What To Do With an Inherited Condemned House??

[trippypea]

My MIL passed away last week. She was extremely secretive about finances. She went into a nursing home over 3 years ago and couldn't keep up with mortgage payments (somehow she got a bank to give her a mortgage at some point) and just stopped paying. She wouldn't talk about it with her children, so they just assumed that the bank would eventually foreclose on it. The house was never worth a lot, and on top of needing tons of repairs, she was a hoarder. They went into it once about two years ago to look for pictures and there had been food left in the refrigerator and all over the floor and counters, and it was really just gross. Since then, it has been condemned, and someone (I assume the bank) padlocked the doors.

Now looking at her will, we find that she left the house to my two daughters, with DH as trustee until they are 21. From what my BIL can find out, MIL's name is still on the house. There are back taxes owed from last year and there would be a bill from this year. We found a bank document, "Cancellation of Debt" from the bank that held her mortgage to the tune of almost $35,000 and if you look up her property, there was a Satisfaction Piece filed at the same time as the cancellation of debt. Zillow lists the value of the house at only $40,000, and they have no idea what the inside looks like.

Now what? We do not want to put a single cent into paying the back taxes and cleaning it up enough/repairing it enough to get removed from condemned status. I can't imagine it is worth much in the condition it is in, and would probably be a tear down.

You don't have to accept an inheritance if you don't want it, right? What do you have to do to get out of it?

[hoops902]

Personally, with the way you've made it sound, I'd disclaim it (i.e.  not accept it).  That said, I don't know how that works with minors disclaiming things with a trustee and all that.  

[Deleted]

Aug 20, 2019 15:47:40 GMT -5 trippypea said:

You don't have to accept an inheritance if you don't want it, right? What do you have to do to get out of it?

Nope.  I'm planning on saying hell to the no on a couple time shares.

[weltschmerz]

Is the land it's sitting on worth anything?

[haapai]

Contact an instate lawyer to figure out the ins and outs of disclaiming an inheritance.

If that fails somehow, or if the house is on valuable land, particularly rural land, you might be able to gain something by getting the local fire brigade to use it as training. The township that my parents live in has used several houses in this manner, although I'll be the first to admit that I don't know the nitty-gritty. A lot of the properties that once had training houses on them seem to have eventually become township parks, so there were probably some tax angles or destruction-cost angles being played.

[geenamercile]

How much would the taxes be?  Can you set it up for an as is auction, get enough to cover the taxes and then put the rest into a fund for your daughters.  I would think the back taxes on a 40,000 house would only be a thousand or so.  Find a flipper to take it for 20K and you would still have a bit for your daughters.  I know we have signs up around here that say will pay cash for house and condition.  I would at least see what they would offer.  

[haapai]

Perhaps the question that we should be asking is "How much time do you have to make up your minds?" There's a clock ticking on refusing the inheritance and a clock ticking on tax foreclosure.

It may take some fast-stepping to avoid becoming the trustee to a white elephant property. In my state tax foreclosure takes about three years of unpaid taxes, so you could be facing an absolutely miserable damned-if-you-do and damned-if-you-don't situation. You could be accused of negligence if you allow this property to enter the next stage of tax foreclosure and you can be similarly damned if you accept it on behalf of your minor children.

I suggest that you get cracking on what taxes are owed on this property, what the land is worth, what the tear-down costs are, what kind of time-lines you are facing, and several other headaches that I haven't even considered.

I'd also suggest documenting the hell out of the decisions that you make. Your children will want to know the details regarding why you let go of grandma;s land without anything to show for it. Even if the thought of hiring a lawyer to "ask" this question is anathema to them, they will still want to see some explanation.

Based on your description of the property, providing such an explanation may not be difficult. So just do it.

[haapai]

FWIW, Let me tell you a bit about my Great-aunt Elma. I rather liked my Aunt Elma. She was kind and patient with me and her house was terribly exciting to me. It was unlike any other house that I had ever seen.

I saw my first rat trap under my Aunt Elma's porch. She was the first person to tell me that marigolds planted around a garden deterred caterpillars. Aunt Elma strung an electric wire around her garden. Aunt Elma had a piano in her living room and a set of narrow stairs that led to an impossibly small upstairs that I never saw anyone go up or went up myself. Aunt Elma's house had the widest floorboards of any house that I had ever seen. Aunt Elma was also diabetic and once, quite inadvertently and unobserved, showed me how a woman could pee standing up. She also liked to serve me full-sugar, Country-Time lemonade from the pre-mix canister, although she always claimed that she could not partake of the same. Even as a young child, this struck me as odd, as my visits were erratic and completely unannounced.

