Real Estate Question

[orignas 0]

I have a real estate question that I need help on rather quickly.

Friday I learned that I was 1/16th owner of a property my father owned. He died several years ago. His wife or gf has been living in the home since he died. She wants to refinance the home. I was told she can't do that unless I sign a Quit Claim Deed, relinquishing my ownership for $1. I have no idea what the property is worth or how much equity is in it. They were living there for something like 15 years.

What are my options and the tax implications?

Would it be better to sell my interest for $1 and take a loss write-off?
Could I maintain 1/16th ownership and cash that out when the wife dies? (She's late 60s or early 70s) Would I be asked to pay 1/16th of mortgage, taxes and insurance for the past several years? (Even tho I did not know I owned part of this property til last Friday?)
Could the refinancing be used to buy me out?

A slight complication is that one sibling is no where to be found for the past 25 years or so. No one knows if he's dead or alive. So he won't be signing a Quit Claim Deed. What happens to his partial ownership?

[NWFlyer 2]

That sounds like a fairly complicated request that you might want to consult a real estate attorney about, not a skydiving board. Maybe there's someone on here with some expertise, but you're probably still better off consulting someone who knows the local laws and regulations.

"There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences." -P.J. O'Rourke

[FrEaK_aCcIdEnT 0]

I agree, i thought this was going to be something easly answered. boy was i wrong!

ExPeCt ThE uNeXpEcTeD!
DoNt MiNd ThE tYpOs, Im LaZy On CoRrEcTiOnS!

[Douva 0]

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I have a real estate question that I need help on rather quickly.

Friday I learned that I was 1/16th owner of a property my father owned. He died several years ago. His wife or gf has been living in the home since he died. She wants to refinance the home. I was told she can't do that unless I sign a Quit Claim Deed, relinquishing my ownership for $1. I have no idea what the property is worth or how much equity is in it. They were living there for something like 15 years.

What are my options and the tax implications?

Would it be better to sell my interest for $1 and take a loss write-off?
Could I maintain 1/16th ownership and cash that out when the wife dies? (She's late 60s or early 70s) Would I be asked to pay 1/16th of mortgage, taxes and insurance for the past several years? (Even tho I did not know I owned part of this property til last Friday?)
Could the refinancing be used to buy me out?

A slight complication is that one sibling is no where to be found for the past 25 years or so. No one knows if he's dead or alive. So he won't be signing a Quit Claim Deed. What happens to his partial ownership?

CONTACT A LOCAL REAL ESTATE ATTORNEY! The best solution to your dilemma is going to depend on what state the property is in, how long the wife/GF has been living there, and how much equity is in the house. Only a real estate attorney (not an agent or broker) familiar with real estate law in that state is going to be able to adequately advise you on a course of action.

I don't have an M.D. or a law degree. I have bachelor's in kicking ass and taking names.

[Deuce 1]

I'm a Realtor, not a real estate attorney (get the advice of a real estate attorney!)

That said, your 16th ownership has put a "cloud" on the title to the property that can't be cleared (the property can't be bought or sold or have any loans made on it) until you have "quit your claim" on it.

So, if the house is worth $100,000.00, you have a valid $16,000.00 claim on it. You are being asked to "sell" or "quit" your claim (Quitclaim) for $1.00.

Do the math.

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[IanHarrop 37]

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I'm a Realtor, not a real estate attorney (get the advice of a real estate attorney!)

That said, your 16th ownership has put a "cloud" on the title to the property that can't be cleared (the property can't be bought or sold or have any loans made on it) until you have "quit your claim" on it.

So, if the house is worth $100,000.00, you have a valid $16,000.00[/S] $6,250.00 claim on it. You are being asked to "sell" or "quit" your claim (Quitclaim) for $1.00.

Do the math.

Did the math - fixed it for you - he has a 1/16th ownership - not 16%

Edit to add

"Where troubles melt like lemon drops, away above the chimney tops, that's where you'll find me" Dorothy

[tigra 0]

OK, not an attorney, but I do closings for a living and I've taken a few classes. I've come across similar situations in the past.

First off, there are a few ways a married couple can hold title to a piece of real estate. Based on the situation you describe, it sounds to me like they were "tenants in common". If they held the property as "joint tenants" or "tenants by the entirety", 100% ownership would have passed to her upon his death, with or without a will. (As far as I know, that applies in any state.) With tenancy in common, if your father died without a will, his wife would receive a certain percentage-her half which she already owned and perhaps 50% of the remaining half. So the remaining 25% would be split among the remainder of his heirs, and that's where your 1/16th is probably coming from.

