This guest blog post was written by Attorney Tony Abou Ezzi of Chicago, Illinois.
Before we start, I suspect that you stumbled across this article because you have lost a loved one. For that I am very sorry and I offer my condolences to you and your family.
Below are some steps you can take when inheriting a house that is in foreclosure or expected to be foreclosed on because of a mortgage.
Talk to a lawyer if possible
This is a complicated area of the law, so it is best to talk to a lawyer if you can.
Find out how title is held
There are a few different ways the property can be owned (or how “title” is “held”). You can find this out by looking at the deed for the property. You can request this at the Recorder of Deeds Office in the county where the property is located. Here are the types you can look for:
- Joint tenancy: When one joint tenant dies, the other joint tenants inherit the property. You don’t have to do anything extra. However, you can file an Affidavit by a Surviving Joint Tenant with the Recorder of Deeds to remove the deceased person’s name from the Title.
- Tenancy by the entirety: This is similar to joint tenancy, but it can only exist between spouses.
- Tenants in common: Each tenant in common has an individual share and you will need to transfer title (see below).
- Sole title: If the deceased person held title in their own name, you will need to transfer title (see below).
If you need to transfer title, you may have to go to a special court called Probate court.
If the deceased person had a Will, it generally names heirs/beneficiaries who inherit the property. You will have to bring this to Probate court and get the approval of a judge to transfer the title.
If the home was held in a Trust, it should say who gets the property. Otherwise, title may be transferred through probate into the name of the trust. The terms of the trust will list the heirs/beneficiaries and any conditions that may apply to transferring title.
If you do not address the issue of title, a mortgage company may foreclose on the property in order to satisfy the mortgage. The property may be sold at auction if taxes and other expenses are not paid.
Find out how much is owed
The next step is to find out how much money is still owed on the mortgage. You can find this on a recent statement from the mortgage company. If the amount is more than the value of the property, it doesn’t make sense to inherit a home in that situation. You can let the property go and it will be sold in a foreclosure proceeding. You will not be responsible for the mortgage unless you co-signed on the mortgage or agreed to be responsible. Be careful, sometimes the mortgage company will try to get you to agree to be responsible to pay the mortgage when it is not in your best interest.
Try to save the house
If the amount owed is less than the value of the property, you might want to try and save the house. What you can do depends on the status of the foreclosure case.
To find this out, go the the Recorder of Deeds and look for the words lis pendens. This usually means a foreclosure case has been filed on that day. You should be able to find the case number on the documents. You can take this to the Circuit Clerk and see the status of the case.
If you don’t see the words lis pendens, it means a case has not been filed.
Foreclosure case already filed:
Even though a case has been filed, you may still have options. You may be able to redeem, payoff, or reinstate the mortgage. Other options may exist depending on the facts of your situation.
Generally, the mortgage should be paid with money from the estate left by the deceased person. If you don’t have title or an agreement to pay the mortgage, the mortgage company will not accept your payments.
If the home was already sold, there might be a surplus. This is money left over from the sale after paying off the mortgage. You can collect the leftover money.
Foreclosure not filed yet:
If the case has not been filed yet, you can prevent it by getting the mortgage payments back on track.
First request a “payoff letter” from the mortgage company. This will tell you the balance of the mortgage. You can then start making payments once you inherit the property or it may be possible to make payments from the estate funds.
You can also ask to pause, or “stay” the foreclosure case by showing that you are going to have the home sold. Do this by starting a case in Probate court, being appointed as Administrator/Executor, and getting court approval to market the property for sale.
What can I do to prevent all of this from happening to me and my family?
A good way to ensure the transfer a house when you pass away is a Transfer on Death Instrument (TODI). A TODI notifies the Recorder of Deeds that you want title to transfer to specifically named beneficiaries. Learn more about TODIs.
You should also have a Will drafted as soon as possible. However, this won’t prevent the need for Probate court unless you have beneficiaries listed on everything.
Finally, having a Trust set up helps too, but you must make sure that the title to your home is in the name of the trust. You can explain in the trust exactly what you want to happen to the property when you pass.
This information is posted as a public service by Illinois Legal Aid Online and its partners. Its purpose is to inform people of their legal rights and obligations. Talk to a lawyer if you have questions about how this information applies to you.