This will make sense in a minute.
About a year and a half ago I bought a non performing 2nd mortgage secured by a 2bd 1 ba house on 2 acres in Ocoee, Tenn, pop 1500. The house was built in 1998, pretty new. The borrowers haven’t made a payment since 2013 but have been paying the first mortgage and the property taxes. Following my standard protocol I immediately filed for foreclosure. Usually that gets the homeowners to call me and then I go into that thing that I do to get them to pay me. Well, in this case no one called me. For months. Very odd, so my next move is to see if the borrowers are alive or maybe even abandoned the property. I found out both borrowers are dead. The husband died in 2016 and the wife in 2019, they were in their 80’s. So I get a realtor from a neighboring village to go door knock for me and take some pics of the property. The realtor calls me and says, “ I know those folks that live there and I will go but I need to ask the sheriff to go with me, I won’t go alone”. Damn, I thought. Are these the folks from the movie Deliverance? The Hatfields or the McCoys? So after a few weeks the Realtor finally gets the family covered wagon out of the barn and latches the horses to it and gets out there. She calls me and says that house is occupied by the kids of the dearly departed. And by kids I mean a brother and sister in their 60’s. And further the realtor tells me that they refused to talk to me because I’m some” California douche bag trying to scam them” Damn, they nailed it. How did they know ?😂
When I found out the borrowers were dead , I updated my title search and the house is still in the name of the dearly departed. Hmm. No living trust. No will. The heirs can’t sell it unless they probate the property first. They are hosed. So I’m putting the property up for auction on March 27. My opening bid is $89,000 but the successful bidder also has to pay what is owed on the first mortgage, which is $46,000. I paid $27,500 for the loan. Two things can happen at the auction.
1) An investor bids my $89000 or higher and he gets the property and I get my $89k.
2) No investor buys it, there are no bids, and I automatically become the owner of this fine estate in Ocoee, Tennessee.
I peg the value of the home at about $225,000 if it’s in decent shape. Land value about $125,000 for two acres but I’m guessing. I’m a pretty good guesser tho.
Given the rural, sparsely populated location, I suspect number 2 is the likely outcome. My plan is to turn up the heat on them, start the eviction, and figure out a way to sell it back to the family.
The moral of the story is don’t have dumb kids. But if you do, don’t leave them a mess. Get your affairs in order. Get a living trust. If they have a living trust, they don’t have to probate the property. They can sell it with zero capital gains tax because of the step up cost basis feature of a living trust. If they want to keep the property they can also keep your low property taxes as long as they live in the house. Great move!
If you have a house and some modest assets a living trust should only cost you about $800 bucks. If you own more stuff, get a lawyer to do it. It will cost around $2500 bucks, but it’s totally worth it. If you have to probate a property in California it will cost you at minimum $30-40k. I’m guessing it’s similar in other states.
I really don’t want this property, it will take me a year or more to sell it. Hoping a local investor takes me out.
Ya, nothing says you hate your children like not setting up a trust.