DEAR BOB: My 90-year-old mother-in-law has recently moved permanently into a nursing home. She has a new reverse mortgage on her free-and-clear home to pay her living costs. My husband will inherit her house when she passes on. At that time, we plan to demolish it and build new. What are the financial ramifications of renting the house to tenants until she passes away? He is reluctant, whereas I hate to see a nice house sitting there vacant that can bring in $2,000 monthly rent. –Elaine H.
DEAR ELAINE: Bad news! Because your mother-in-law permanently moved out of her principal residence, her reverse mortgage will become due and fully payable in full after 12 months of her non-occupancy of the house.
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Reverse mortgage lenders periodically check up on their borrowers to see if they (a) are still alive and (b) are occupying their primary residence (except for absences less than 12 months).
If the house is rented to a tenant, when the reverse mortgage lender discovers the owner no longer lives there, the lender can require the loan balance be paid in full or it will be put into foreclosure. For more details, read the reverse mortgage documents and consult a local real estate attorney.
JUDGE CAN’T FORCE YOU TO BUY OUT A CO-OWNER
DEAR BOB: My sister and I inherited two parcels of land. She wants me to buy her out. But I can’t afford to do so. I live on one of the parcels as my residence. She says she can go to court to get a judge to force me to buy her out. Is this true? –Josh S.
DEAR JOSH: No. I am not aware of any state with a statute allowing a judge to force one property co-owner to buy out another co-owner.
However, your sister might be thinking of a partition lawsuit. Virtually all states have partition statutes where one co-owner can bring a lawsuit to force the sale of jointly owned property. But if you want to keep the property after a judge orders a partition sale, then you would have to figure out a way to buy out your sister’s half. For details, please consult a local real estate attorney.
WHAT TO EXPECT WHEN YOU PAY OFF THE MORTGAGE IN FULL
DEAR BOB: I recently paid off my land. The sellers sent me the original promissory note marked “paid in full” and signed by the sellers along with the original deed of trust and request for full reconveyance, signed and dated by the sellers. What do I do now? Or do I have to do anything? –Kim B.
DEAR KIM: You must act to clear the recorded deed of trust security instrument from your title. This is done by taking the request for full reconveyance form to the trustee named on that document, paying the fees, and making sure it gets recorded to clear that deed of trust from your title.
If your lender had recorded a mortgage, the document to be recorded is called a satisfaction of mortgage.
Don’t let this slip by. It is extremely important to take care of this now to clear your title. If you fail to act now, when you want to sell that land you could have a nightmare on your hands if the trustee and/or your sellers can’t be found.
That happened to me when I bought my house. Fortunately, my sellers were able to locate their private party lender who failed to clear the title when the sellers paid off a second mortgage.
IF EX-TENANT CAN’T BE FOUND, GO AFTER CO-SIGNER FOR DAMAGES
DEAR BOB: My son and I own two rental houses in a college town. A property management firm handles them for us. We had “the tenants from hell” who were finally evicted after several months of no rent payment and some extensive damage. The property manager finally got around to filing a lawsuit. But the court date has been postponed because they couldn’t locate the ex-tenants to serve them. Couldn’t they have served the co-signer parents of one of the tenants? –Ken C.
DEAR KEN: If your tenants from hell were college students, they probably have zero assets. But the parents likely have assets and will probably pay up to avoid hurting their credit ratings.
Can you say “bad management company?” It sounds like that’s what you’ve got. The management company should have served the co-signer parents. Forget about trying to find those ex-tenants who are probably judgment proof.
Now you know why I recommend managing your own properties, which should be no more than an hour’s drive from your home. For more details, please consult a local real estate attorney where the properties are located.
WHAT IS BEST WAY TO PASS HOUSE TITLE TO HEIR?
DEAR BOB: What is the best way for my grandfather to pass the title to his house to me? –Chris T.
DEAR CHRIS: To avoid probate, your grandfather should have a revocable living trust, and then transfer title to his house and other major assets into his living trust. Then he maintains control of his assets during his lifetime.
After he dies, presuming he hasn’t sold the house, the successor trustee (probably you) can transfer the title without probate to whomever was designated in the living trust to receive the house. More details are in my special report, “24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.
DON’T ACCEPT QUITCLAIM DEED WITHOUT OWNER’S TITLE INSURANCE
DEAR BOB: Eleven years ago, my boyfriend at the time bought a condo for my children and me to live in. The purchase was in his name because my credit was poor at the time. He bought it with the intent that someday when my credit got better I would get my own mortgage and put the condo in my name. I have paid the mortgage for the 11 years. The only thing he did was pay the $5,000 down payment and use his credit to buy the condo. We broke up in 2000. He says our agreement is still the same. I still live in the condo, making the mortgage payments. My credit is now excellent. How can I get the title into my name? I think he is expecting to make money on this. But I don’t think it is fair for him to profit since all he did was pay $5,000 and let me use his good credit. Can he give me a quitclaim deed to transfer title? –Sandra F.
DEAR SANDRA: Yes, he can sign a quitclaim deed to you. However, be sure to have this handled by a title insurance company or title attorney.
The reason is you need to buy an owner’s title insurance policy to be certain you obtain marketable title. You don’t want to get stuck with any of his judgments, liens or other obligations that might have attached to the condo. For full details, please consult a local real estate attorney.
CAN INHERITED PROPERTY BE SOLD OFF PARCEL BY PARCEL?
DEAR BOB: Several years ago, I inherited a house located on 1.25 acres of land. An appraisal was made to establish the new basis stepped up to market value at that time. The land is divided among three separate deeds. Would it be possible to sell the three pieces of land separately? How would one establish the stepped-up basis for each parcel when the appraisal was based on the totality of the property and the house? –Ed A.
DEAR ED: Yes, you can sell each of the separate parcels individually. I recommend obtaining a new professional appraisal to allocate the stepped-up basis to each of the separate parcels.
HOW TO DEED HOME TITLE BACK INTO YOUR LIVING TRUST
DEAR BOB: When we refinanced our house recently, the mortgage lender insisted on taking the title out of our living trust. How do we get the title back into our living trust to avoid probate? –Ann J.
DEAR ANN: The title attorney or title company who handled the refinance should have asked if you wanted the title transferred back into your living trust. It is usually a simple matter to execute and record a quitclaim deed from yourselves back into your living trust. A local real estate attorney can provide full details.
The new Robert Bruss special report, “Five Easy Ways to Buy Your Home and Investment Property for Nothing Down,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
