DEAR BERNICE: I appreciate your helping people like me who are like babes in the woods when it comes to real estate stuff. My mom died recently in an out-of-state nursing home. I am the executor of her estate. Mom had no money and neither do I, but her house is paid for. That’s a good thing because I am recently unemployed.
The house sits on three-fourths of an acre that was originally two separate lots. The roof has major leaks, one of which caused a 2-foot-by-4-foot hole in the ceiling. Possums have taken up residence in the attic. They stare at me with impunity. Raccoons are now living under the house. I use bug spray to keep them from moving into the main house.
The house, which needs paint inside and out, has original electrical wiring from the 1950s and three of the sinks are not working. Part of the front porch needs replacing. That would have to be repaired before I could move out my Mom’s grand piano, provided the movers could get through the clutter.
Medi-Cal is demanding reimbursement for Mom’s care. Unless I can get the house exempted, I will be forced to sell the property. My credit is zilch and I have no savings. Since the property was originally two lots, I was thinking it would be worth more if I could get the judge to approve dividing it again. I am guessing if I sold the whole thing as one lot I might be losing out.
Zillow says the property is worth about $272,500. That means it has lost about $65,000 in value this last year. I’m guessing that I would have to spend $10,000 for roof repairs and maybe another $10,000 for the other upgrades. Can I sell a house like this "as is" here in California? Do you think knocking off $20,000 would be enough? These are pretty much my options. I can’t rent out the home until I take care of the plumbing, wiring and heating deficiencies. Selling part of the property to a developer 18 months ago would have been easy, but not anymore.
If I do nothing, the state will replace me as executor and sell the house for whatever they want and leave me nothing at all. It has happened here before. Any and all advice would be appreciated. –Bill Q.
DEAR BILL: There are so many issues here that it’s hard to know where to begin. The first question is who has title to your mother’s property? You mentioned that you are the executor of the estate. Are you also the only heir to the property? Was the property conveyed to you in a trust? Do you need to go through a probate procedure to secure the title? These are all legal questions that should be addressed by an attorney. Unless you have clear title, it will be impossible to sell the property. Consequently, get the title issues resolved first. You will also need to chat with the attorney about the situation with Medi-Cal. …CONTINUED
One of the things that you will need for the estate is an accurate estimate of the property’s value. This will be required for tax purposes as well. In this case, relying on the online value provided by Zillow is inappropriate due to the double lot and the condition of the property. It’s impossible to tell whether the Zillow number is high or low. My recommendation would be to obtain a comparative market analysis (CMA) from at least three different experienced real estate professionals who specialize in your area.
Ask them to price the property with and without repairs. The problem with fixing up the property is that it takes money. Where are you going to obtain the $20,000 to do the needed repairs? Given your current financial situation, it’s highly unlikely that you could obtain a loan.
In terms of the lot being divided in two again, ask one of the Realtors to check with either the title company or the county recorder’s office to determine whether the property is still legally two lots. If it is a single lot, doing a new lot split is expensive. You have to obtain a survey; an attorney will have to draft a new legal description; and you will have to obtain two new title insurance policies, plus paying for a host of planning and other related fees. This process can take a very long time. If you do have two legal lots then you can sell them separately.
In terms of selling "as is," under California law you must complete a full disclosure of the property’s condition as per Civil Code Section 1102.6. In California, this is normally done with a "Transfer Disclosure Statement." Don’t try to hide any facts about the property. People will purchase almost anything if the property is priced correctly and the defects are disclosed.
It would also be smart to obtain some contractor bids to determine how much the actual repairs will cost. Buyers are usually a little bit more flexible on the price if they can gauge how much the repairs will cost.
If you are selling the property through the probate process, it may actually be easier to find a buyer. People who purchase probates are often comfortable buying properties that are in poor condition.
Bottom line — speak to an attorney about the title issues and how to best handle Medi-Cal’s demand. Once the title issues are resolved and you have an idea of what the property is worth in today’s market, then proceed with selling it. Good luck sorting through all these issues!
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.
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