Real Estate Sales, Mortgages, and Probates

Probate Lawyers in Lakeland Florida. We Provide experienced Probate Legal Services in Polk County, Central Florida and the entire State of Florida.

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August 2, 2024

The real estate market is both a cornerstone and a barometer of the larger American economy: it is the largest and most common form of accumulating and measuring personal wealth. Owning Real Estate is also a major component of the American Dream and is a nearly universal goal for all Americans. But what about inherited real estate? What is a person to do when they come into possession of real property that they did not seek out and strive to own but was left to them upon the death of a family member? There are many options and many issues associated.

One option is to sell the property and place the funds from the sale into the estate's assets. This is the most common option our clients choose, but the sale can be complicated based on a number of factors and varies from case to case. The best case scenario is that the decedent owned the house outright, having satisfied their mortgage and kept the house in proper maintenance and up to code. When this happens, a sale is very straightforward and simple, but these cases are rarer than most of our clients expect.

More commonly, our clients inherit a piece of property that is still subject to a mortgage and their first question is "do I have to continue paying the mortgage?" The answer is that, yes, the mortgage must continue to be paid, but the heirs or beneficiaries are under no obligation to make payments personally. The decedent made the contract with the mortgage lender, and upon their death their estate becomes responsible for making such payments. A Personal Representative, once appointed, can make these payments from any existing cash assets in possession of the estate while the probate is administrated. This usually brings another question from our clients: but what happens to the mortgage if I want to sell the property?

In 1982, the Federal Government passed a law known as the Garn-St.Germain Act. This act primarily pertained to the Savings and Loan industry and was part of a series of deregulatory measures designed to strengthen the home mortgage lending sector of the economy, but also included some very important features that afforded consumers new abilities and protections. Chiefly, this law allowed property owners to place real estate into their own trust without triggering a due-on sale clause, meaning that properties which were still under a mortgage loan agreement could be transferred, in effect, to heirs or even minors, via an Inter Vivos trust, without having to satisfy the mortgage first, enhancing inheritance protections and shielding property from foreclosure actions upon the death of a property owner. This law outlined 9 specific instances in which due-on-sale clauses could not be enforced, and the death of a homeowner is one of these instances.

It also acts a protective measure against lenders changing mortgage rates or terms of an agreement upon the transfer of a property from a decedent to an heir via probate. Any mortgage in the name of a decedent will remain in place after their death and will stay locked-in until the property is transferred outside of probate via a deed or court order. A mortgage lender cannot suddenly raise the mortgage rates even on an adjustable rate mortgage once a person dies just to absorb whatever cash assets the decedent may have. It is also important to note that The Garn-St. Germain Act is a Federal Law that supersedes state laws and applies to all 50 states. It doesn't matter where your loved one's property was, this rule applies those protections to any property owned in the jurisdiction of the Federal Government of the United States.

The crux of this law when it comes to sales of real estate in probate is that if an heir to a decedent's estate comes to own a home and wants to sell it, but there is still an active mortgage, the heir can sell the property to someone else and use the funds of the sale to satisfy the existing mortgage. The remaining funds can then be be deposited into an estate account and then disbursed to the beneficiaries of the estate at the end of the probate process, minus any fees associated with the sale such as realtor and closing agent fees. Any buyer not purchasing the home in cash will have obtained their own mortgage loan and that rate will be applied from the date of the sale.

There is one more detail unique to Florida that is important to understand: due to our state's unique Homestead Exemption laws, these funds will remain immune from creditors' claims as long as the property meets the statutory requirements. Any funds that arise from the sale of a Homestead Property, meaning a home that was the primary home for the decedent for more than 6 months of the year during their lifetime will be passed directly to their heirs and beneficiaries in shares determined either by the decedent's will or the Florida Laws of Intestate Succession; creditors can't touch a single cent. Suffice to say, if you inherit a home with an active mortgage, we're fully equipped to facilitate a sale that brings you the best possible outcome for you probate case.

If you have questions about Probate issues, don’t wait—make sure your legal rights are protected. Call 863.250.2990 today to schedule your Free Consultation with our Probate attorneys.