Why Grandma, What big eyes you have………
Run kid, it’s not Grandma, it’s her bank!
If real estate is passed to an heir in probate, the ownership is effective on the date of death. You can end up like the red riding hood in the picture at the bottom of the page, instead of the red riding hood in the picture at the right. A completed probate is, however, necessary to pass clear title. The real estate is also subject to any home loan secured by the property.
Since there is a four month period for creditors to submit claims to the estate, usually a lender will be patient even if payments are not made during this period. This does not necessarily mean the heir can assume the loan. The lender will evaluate the heir as if they were applying for a new loan. Credit history and the amount of equity in the property will affect the heirs’ ability to keep the property. A house that is worth less than the debt owed on it will have to be sold in a ‘short sale’ to get the lender’s release in exchange for payment of all the net proceeds of the sale. Unfortunately, in this situation an heir would have to buy the house from the bank. See an attorney who understands estates and real property law before making any decisions regarding such property. Pass this article, “Save the House,” by Spokane Probate Attorney Steven Schneider, to those you feel would find it useful.