our investor trainees told us of a fascinating probate deal or “experience” they’re dealing with now and while it’s a great story, it also illustrates great deals of the ins and out of probate or estate issues and purchases.
The Seller (we’ll call him Scott) co-owned this house with his mommy, and he co-signed on the loan with mommy. Mom has been deceased for 3 years now.
Scott says his sibling lives there and is not making the payments, so the home mortgage lags 6 months in payments, and he’s ready to sell your house. He stated Mom left no will for her estate, however there are 6 other brother or sisters. If that’s not enough of an investing adventure for you yet– Scott then tells us that the bank is threatening foreclosure.
They’re not just threatening … we find that the house is set up to go to the court house steps in 3 weeks. Why would anyone even attempt to buy a mess like this with a brief timeframe? Well, Scott owes $33,000 + $5000 in back payments on a cosmetic, light fix-up $10k rehabilitation home that deserves about $140,000 when it’s all fixed up. So let’s do a little math to see if there’s simply a wee bit of revenue in it.
ARV $140k minus Rehab $10k minus BuySellHold $21k minus Revenue $25k equals MAO $84k
So limit we might pay for to use on this home is $84k, and he needs to have $38k to cover the home mortgage and the back payments, say another $35k so that each Scott and each sibling/heir gets $5k earnings too. That’s a total of $73k, still leaving $11k EXTRA earnings for the financier!! There IS big cash to be made if you comprehend problems like these!
Now, how do we work through the estate stuff. Well first we (or Scott) would need to negotiate this rate with all the siblings to reach agreement on their share. Next they ‘d all need to validate that “mother didn’t leave a will”. If so, Scott could petition the probate court to designate him as Administrator of the estate and he ‘d have to run a notification of the estate advertisement, and get all the siblings to sign file accepting his being made Administrator. Now Scott might sign the Purchase Agreement as “Scott, Administrator of the Estate of Mother”.
If the brother or sisters said “no, Mommy DID have a will” … then we ‘d spank Scott for fibbing, and see who was designated as Administrator of the estate in her will. That individual would then have the court probate the will, and run an ad. Then the Administrator would have to sign the Purchase contract as” [Call], Executor of the Estate of Momma”, and offer your home and distribute the revenue to the sibling/heirs as explained in mother’s will.
In the meantime, do not forget the upcoming foreclosure auction either. It’s a race between the probating and the foreclosure to see who will strike the ‘goal’ first. So the financier (she can state she’s a good friend of Scott, simply assisting) will have to talk to the lender or their foreclosing attorney, in order to stall the auction.
She’ll have to get a ‘declaration of account’ to find out exactly what the loan balance is, as well as exactly what the back payments, charges and attorney charges add up to. These additional fees might be paid by the investor as preparation for a subject-to purchase. The danger is that if there is no will AND the sibling/heirs could not reach a fast agreement on cost, she ‘d need to keep making month-to-month payments to the lending institution to prevent foreclosure however she wouldn’t yet own it until (hopefully) the siblings reach agreement and designate Scott as Administrator.
I can hear you saying “however the investor could pursue a short sale purchase direct from the lender, and not stress over all these siblings and probate problems” … issue is she can’t get all the customers (mother’s deceased) to sign all the short sale paperwork, and she doesn’t yet have the property successfully probated to have a brand-new legal Adminstrator/Executor that might sign either.
So no one can yet lawfully sell, nor indication short sale paperwork until either estate is probated or the loan provider forecloses and takes back ownership of the home … the clock is ticking … we will see.
Best of success & abundance,