Foreclosing before probate opens?

Question

Can a lender foreclose on a home if the owner is deceased and probate has not been opened? Or is it required that probate be initiated, and PR's assigned before the foreclosure can take place?

Ken M. · Answer

There are actually two different things.
1. Who owns the property
2. Who is on the loan
These are very, very different.

"Who can sell a property"
Only people on title, or
someone with power of attorney if the owner is still alive, or
if the property is in a trust, the trustee can sell, or
someone appointed by probate court.

If it it a Deed of Trust state, the lender can sell under certain circumstances, such as non-payment, to protect their interests. It is a process that requires following a specific set of steps determined by each state.

A quick search shows Hawaii is a Mortgage state. That means if the property is in Hawaii, the lender must sue to foreclose, which is a much longer process. A personal representative can be appointed by probate court even while the lender is going through that process. The property belongs to the estate and can be sold, even when in foreclosure, until the lender successfully completes a foreclosure sale.

It isn't hard for a relative to get appointed by the court and then they have legal right to sell along with the legal responsibilities of probating the estate

Many lenders will accept payment from relatives living in the property as though it were from the borrower

The clock starts ticking from when the first payment was missed.

Any missed payments along the way get added to the reinstatement amount.

Those debts do not go away, they just get added to how much you need to make the lender happy again.

Here is the procedure for Hawaii

https://www.alllaw.com/articles/nolo/foreclosure/hawaii-fore...

Chris Seveney · Answer

I believe it probate is not open then yes as the property is not in any probate case

Sean Dougherty · Answer

My question is this:

can they foreclose BEFORE the probate opens?

Ken M. · Answer

Your comment: "In all foreclosure cases I have seen where the borrower is deceased, the lender themselves must petition the court to open probate so that they are able to complete the foreclosure process."

Maybe that's a local thing.

It could be that since in a Mortgage you are suing someone and that requires proof of service. Because the borrower is deceased, they can't respond. The court may require locally that all foreclosures have to have proper notice to proceed. In a Deed of Trust, the borrower is giving authorization to foreclose for lack of payment with the Deed of Trust itself. No court order is required. That is essentially the difference between a Deed of Trust and a Mortgage.

I have only bought pre-foreclosures in Deed of Trust states. So, my experience applies to Deed of Trust foreclosures.I may misunderstand the question, but I have personally bailed a dozen or so probate properties out of pre-foreclosure that already had a sale date set. The borrower(s) had become deceased and the heirs had no clue that the mortgage still needed to be paid. Or, they couldn't afford the payments or simply wanted to sell the property.Depending on the circumstances, if the lender was notified of the death of the borrower and proper notification had not been given to the heirs by the bank of the foreclosure, the foreclosure would simply be started over again. But, it would proceed. If the lender knew about the death, they would first find out if an heir was living in the property and willing to make the payments, if yes, they typically would accept the payments, if no, they would proceed with the foreclosure.Some states have "small or limited" estate provisions where if the total value of the estate is below a minimum, they have a simpler probate process. In most states it's illegal for a non-attorney to receive compensation for filling out and applying for personal representative for someone else. But, generally it's legal for an heir to fill out and submit the paperwork for themselves.Probate is tedious and most people don't want to or can't do the paperwork and/or take the time. Taxes have to be dealt with and all creditors and debtors and heirs have to be identified and notified. Laws have to be followed. It varies a little by state. All this and the foreclosure process still moves forward.

The solution I've applied a couple of times is to bring the loan current, even though I didn't own the property, there wasn't a court appointed personal representative and no one had legal authority over the property yet. Very advanced investing and very risky. The lender has to accept the payment and they are not required to. Getting a reinstatement amount when you are not authorized on the account requires an advanced investing technique.

Probate and foreclosure are the most technically advanced properties I've been involved in. You can spend a lot of time on them and they are very easy to blow up.

If the loan is a reverse mortgage there are additional complications.

I would guess that a probate mortgage foreclosure has most of the same complications as a probate Deed of Trust foreclosure, but more time to work on them,

Sean Dougherty · Answer

Thanks again Ken. That is what I thought as well. Obviously property cannot be sold by the heirs unless they are Personal reps to the estate.

Still though I have alot of experience locally with probate/foreclosure cases. In all foreclosure cases I have seen where the borrower is deceased, the lender themselves must petition the court to open probate so that they are able to complete the foreclosure process.

I have never seen a case where the bank was able to foreclose on a deceased borrowers home without probate opening and serving the papers to the PR or a special administrator.

I have looked at many proceedings and as soon as the foreclosing lender becomes aware  borrower has passed away they then contact the PR. Or if probate is not yet opened, the lender themselves become the petitioner.

Any thought on this?

Any feed back on this?

Ryan Coon · Answer

I would second the comments of @Ken M., absent the property being owned by a living trust, it is generally not possible to transfer real estate where the owner is deceased without opening a probate and petitioning the court to appoint a personal representative (PR). Once appointed the court will issue what's called "letters testamentary" which enable the the PR to administer the business and assets of the deceased, such as the transfer/sale of real estate. It is important to note that the PR does not generally have unfettered power but must follow the terms of the will (if there is a valid will) or the states intestate statutes (if there is no will).

Some state, including Hawaii allow the use of a "small estate affidavit" which can be used to administer a small amount of assets outside of probate if the entire estate is under a certain value ($100k in Hawaii) but like most states, Hawaii does not allow you to use a small estate affidavit to administer real estate. Thus, either way you're almost certainly going to be pigeonholed into probate unless the assets were owned by a valid living trust.

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Sean Dougherty · Answer

Thanks Ken I appreciate the reply. Considering that they can foreclose even before probate is opened,  this puts the airs in more urgency to sell before the foreclosure.

Are the heirs able to sell the home if there is no probate opened and PR assigned?

Foreclosing before probate opens?

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