It should not surprise you to learn that not all of my other relatives were not quite as enamored with Aunt Elma as I was. The hostility ran so deep that I'm still uncertain how I was related to her. I think that she was my grandfather's half-sister but as time went on I was increasingly encouraged to think of her as my grandfather's cousin or the widow of someone who he was related to in a halfish or cousinish way.

Aunt Elma didn't have much money,
That's probably an insane understatement. The house that I was so enamored with was a tar-paper shack that had somehow been transported above the 45th parallel. It had absolutely no siding or insulation and I rather doubt that it had any sort of basement or tornado shelter. I don't know how she heated it and I'm not sure whether she had piped water, a hot water heater, or an indoor toilet.

In other words, Aunt Elma's house was a wreck, but I still questioned the decision to knock it down and felt that something had been lost by doing so. You might be doing your kids a huge favor by documenting the uninhabitable nature of the house that your "let go". Fond memories of the stubborn old bird can be very distorting.

[trippypea]

The thing is, we don't want ANY part of the house. My kids haven't seen their grandmother in 15 years (she was a bad person). We've kept them in the loop and they don't want to be saddled with it either. We've got lawyers working with us already, and I'm being told that they/we can disclaim it, but down the line, someone could file title action and cause problems for them. She had a small life insurance policy that belongs to a beneficiary and will be going towards her funeral costs, as will the small amount she has in the bank, but we will be paying for the balance of the funeral bill out of pocket. There are no other assets besides the condemned house and property it sits on. She does however, have a lot of credit card debt that she hadn't been paying on, plus the nursing home is probably owed money.

DH told her when we thought it was going into foreclosure that we wanted NO part of the house, and thought it would be over and done with by the time she passed. How can someone just force a financial burden on you without your say so?

Is there a way to wash our hands of it so we are free and clear of it?

[swamp]

Let it go for taxes 

[CCL]

Have you talked to the attorney about "refusing" it? How old are your daughters?

If there's any value in it at all I would think the executor would have to somehow sell the place and use the proceeds to pay back the debts.

[CCL]

Aug 20, 2019 20:50:13 GMT -5 swamp said:

Let it go for taxes 

What about all her debts? Shouldn't the executor verify the value and attempt to pay the debts with any money they can get for it?

[trippypea]

My daughters are older teenagers. DH is listed as trustee until they turn 21. They are currently trying to piece together what the debts are, which is proving to be difficult since MIL never shared any financial info with anyone, and wouldn't answer any direct questions about her finances. I have no idea how she finagled a cancellation of debt for her mortgage, unless the bank determined that the property wasn't worth the trouble and wrote it off.

I just don't want anyone coming after them (or us) for unpaid taxes or a blight on the community when we never agreed to take it in the first place.

[CCL]

Maybe the taxes aren't that far behind? Since she had a mortgage the mortgage company was probably paying the taxes. Until they cancelled the debt, anyway.

Can you look up any info thru the county's website?

I'd still talk to the attorney and see what your options are.

[Tiny]

On other peice of advice:   you should find out what the status of the house is AND what that status actually means.     A status of "condemned" might not mean it's a tear down.    It might just not have working heat or a working well or a working septic system.   The house MIGHT have some value to someone who is able to make it habitable again.      

(I did buy an uninhabitable house (it wasn't condemned as it had a functioning roof and wasn't boarded up) .   Not all sad and sorrowful houses are tear downs. )    

Don't just assume the house should be bull dozed - based on the legal words used to describe it.  

[haapai]

Sometimes condemnation is used as a mechanism for getting someone who can no longer live alone into a nursing home.

How good is your info on the current condition of the house?

I know that this is something that you passionately do not want to deal with given what you think about your MIL, the hoarding issue, the state of the house 2 years ago, and the bank's apparent forgiving of the mortgage. There are definitely lots of signs indicating that the house will be a wreck.

But the executor has to make sure. You (or more appropriately, your DH) could make the executor's job a whole lot easier by helping them verify the house's tear-down status.

[haapai]

Who is the executor?

You don't need to answer if this is information that you have deliberately withheld but if sure seems relevant.

You don't want to second guess your in-laws in the future or have any doubts regarding the decisions that they make. You also don't want to have doubts regarding the decisions of a lawyer who is handling the mess.

FWIW, this seems like the kind of case in which a named executor might consider refusing the role. Is that the case here?

