Q: What happens to a mortgaged property when homeowner dies intestate and nothing is filed in probate.
What if someone is living in property? I.e... Relative, renter, caretaker
A: Dear Van Nuys:
When a person dies, their debts live on. This includes mortgages, which are subject neither to the one-year universal statute of limitations from date of death for most creditors (which excludes various government claims) or the creditor's claim procedure. This is because the mortgage or deed of trust "attaches" to the property, providing the lender an interest in the property.
If nothing is done, the bank will not foreclose unless payments are not being made in a timely fashion. (Reverse mortgages work differently.) But, an occupant can be evicted by the estate representative at any time, unless they have a lease. Even then, they are subject to eviction when the lease expires.
If no one is making the payments then the bank will foreclose. After the foreclosure, the bank or purchaser at the foreclosure sale will evict the occupants. Any excess (that is the amount the sale price exceeds satisfying the existing mortgage and costs of sale) would be paid over to the Decedent's estate.
It is generally better for someone to step up and probate the estate, as a market sale generally provides a better price than a foreclosure sale. Although there is a priority as to who serves as the estate representative (executor or administrator) anyone can ask to be appointed. Once appointed, the representative can work with the lender to allow sale to occur in the probate matter, as opposed to a foreclosure.
There are certain protections for family members who are entitled to distribution of the property that allow them to take the property subject to the existing mortgage. (Reverse mortgages work a bit differently.)
You, or the person you are asking this on behalf of, should discuss this with a qualified attorney who can provide a better picture of what the future may hold. And, if the occupant becomes the administrator (estate representative for an intestate estate), they are entitled to a statutory fee even if they are not an heir to the estate.
If you do not know where to find an attorney, you can try your local county bar association's attorney referral program. Most county bar associations operate a referral program where, for a small or no fee, you receive a consultation with an attorney to discuss your case.
Bill Sweeney agrees with this answer
A: This is a usual type of situation and hopefully the heirs of the homeowner are on top of the situation. The mortgage and the obligation to make mortgage payments stays on the property after the death of the homeowner. If the payments are not made late charges will accrue and eventually the mortgage lender will foreclose. The house could be lost to foreclosure unless the legal deadlines and legal notices are tended to.
It doesn't matter if anyone is living in the property. The lender will foreclose in any situation if not paid. If there is a foreclosure sale then whomever is living on the property will eventually be evicted by whomever buys the property at the foreclosure auction.
Somebody needs to file a probate court proceeding in the county where the homeowner died. The point of probate is to put somebody in charge of the property and other accounts and assets of the deceased person. Ultimately, the assets are sold and/or distributed through the court probate process after all debts and taxes are paid. The distribution is to the heirs in percentages according to the laws of intestate succession found in the probate code.
Any interested party can file the probate and take charge of the situation. That is typically a surviving spouse or surviving children or parents.
David L. Crockett, attorney/CPA/broker, Martindale Hubble AV preeminent rating.
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