I Loaned Money On A Property, Borrower Defaulted, Then Passed Away

[John Thedford]

The title pretty much says it all. I hired a law firm to foreclose. I received a letter in the mail yesterday from the attorney handling the estate. Now what? What should I do if I want the property? Any comments, suggestions, helpful hints, or words of condolences to me as the lender?

Thanks!
MGJohn

[Rick H.]

My 35 cents* worth: Been making mortgages to probate estates and trusts forever.

@John Thedford - The basics have been covered here. Although your borrower pledged the real estate as collateral, it's unlikely that you will become the owner. You do have the right to continue pursuing foreclosure of the security instrument (mortgage) however at a 40% LTV there are likely to be other bidders.

As for someone else giving you a deed-in-lieu, well, that probably won't happen either. In order to pass marketable title, that person will need capacity, powers and authority to transfer, as typically provide via probate. Why would anyone open probate in order to give you the property? More likely, someone will open probate in order to devise a plan to either save the property from (your) foreclosure and sell it or distribute it to heirs or beneficiaries.

That's not to say that there are no profitable plays for you (I consider myself a master at these) however you'll be in an adversarial position with the estate and not held in high regard by the judge who will be asking why you're not just happy to get your investment back. Not my position, mind you, but how unsympathetic a court will look at your actions.

Good luck. Do the right thing. You'll get richer in the long run.

*Used to be 25 cents, but due to inflation...