[haapai]

Aug 20, 2019 20:40:03 GMT -5 trippypea said:

The thing is, we don't want ANY part of the house. My kids haven't seen their grandmother in 15 years (she was a bad person). We've kept them in the loop and they don't want to be saddled with it either. We've got lawyers working with us already, and I'm being told that they/we can disclaim it, but down the line, someone could file title action and cause problems for them. She had a small life insurance policy that belongs to a beneficiary and will be going towards her funeral costs, as will the small amount she has in the bank, but we will be paying for the balance of the funeral bill out of pocket. There are no other assets besides the condemned house and property it sits on. She does however, have a lot of credit card debt that she hadn't been paying on, plus the nursing home is probably owed money.

DH told her when we thought it was going into foreclosure that we wanted NO part of the house, and thought it would be over and done with by the time she passed. How can someone just force a financial burden on you without your say so?

Is there a way to wash our hands of it so we are free and clear of it?

I think that you got good advice here.  If your daughters disclaim the house it will probably become part of the estate and it may be difficult to convince creditors that the house was valueless.  (I'm assuming that the will did not name anyone that would get the house if your daughters refused it.)  Those creditors will be looking at Zillow and local land records and it may be quite difficult to convince them that the property wasn't worth something. 

The executor or co-executors will have to protect themselves against this possibility and this may mean shelling out of their own pockets.  Estates that do not include enough money for burial do not have enough money to reimburse the executor for expenses. 

ETA The struck-out statement is false.  Estate expenses have first priority, that would include executor expenses.  Burial typically comes next. 

ETA2 While the bolded statement is generally true the last word in it "them" referring to your daughters is goof unless your daughters are the executors.  Creditors that receive nothing from this estate and see that it was allowed to go for back taxes will sue the executor. 

[happyhoix]

Aug 20, 2019 21:18:22 GMT -5 trippypea said:

My daughters are older teenagers. DH is listed as trustee until they turn 21. They are currently trying to piece together what the debts are, which is proving to be difficult since MIL never shared any financial info with anyone, and wouldn't answer any direct questions about her finances. I have no idea how she finagled a cancellation of debt for her mortgage, unless the bank determined that the property wasn't worth the trouble and wrote it off.

I just don't want anyone coming after them (or us) for unpaid taxes or a blight on the community when we never agreed to take it in the first place.

I was the executor of my older sister's estate when she passed. DS was a cat hoarder and a regular hoarder. she also had health issues and hadn't been able to (or didn't want to) take care of her house for years. She threw kitty litter on the kitchen floor for a giant litter box. It had streamers of cobwebs imbedded with dust hanging from the ceiling and every picture frame and light fixture. The smell was so bad we had to wear Tyvek and respirators to go through the house.

We didn't want to have to deal with her home, but as the executor, I had to, since it was part of her estate, and her only asset that wasn't a bank account. Plus we wanted to try to find a painting our grandmother did, to give to one of the grandkids (after a good cleaning).

First of all, contact a realtor and see what the value of the property is. See if it could be sold as a tear down or as a house flip.  My sister's little 800 square foot shit shack on a 1/4 acre lot happened to be in a HCOL area not far from the river, and sold for 150K. We sold it as-is, since the basement was full of boxes and crates covered with black mold, and the upstairs contained 800 square feet of pee and poop soaked carpets that we just didn't want to deal with - and it got snapped up in a couple weeks, even with all that stuff inside.

Plus, the executor will need to dispose of the property before the estate can be finalized. If there are outstanding bills, the judge handling the estate will demand the house be sold and all her other assets liquidated to pay those bills, and to pay the estate lawyer fees. If you're not the executor you may be able to walk away from it (you need to ask a lawyer about that) but the executor won't be able to. If your MIL didn't name an executor, the state will appoint one (who will take a chunk of money for doing it) - but someone will have to do something with the house.

Sorry about your MIL, and sorry for the chaos she left with her house. I know I had a lot of bad thoughts about my DS while attempting to get rid of her house, her two junked cars and 2 yard boxes of junk we dragged out of her house to throw out. What a nightmare.

[trippypea]

DH and his sibling are co-executors (though MIL never asked DH if he wanted to do it, she just stuck him on there). They are going to take care of everything because there is no one else. My primary concern is getting this albatross out of my childrens' names. They are both college age and do not need to be declaring blighted properties on their FAFSAs, lol. If there is a way for the kids to disclaim it so it bounces back to the estate, I would prefer for it to be the adults responsibility and not theirs. If they were completely out of the picture, then we can figure out the rest.

