Can a Bank Foreclose on a House in Probate
We get the question "Can a Bank Foreclose on a House in Probate" and here's what you need to know!
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A common question regarding foreclosures that we see is Can a Bank Foreclose on a House in Probate.
Yes, a bank can foreclose on a house in probate.
When a homeowner passes away, their mortgage does not simply get wiped away because they are no longer alive to make payments.
In other words, mortgage agreements do not simply dissolve when a homeowner passes away.
If there is an outstanding mortgage, the bank will want to receive payments on said mortgage until the loan has been satisfied.
What is Probate?
Probate is the legal process that happens when someone passes away.
Probate ensures that the deceased person’s property gets properly distributed to their next of kin according to the last wishes stated in their will or estate plan.
If there is no will or estate plan, the deceased person’s property will still enter the probate process.
When there is no will available, assets will be distributed based on local state laws, which can vary slightly from state to state.
The purpose of probate is to make sure all of the assets (estate) of the deceased are distributed appropriately.
Probate cannot stop foreclosure because whoever is listed in the estate plan or will has rights to the property and therefore assumes the responsibilities of paying the outstanding mortgage.
Can a Bank Foreclose on a House in Probate?
As mentioned above, yes, a bank can foreclose on a house in probate.
In fact they can foreclosure on any type of property that has an outstanding loan balance including a home, apartment, land, commercial building, or otherwise.
Before this can happen, the following main duties need to have been completed by a probate lawyer or executor:
- All of the deceased’s estate assets must be identified
- Once all assets are identified, they are used to pay off any outstanding debts
- Beneficiaries are notified
There are several reasons why a bank may foreclose on a house in probate:
- There were not enough total assets in the estate to liquidate to cover the outstanding mortgage. In other words, there was no money or not enough money available in the estate to pay the mortgage.
- The executor or probate lawyer may not be experienced or may mismanage the estate and either forget to pay the loan or assumes they do not need to pay it.
- Family members may decide to willingly foreclose on the property when they realize there is not enough money to cover the debt. This can happen if the home is worth less than the outstanding mortgage amount and is commonly seen with elderly who had reverse mortgages on their homes.
There could be other reasons that would force a bank to foreclose on a house in probate but regardless of the reason, if the mortgage isn’t paid, the bank will seek to foreclose on the asset.
Conclusion
As you can see, a bank can absolutely foreclose on a house in probate.
When a homeowner passes away, their mortgage does not simply get wiped away because they are no longer alive to make payments.
The bank wants to get paid to satisfy the outstanding loan.
If you find yourself in a probate bank foreclosure situation, you will want to speak to an attorney who specializes in estates.
They can help you work with the lender to see if there are any options before the foreclosure happens.