A very common problem I have seen is unqualified people preparing deeds and not specifying how they want title to be held. (Sure, its a "fill in the blanks" form, but there are consequences for doing it incorrectly.) Many people do not understand that if it isn't specified, tenancy in common is automatic and that sounds like what your father's wife is dealing with now. Without QC deeds from ALL the heirs, she will have a very difficult time doing anything with the property. (selling or refinancing) And that includes the sibling who can't be located. She might need to go to court to resolve the issue, or set aside funds for the missing heir's "share" of the property. (which would probably be based on what it was worth when your father died, and not today's market.)

Do you know what your father's intent was with regards to you and this property? You could take the "high road" and assume he meant for the house to be hers alone, and sign the deed she's asking for. Or maybe you know your dad wanted you to have something- you could hire your own attorney and see what you need to do to get your "share" of your father's estate. You should verify the tax consequences of either action- my assumption is if you take no money from the house, you should not be taxed, but I really don't know.

As far as the mortgage and property taxes and homeowner's insurance? Well, it all needs to be paid and there are consequences if they are not. While you may not be legally obligated to pay the note, the bank can still foreclose on the property, and you can also lose the property over unpaid RE taxes. If you want to keep that 1/16th interest, it may be in your best interest to make sure these items are kept current.

[warpedskydiver 0]

ask law rocket I am a land surveyor but he would be the person to ask...quit claim deed in consideration of money is the way it is handled

[Nightingale 0]

You need to talk to a real estate attorney, preferably one that also specializes in tax law. You don't want to get stuck in the quagmire of gift taxes, write-offs, and such. I remember enough from my income tax law class to know that this could be a real mess if not properly handled.

[orignas 0]

Thank you for your replies, especially tigra.

I kind of know I should talk to professional paid help, but this was Sunday when those folks are not available.

I don't want to put this elderly woman (who I have never met) out on the street. I also don't see why she doesn't just sell and move into a place she can afford. The generation she comes from has that ideal that women 'marry a man to take care of them'.

Anyway, if the home is $100K then I'm looking at throwing away $6250, or at $200K throwing away $12,500 for a buck. Does that make any sense to anyone for someone you have never met?

I'm just looking for a way to accomadate her wishes 'to have lower expenses' and still cash in on my inheritance, now or later. I don't need the money now, I can wait.

[Guest 1010]

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Anyway, if the home is $100K then I'm looking at throwing away $6250, or at $200K throwing away $12,500 for a buck.

Actually, you don't know that at all except the "for a buck" part. The information provided by people here has been based on assumptions they had to make to respond to your post ... the amounts involved could be quite a bit more or less than above ... hence the common suggestion for you to speak to a RE atty about it, which is what you should do.

You can have it good, fast, or cheap: pick two.

[JohnMitchell 14]

Find a real estate attorney. All jokes aside, a little time and money spent with a lawyer can be soooo worth it. I've had lawyers save me thousands. . . .

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[Deuce 1]

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Thank you for your replies, especially tigra.

I kind of know I should talk to professional paid help, but this was Sunday when those folks are not available.

I don't want to put this elderly woman (who I have never met) out on the street. I also don't see why she doesn't just sell and move into a place she can afford. The generation she comes from has that ideal that women 'marry a man to take care of them'.

Anyway, if the home is $100K then I'm looking at throwing away $6250, or at $200K throwing away $12,500 for a buck. Does that make any sense to anyone for someone you have never met?

I'm just looking for a way to accomadate her wishes 'to have lower expenses' and still cash in on my inheritance, now or later. I don't need the money now, I can wait.

You are answering your own questions (and sorry for the original math mistake, thanks for the correction) . Your benefactor wanted you to have 1/16th of that property. If you want to sacrifice it, that is your business.

But if it was paid off, now the heirs of the new owner are going to benefit from you quitting claim.

I suggest you consider you getting paid off with the new refinance. Particularly if it is a reverse mortgage.

[cocheese 0]

When i was into real estate and insurance, most people got great advice form their barber, doctor, or uncle Joe who used to dabble in the game.

[RhondaLea 3]

What state is the property in? Where was the will probated? That would be a start.

Unless all the heirs to this property are willing to quitclaim their interest, someone needs to file a partition action. Once that's resolved, if this woman wants to stay in the house, she's going to have to pay everyone off, or the house can be sold.