As far as the property goes, it was condemned after MIL had to be taken to the hospital and the paramedics were obligated to report the conditions of the house. We have been in the house since then, so can verify the condition. And it's had an additional 2+ years to sit like that, so it hasn't gotten any better. I would imagine that it would have to be inspected in order to get it out of condemned status, and frankly, the house had structural issues (needed a new roof, basement took on water) 15 years ago, so I doubt any of that was remediated prior to condemnation.

There were unpaid back taxes from last year of roughly $700, which I am guessing is from the time the bank stopped paying for them. When the next tax bill comes, I imagine it will be about $1100 or so, based on what I can find online.

We were able to find the condemnation notice, and the city never filed a citation. I don't know what that means. If we got a realtor to assess value, I know you can't get a mortgage on a condemned house, but can one be SOLD as condemned? And can it be sold with the caveat that the buyer pay for the back taxes? Or would the back taxes have to be paid first AND the property cleaned up before sale?

IF we have to put money into it in order to sell it, if it sells, are we entitled to get our money back out of the sale BEFORE other creditors get paid, or are we out of luck? I don't want to have to pay thousands of dollars out of pocket for a debt that isn't ours so other debts that aren't ours can be paid...

[haapai]

Oh dear. I was so hoping that neither your husband nor his siblings were executors. Have they already accepted the job? If so, have they been briefed on how to resign?

If the estate is as insolvent as you make it sound, they have accepted ssignificant legal and financial risk mostly for the benefit of the creditors. (It sounds extremely unlikely that the assets of the estate are sufficient to satisfy the creditors in full. If this is the case, the creditors will be paid in order of priority with the last class of creditors receiving only partial payment. Beneficiaries (i.e.) your daughters, will get nothing.)

And it gets worse. If the estate has almost no assets, the expenses that the executors incur to secure the estate and quite frankly cover their asses may not be reimbursed.

There are some great synopses of the duties of executors available on line. State specific ones also exist. All of them make it very clear that no one can be forced to serve as an executor.

You may also want to bone up on the priority of debts or who gets paid in what order from an estate. This is very state-specific, but there are some general guidelines that you should find helpful. When you find them, make sure that you are reading the guidelines for an estate that has a will, not an intestate estate.

You may also want to google insolvent estates. Again, there are general guidelines that are well-written and quite understandable and state-specific ones that may be goobbly-gook.

I'll try to find some of the links that I found interesting yesterday but it may take a while. They may help you understand what your husband is going through and the reasons why both he and his brother might want to refuse to serve as executors.

[gacpa]

I am thinking the unpaid property taxes will have to be paid before the property can be sold.  The taxes could be paid out of the closing statement if there is a buyer for the property and the taxes would come out of the seller's proceeds.  I don't think any buyer could gain good title/ownership without the back taxes being paid up.  The property tax issue would factor into the sales price the seller is willing to get after the taxes are paid.

I don't know of any reason you would have to put money in it to sell it. 

[haapai]

I found these two articles particularly helpful. this one is one of the clearest explanations of the duties of an executor that I could find. You may want to perform a google search including "duties" and "executor" to learn more.

This one talks specifically about insolvent estates. IMHO it may present an overly-rosy synopsis of the issues involved but it does include a handy list of the order in which creditors are typically paid that may help you out a bit.

[haapai]

Aug 22, 2019 11:25:14 GMT -5 gacpa said:

I am thinking the unpaid property taxes will have to be paid before the property can be sold.  The taxes could be paid out of the closing statement if there is a buyer for the property and the taxes would come out of the seller's proceeds.  I don't think any buyer could gain good title/ownership without the back taxes being paid up.  The property tax issue would factor into the sales price the seller is willing to get after the taxes are paid.

I don't know of any reason you would have to put money in it to sell it. 

I'm skipping several transitions here, but the short answer is "bottom feeders".  There are folks that specialize in buying up uncollectable debt, including that of deceased individuals, and trying to make some money off of it.  When individuals like that see a case in which the property was valued by Zillow at $40k or by the taxing authority at whatever price they slap on a vacant property depending on size, they'll ask why the property sold for so much less. 

It can take a lot of documentation to prove that the property was sold for a fair price and it can take a while to do so.  There are folks out there who will wait for a subsequent, higher sale price for the property and then sue the executors, conveniently ignoring that the interim owner has knocked down the condemned structure and possibly put something else up.

[trippypea]

So far, all that has been done is the sibling contacted the insurance company (has a small policy that would go towards her burial expenses) and is awaiting the paperwork through the mail so it can be assigned to the funeral home. The insurance policy DOES have a beneficiary so is not part of the estate, but it is getting put to the funeral home.

