NEED HELP WITH FIRST WHOLESALE DEAL-PROBATE ISSUES

[Sherri Southwell]

I have a property (vacant about 4 years) in probate with some title issues.  There are no heirs and is being handled by an estate atty with the assistance of a RE broker.  There are $5k+ in back taxes owed.  The estate atty/RE broker are working to determine an asking price.  Ok, the fun part:  According to the RE broker, the probate issues stem from a reverse mortgage taken out by the deceased.  At death, the mortgage balance was $0 but then the mortgage company attempted to foreclose alleging that they paid the deceased almost $500k.  There is no proof of any payments to the deceased and judges have repeatedly ruled without prejudice for the estate but the mortgage company has continued to appeal.  The title company won't offer title insurance until there is a ruling with prejudice to keep the mortgage company from filing in the future and any heirs from coming forth later.  The house itself is ok but there is are some big ticket items that must be addressed to make the property whole.  Such as the pool, it has cracks and popped up; the dock must be rebuilt; new a/c; kitchen needs makeover. Structurally, it actually looks ok.  Input?  Suggestions?  I think there is potential as it's in a desirable neighborhood and not in overall bad shape.  I just need to know how to make this work.  Thanks!

[Dana Whicker]

Hopefully Rick Harmon will see this.  Something seems fishy about the dismissals on the reverse mortgage cases but it could be simply that the defendant (the estate with no heirs) is not putting forth the effort of a proper defense.  That's speculation of course and I'm probably talking over my head as I'm not an attorney.

[Rick H.]

@Sherri Southwell - suggest you double check to understand how a reverse mortgage works. 

In essence, it's an extension of credit to a qualifying senior who makes no payments as long as they remain in the property, until death. Interest continues to accrue and is added to the total outstanding debt.

Death or extended move triggers a "non-curable" breach, also known as a maturity event in RM lingo. Essentially, the loan is called and the balloon payment becomes due. 

Reinstatement is not available because of this balloon.

There was a guy going around so cal a few years ago convincing people to open probate and do a short sale when estate properties were upside down. 

The only one who benefitted were he and his followers; he succeeded in pissing off all the judges such that now we can't get priority of estate costs as superiority debt. Of course, I modified my documents years ago anticipating this issue and act accordingly.

If you are a real investor with money and the ability to close, you might find an opportunity when eventually listed. Absent that, I'd say your chances are slim.