As for taxes, unless it was a very large estate (the amount depends on the year he died, but unless it was quite a few years ago, figure at least a million; last year it was $1.5M, this year it's $2M), or unless the state he lived in has a separate estate tax, you shouldn't have much of an issue with inheritance or gift taxes.

There are other issues, but they're relatively minor. You do need a real estate attorney, and it would help if s/he has some expertise in wills, trusts and estates.

Edited to add: You can get a ballpark value of the property by checking with the tax assessor in the county where the property is located. Depending on where the property is, you may be able to find this information online.

rl

If you don't know where you're going, you should know where you came from. Gullah Proverb

[Kidd 0]

Orignas- Tigra and Deuce have good advice here. I'm a Mortgage Banker and handle loans in all 50-states and might be able to help a little. We always recommend talking with a realestate attorney to keep yourself protected and to guide you through the legal issues involved. Shoot me an email if you'd like more information, I'll send you my phone number.

[tigra 0]

Good luck. Hopefully you'll be able to work something out with her, but before you agree to anything you really need to speak with a professional. And that's just common sense. I wonder how she would feel if the situation were reversed and HER children were being asked to sign over their inheritance without question.

Its funny- your situation reminds me of my family- I haven't spoken to my father in years, never met his 2nd wife, and I've got a brother who would be extremely difficult to locate. If he (my father) died without a will and left any type of estate at all, I'd be in the same situation.

[Deuce 1]

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Good luck. Hopefully you'll be able to work something out with her, but before you agree to anything you really need to speak with a professional. And that's just common sense. I wonder how she would feel if the situation were reversed and HER children were being asked to sign over their inheritance without question.

Its funny- your situation reminds me of my family- I haven't spoken to my father in years, never met his 2nd wife, and I've got a brother who would be extremely difficult to locate. If he (my father) died without a will and left any type of estate at all, I'd be in the same situation.

This is a great discussion, but Tigra, no, you probably wouldn't.

The Anna Nichole thing is going to the Supreme Court on some of that subject matter.

In most states, absent a will, the wife is the heir. It's something that drives remarried families nuts. Dad or Mom build a fortune and the family makes sacrifices to build it. The children think they have something coming. One parent dies and the surviving parent marries some Johnny-come-lately and cuts the kids out of the inheritance through a lack of a will, or despite one.

[tigra 0]

That does vary from state to state, and it gets complicated. (all the more reason for good legal counsel and planning for that what if......) In Illinois, if there are children invlolved, the surviving spouse is only entitled to 50% of the estate and the remaining 50% is divided among the children or their descendents. I don't know where the original poster is from, but the situation described sounds like the father left no will and owned the real estate as a tenant in common- not exactly a bequest, but an inheritance all the same.

Bottom line- if you die without a will the state gets to decide for you. But that is a whole different discussion. Originally, I was just trying to explain how that 16% interest might have come up and why the original poster just found out about it now, years after the fact.

Anyway, because of my family's situation, it struck a chord. No, I doubt it would happen to me, but it could.

[orignas 0]

Well, here's some more background on this. I haven't been contacted back from any RE atty yet, so this comes from the 2nd wife and her lawyer.

I'll tell ya straight out that this is very convoluted. In a nutshell, she and my father mis-managed their money and now there is this rather strange looking re-financing to help her get out of debt.

They bought the home as tenets in common 27 years ago. At that time they were not married. Several years later they married and 'thought' the property was converted to joint tenets (that's the story today anyway). The original purchase price was $75K. The original mortgage was paid off about 5 years ago.

In the meantime, they took out three loans on the home equity that total about $35,500.

This new refinancing is to consolidate those 3 loans. The interest rate is a whopping 12.9%. She says it's because her credit rating is very low. She didn't know very many details of the loan, you know like term length, ARM vs fixed or balloon payments. She did know that there are penalties for early payoff. Then she said the rate was fixed for two years and then it could change. That sounded like an ARM to me. I asked about balloon payments. She didn't know. Monthly payments would be $620 w/o taxes. Taxes run about $2900 per year. She earns about $35,000 per year. The loan is through a bank, not a mortgage company. She said she shopped around.

She paid off her car, so no monthly car payments.

The appraisal of the home today is $171,500.

She is 55 yo, not the age I mentioned before. She has no retirement accounts and says she'll be depending on SS for retirement.

She claims my portion is worth (171,500-35,500)/16 = $8500.00
That seems strange to me. Debt passes to the spouse, not the kids, right?
Shouldn't my part be worth 171,500/16 = $10,719?