She has a bank account, but according to her register, she doesn't have much (since she was in a nursing home they don't let you keep much). We don't have death certificates yet, so nothing has been sent to the bank to officially see what she had. Since the funeral expenses are one of the first debts to get paid from an estate, that would also go towards that. So those assets would be going to pay the funeral bills.

Then there is the house, which apparently had the debt cancelled.

For debts, I doubt she filed taxes last year to pay the tax on the cancelled debt, so there would be that. I'm assuming around the $3500-$4000 mark. Then there are the back taxes on the house, and if we don't unload it before this year's tax bill comes around, there would also be this year's tax bill. She had credit card(s), but they haven't been contacted yet since they will also require a death certificate. Don't know the balances, but looks like $10,000. Doesn't look like she was paying on them.

I looked up the Classification and Order of Payments for our state and it is 1) costs of administration, 2) family exemption, 3) funeral & burial costs, cost of medications for last 6 months of life, cost of medical/nursing service for last 6 months, cost of hospital services for last 6 months, 4) cost of grave marker, 5) rents for occupancy of decedent's residence for last 6 months, 5.1) claims by the commonwealth, 6) all other claims.

So it would be funeral expenses first, then outstanding nursing home or hospital bills from the last six months, then the tax bills, and finally credit cards.

That leaves the house. If we are not going to get our money back, we are not going to put any of our own money into it. If the house goes to the estate before it goes to the beneficiary, then it is the estate's responsibility to pay for the back taxes, etc to get it to a saleable state. It should never even be a problem for the beneficiary if it is used to settle the estate, correct? The beneficiaries and the remaining unpaid creditors just get nothing, right?

[haapai]

You've done some homework and are beginning to sort through things, Good for you.

I think that you are correct that the beneficiaries, your daughters, aren't in much jeopardy and will almost certainly receive nothing.

It's the executors who are at risk here. Creditors can sue them for mishandling the estate. They're going to hone in on the highest possible valuation of the house and then claim that the executors did something wrong when they disposed of it for significantly less.

Accumulating the necessary proofs to fight off their fanciful claims can cost quite a bit and take a long time.

[trippypea]

I am going to talk it over with everyone and what I think we should do is just get a realtor to assess the property to see what value it has, get that in WRITING in case a creditor doubts it's value, and then see if we can find a buyer who is willing to pay the back taxes as a stipulation to buying it. Then anything made from the sale can go towards settling the debts.

[bookkeeper]

I paid for a comprehensive market analysis on my last home before I sold.  I had a buyer lined up, but wanted to set the sales price where I would profit the most.  I paid $200 for a local realtor and certified appraiser to bring me a market analysis with 4 other recent sales for comparison.  I consider it money well spent.  The sellers knew what the market would bear, buyers knew they weren't overpaying for the property.

[happyhoix]

Aug 22, 2019 12:56:55 GMT -5 trippypea said:

I am going to talk it over with everyone and what I think we should do is just get a realtor to assess the property to see what value it has, get that in WRITING in case a creditor doubts it's value, and then see if we can find a buyer who is willing to pay the back taxes as a stipulation to buying it. Then anything made from the sale can go towards settling the debts.

 I don't think the creditors can challenge the value you get for the house.

In CT, any way (each state is a little different) a judge has to review the estate and verify that all the property has been sold and debtors paid off in the required order before they will sign off on the estate. If I remember correctly, our estate lawyer had to provide the judge with the realtors' estimate of the property value before the judge would sign off on letting the property be sold (which makes sense - otherwise, an executor could agree to sell Grandma's million dollar Victorian house to his good buddy for $1000).  The debtors do not have a say in it.

Keep in mind that you can't be made liable for your MIL's debts. The executors have to sell off her property and pay off her debts, and if there's not enough money to cover them all, that's the end of it.

You and your daughter's aren't obligated to pay the back taxes on her house, either. It may be worthwhile for you to pay off the back taxes so you can sell the property, depending on how much the property is worth, but that expense should be paid out of the estate.

And you asked earlier if someone would by the house as-is, even if it's in crappy condition - yes. We sold my sister's house with a basement full of moldy boxes and a house full of pee and poop saturate carpets. I was afraid we would be obligated to have all that junk hauled out - nope.

[CCL]

I'm surprised the funeral home is willing to wait for payment. All funeral arrangements I've ever been a part of had to be paid in full before the service. We had to borrow the money or put it on credit cards and settle up later.