Do Leins Pass With Probate Property

Have you ever been having a conversation with someone and they continually use terms that are specific to an industry or hobby and you have no idea what they mean? Sometimes it almost seems like they are using this language to build their own ego. Has that ever happened to you? I know it has for me and it's kinda irritating.

Well guess what? I found out that I did the same thing the other day.

Here's what happened: one of my subscribers asked me this question. "What happens when after you and the Personal Representative reach an agreement on the purchase price of the Probate home, and you later find out there is an outstanding mortgage on the property that is greater than the price you agreed to pay?"

My subscriber wanted to know if he would be stuck buying the property and then be responsible for the existing mortgage.

My answer was "liens do not pass with title." Now let me assure you that IS the correct answer. However, can you see how that might not be totally understood by everyone? That is a "real estate industry" phrase, if you know what I mean.

So it looks like I was guilty as charged, Perry Mason!

Here's what I should have answered and if you have wondered this same question, this should clear it up for you.

First of all, a mortgage is a lien. That means the lender who loans money to purchase a property always will file with the county a lien against the property to protect their interest. You might say, in very simple terms, the lien notifies anyone who wishes to buy this property in the future that it cannot be sold until the original lender is paid in full. Then the lien will be removed.

So when you go to purchase a Probate property, your title company (remember I told you to always use a title company or if you live in a state that uses attorney's to close, use a real estate attorney) will always order what is called a Preliminary Title Report. Many times you will hear real estate folks call this a "prelim."

One of the things the prelim shows you are any liens that are still existing against the property. In most Probate purchases the houses are free and clear so there are no liens. But, can you see why this is so important?

Let me give you an example.

What if you and the Personal Representative agree on a purchase price of $175,000. However, when you get the prelim you find there is still an existing mortgage of $200,000. Are you the buyer responsible for that mortgage?

Well, breathe easier folks! The answer is, keep your checkbook in your pocket! The seller has to pay!

Remember the real estate jargon I used to answer, "liens do not pass with title?" Well, what that really says is that before you can receive title to the new property, all liens must be paid by the seller. They cannot pass with title.

So you can't get stuck. Are you breathing a little easier?

Oh, by the way, the legal term you will hear used for paying off the liens is "satisfied." So for those of you who were worried about getting stuck with an existing mortgage, it won't happen!

Ron Mead, Probate Real Estate Specialist, has been a Real Estate Investor for the past 32 years, 15 of those years specializing in Probate Real Estate. Ron has the number #1 rated course on Probate Real Estate investing available on the internet. He has authored other books on financing your probate projects, finding private money and clearing up your credit issues. Get your FREE REPORT, "Probate Real Estate: The Untapped Market," and find out how you can tap into this little known but very lucrative niche at http://BuyProbateProperty.com. Visit Ron's blog at http://ronmead.com.

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Probatable Properties

In this article, we'll see as to which properties are probatable (known as "probate properties") and which are not. For this we need to list down all the properties of the dead person [known also as `decedent' or `deceased'] and remove all non-probate assets from the list. The remainder will be probate assets. So the set of probate properties can be defined as non-probate properties subtracted from total properties.

The most commonly considered non-probate assets are the Community Property Agreement, a special agreement according to which the decedent's property is automatically transferred to the decedent's surviving spouse; Living Trusts; Joint Tenancy Property; Joint Bank Accounts with Right of Survivorship; accounts which are transferred to the surviving joint tenants; Payable on Death bank accounts; securities, accounts which are Transferable on Death; annuities; Individual Retirement Accounts; Life Insurance policies/premiums; employee benefit plans; foreign property, defined as real estate or financial property that was invested outside the state jurisdiction; Social Security benefits up to a certain limit; IRS tax refunds; and U.S. Savings Bonds.

Probate assets are the decedent's assets held in his/her sole name without any nomination. These include bank accounts, financial securities, Individual Retirement Accounts, Life Insurance policies/premiums, employee benefit plans, foreign property, Social Security benefits, IRS tax refunds, and U.S. Savings Bonds.

In general, probate assets include any document of ownership including real estate, financial or other tangible assets, such as a vehicle or vehicles, in which the decedent didn't nominate anyone. Probate properties are required by law to be inventoried and appraised.

Probate provides detailed information on probate, how to avoid probate, probate court, probate law and more. Probate is affiliated with Free Last Will And Testament Packages.

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