She's asking me to toss her 8 to 10K because she screwed up her financial life.
I feel she and my father screwed up, I should not have to bail them out. Plus she's getting screwed by this loan anyway. There should be a better loan available.

She came across as an airhead, not knowing details of the loan and other details about how these debts came into being.

I'd rather just help her find a better loan that could also buy me out.

[Kidd 0]

This is a situation where she is about to get screwed. Which also means you will too. Anytime a borrower isn't sure about the financing they are getting they need to run. I know mortgage lending is very confusing to the public and her situation doesn't help matters. It appears as if she is setup for a sub-prime loan with a pre-payment penalty. That interest rate is very high. The loan officer is most likely taking her for a ride and will probably make several points in rebate in the proceess. Loan officers can get paid based on the rate she is given on a loan. Most states have very strict laws about predatory lending, some do not.
Usually when people say they shopped around, they might have called 2 or 3 lenders. The difficult piece is that slimy loan officers know how to talk around that and borrowers get confused and then screwed. It does not matter if she is talking with a major bank or a small mortgage broker yet alone someone on the internet. Never use someone that isn't recommended.
I'll be happy to talk with you if you choose. 1.800.778.6605 ask for Jerry. I've been a Mortgae Broker and Banker for over 8 years and nothing makes me madder than loan officer taking advantage of someone.

[tigra 0]

None of that surprises me in the least. You would probably be doing her a favor if you refused to cooperate. Sub prime lending has its purpose in the market, but it also has a real tendency to be predatory. I have seen a LOT over the years.

As far as your percentage- I don't know, but I think its more of an estate thing. The home is all that's left of his estate, so my assumption is your share is 16% less the debt. BUT, I could be totally wrong about that!

If she insists on going through with this loan, she can borrow enough to buy out you and your siblings as well. And next time she gets herself into trouble- like 2 years from now when her rate goes up and she can't afford the payments- she'll be on her own.

[orignas 0]

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None of that surprises me in the least. You would probably be doing her a favor if you refused to cooperate. Sub prime lending has its purpose in the market, but it also has a real tendency to be predatory. I have seen a LOT over the years.

I don't understand what you mean by sub prime lending.

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As far as your percentage- I don't know, but I think its more of an estate thing. The home is all that's left of his estate, so my assumption is your share is 16% less the debt. BUT, I could be totally wrong about that!

If she insists on going through with this loan, she can borrow enough to buy out you and your siblings as well. And next time she gets herself into trouble- like 2 years from now when her rate goes up and she can't afford the payments- she'll be on her own.

Turns out the loan is for $59k not the $35k debt. The extra includes some CC debit , a truck and some 'other' stuff. Then I said I don't feel that I have any obligation to bail you out of financial debts any more than a co-worker. What makes you think I'd help you out?

But anyway, I did forward some other contacts for better loan deals. But she's still under this ' I must sign' on Tuesday thought - otherwise everything goes down the toliet. The title company screwed up the title search and yet did not give her more days to resolve this. I don't know how many ways I can say 'you're getting screwed by the loan maker' before she believes me.

[Kidd 0]

Home loans are priced (interest rate) based on risk factor of the borrower and the property. When a certain level of risk is reached the loan is considered sub-prime. The most common risk factor that determines sub-prime is the borrowers credit and credit score. Or lack of. Other risk factors are: Type of employment (if any), investment properties, assets, amount of down payment and income to debt ratios to name a few.
Pretty much all sub-prime loans or "non-prime loans" have higher rates and penalties charged to the borrower if they pay it off early or refinance within a 2 or 3 year period. That can be several thousand dollars. These loans in my opinion can set a borrower up for disaster and as previously mentioned "do have there place". Most of these loans have teaser rates at the beginning and can double at the end of the 2 or 3 year period. Sometimes 5 years.
The best thing to do is find out why the borrower needs a non-prime loan and help them fix the issues so they can get a conforming loan and clean up the credit issues. Most loan officers don't want to take that time plus they can make much more money on these loans over a standard "prime" loan.

Last summer I worked with a fellow Skydiver at our DZ and we worked the loan guidelines for a few months to get the better loan program. We even used "Stated Income" since he was paid cash for his working at the DZ. A little patience went a long ways and saved alot of money. Now he won't have to worry about rates changing and not being able to afford the payment in 2 years.

In this case it would be interesting to find out why the loan officer is wanting a sub-prime loan and attempt fixing the problem first. (Granted this may have been done already). However, it's fairly standard for some lenders to rush things along before the borrower catches on. Most states have a 3-day right of rescission to give a borrower time to change their mind after signing.