I am not asking for legal advice of course…simply tell me what you might do if you found yourself in this position.
Thanks in advance for any tips!
Recently, a loved-one passed away. He appointed me his personal representative. I am therefore in charge of liquidating or otherwise disposing of all estate assets. It is not a large estate, and my main concern is the house itself. It is encumbered by a first and second, totaling $54k. Mkt value is in the neighborhood of $70-75k. The first started foreclosure in October ‘05. The owner arranged a repayment plan which he then was not able to adhere to due to failing health. Power of attorney was granted to me January 5, ‘06, due to his inability to conduct his own financial affairs. I was then able to contact the lender and was successful in arranging a second forbearance. I am now deciding whether to rent out the property or to sell, and this is where the complications set in:
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I am both unable and unwilling to take on the mortgage debt in my own name (it just ain’t happenin’), and of course the lender has the right to demand that I do so. I think it likely that as long as they are receiving timely payments, they will turn their heads, although, since the property will be going through the probate process, I am unsure whether the court requires that I formally notify the lenders of the death. If so, the lenders may be more likely to DEMAND that I either take over the debt or face the foreclosure once again. (Remember, the lenders have already been provoked by having to commence foreclosure proceedings in the first place and then by the non-compliance of the original repayment agreement).
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My question then, is: How does the probate process go, as it relates to notification of death to lenders? Does the judge require me to notify the lender of the death?
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I plan to use the assistance of an attorney, but my past experience has shown me that sometimes this can place a hindrance on the main agenda. Meaning, attorneys are required to play by the rules and bending the rules sometimes requires extra effort, so they often just stop right at the line. I don’t want to break rules either, but I am willing to bend them within reason. For example:
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If I’m not mistaking, Oklahoma statutes provide for the assignment of rental contracts in the event of foreclosure (the new owner is required to honor all contract provisions until its expiration). If that is the case, even if the lender tells me (informally) that they intend to foreclose because of my unwillingness to assume, I can still test them by going ahead and renting while continuing to make payments, in hopes of their ignoring. And if and when they actually continue with foreclosure proceedings, I could then sell the property. Since the house will technically remain in foreclosure until the terms of the current forbearance are satisfied, there would be no new foreclosure commencement legal fees (ha!). But there is still the second to think about (which by the way, I’m wondering about the likelihood of the second taking a short if I show them the first has started to foreclose).
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I would then seek top dollar from a retail buyer, and would not be able to sell to a non-investor with renters in it. What can you recommend to lovingly nudge the renters out of the property while they still have the contractual right to refuse to vacate?
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Here is a possibility: If the lender requires that I assume the debt, how likely would the lender accept an LLC (by my creation) assuming the debt. The reason for this question is that my goal is to minimize debt liability. If the current lender or any other lender decided to allow this, how does this relate to credit. Specifically, if the loan (in the name of the LLC) were to go into default, would MY credit be affected in any way? If you know anything on this subject, please expand…I don’t even know what questions to ask.
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How might having the place rented prior to notification to lenders help anything , or would this be a bad move altogether? At this point, not having spoken with the district judge (or otherwise prepared for the formalities), I realize my uneducated position leaves me vulnerable.
There are obviously plenty of books and information about the probate process that I can read, and I plan to, but: the law is one thing, and the way things work in the practical world is sometimes something entirely different. Please educate me if you know how.
I REALIZE THIS IS NOT A SIMPLE ISSUE, AND I DON’T EXPECT ANYONE TO KNOW ALL THE ANSWERS (but if you do, please impress me). IF THERE IS ANY ADVICE YOU CAN OFFER, IT WOULD BE EXTREMELY APPRECIATED!
Thanks,
Monte Gibson
Oklahoma City