You have a great variety of responsibilities as the court-appointed executor of an estate, including property management. If property of the deceased is in foreclosure, you must deal with the matter as soon as possible as you have a legal obligation to pay estate creditors and protect the deceased's assets. A lender is more willing to work with you if you act quickly, before the lender incurs more legal costs related to the foreclosure action.
Contact the lender in writing. Use certified mail, return receipt requested, so you have proof of contact. Include a copy of your court appointment as executor, such as the letters testamentary, and proof of the deceased's death, such as a copy of the death certificate. Request a detailed loan statement. The statement should show the total balance on the mortgage and how far behind the payments are. Request a copy of the payment history, covering a period from at least two or three months before the deceased died until the present. For example, if the deceased died three months ago, ask for the payment history for the last six months. Request a copy of the loan documents.
Review the payment history and account statement. Note the amount the estate would need to pay to make the loan current and total principal balance due. Review the loan documents to make sure the figures and other information are accurate.
Examine the condition of the property. Write down any major repairs needed.
Research market values and recent selling prices for properties in the area with the same features. Contact real estate agents who work in the area. Ask for a list of recent listings and sale prices.
Use the recent listings and sales prices to estimate the property's value. Refer to your repair list. Major repairs needed, such as a new roof, eat into the home's value. Contact local contractors for major repair estimates if you're uncertain of repair costs. Compare the value you calculate to the amount owed on the mortgage. If the home is "underwater," or worth less than the mortgage, the property may be a worthless asset.
Review the estate's other assets, property and debts. Determine whether the estate has enough money to pay the past due amount on the mortgage after other creditors with a higher priority are paid. Review your state's laws regarding creditor priority in probate. Include the amount of any homestead exemptions or allowances state law gives to deceased's heirs. In some states, the deceased's spouse or children are entitled to property or a specific amount of money before creditors are paid.
Pay the past due balance on the loan if possible. Ask the lender to send you proof of the cancellation of the foreclosure action and proof of payment. Make a copy of the payment, such as a check from the estate's bank account. Send payment and the request by certified mail, return receipt requested. Keep the proof of payment from the lender and check copy in a safe place. You will need the papers when you file your final accounting in court later.
Contact a real estate agent if the estate can't pay the past due amount but the home is worth more than the loan balance. The agent will list the home for sale and contact the lender for you. Once the home is sold, any proceeds left after the lender is paid belong to the estate.
Contact a real estate agent if the home isn't worth much more than the loan balance. You may be able to sell the home in a short sale instead. The lender accepts less money than due on the mortgage in a short sale. The agent will handle the paperwork for you.
Speak to an attorney if you can't sell or save the home. You may have to let the lender foreclose if the home is underwater or the estate can't sell the home or pay the past due balance. Keep proof of all your attempts to sell the home, copies of all correspondence with the lender and loan account statements. You may need the proof to show the probate court you tried but were unable to save the home.
Contact an estate attorney if you need help dealing with an estate home in foreclosure or are not sure what you can do.
If you are the executor named in the will but haven't been appointed officially by the court yet, you may file for emergency authority to pay the past due balance or sell the home.
If you must let the house go in foreclosure, the lender may go after the estate for expenses and there may be estate income tax consequences.
While you can sell the home yourself, you'll have to handle showings and paperwork, and the lender may not be willing to halt the foreclosure without the involvement of an agent.
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