We’re Inheriting a Deed Together (And My Co-Owner Has No Job)

Meet Terry, a new deed holder. Terry received the home from his mother. “My mother recently passed away,” as he tells the story. “I inherited the deed, with my sister. My mother was supporting her, but that’s come to an end.”

His sister is already living in what used to be their late mother’s home.

“But it looks like I’m stuck with the mortgage, maintenance, taxes, and everything! I never signed up for supporting my sister.”

What can Terry, the unhappy deed holder, do in this situation?

To Protect the Deed, Pay the Mortgage

Sometimes parents make the darndest decisions. Like leaving a predicament for their kids to muddle through when they pass away. Such is the case with Terry’s deed.

There are so many variables in stories like this, but here’s what we might ask Terry to consider.

If you are willing to support your sister, then you can simply keep the deed. You can silently thank your mother for her thoughtfulness, and pay off what’s left of the mortgage.

But it seems you prefer not to have responsibility for your sibling. In this case, it could be time for your sister to move out and to advertise the home as a rental property, so you both receive income and the mortgage is covered. This likely depends on your unemployed sibling moving out and agreeing to the rental idea.

Otherwise, selling the home might be necessary to pay off the mortgage. That, too, depends on your sibling vacating the home. And that might be hard for her. One path you could take is to advance half the funds expected from the sale of the home to your sibling, contingent on her move. Have a lawyer work with you to create a legally binding contract that explains what each of you will do — and how and when you will do it.

What About Just Not Paying?  

So, say you think this is your sibling’s problem and you don’t want to submit the full monthly mortgage payment. Then you, as a title holder, can expect to hear from the company servicing the mortgage debt.

The lender will send a notice of default 120 days after no payment (or an incomplete payment) comes in. Three months later, the lender will be allowed to begin the foreclosure process.

In most (but not all) states, once the lender sells the home through the foreclosure process, the home equity above and beyond the mortgage debt will be issued to you and your sibling.

But you can expect foreclosure to take a heavy toll on your credit profile. And eviction won’t be a pleasant process for the current occupant of the home.    

Did you know? You don’t need to accept a deed that someone left you as an inheritance. Here’s how to turn down a deed.

If All Else Fails, a Deed Holder May Force a Sale

If you want to come off the title, you can use a quitclaim deed to transfer the home from both of your names into just one name. Assuming you are on the title, look out for the mortgage to become due on account of the change, and be prepared to pay it off.

If your deed, under state law, vests your real estate in you and your sister as tenants in common, you can buy her share out with cash if you’ve got it — including enough money to cover the debt.

If you are named on the deed as joint owner, you can jointly sell the home, repaying the mortgage with part of the proceeds.

If you’re on a deed, a copy of your deed is available to you, to show you how you are named.

But what if you’re stuck? What if your sibling won’t accept a quitclaim or agree to sell? You could try mediation to save on court costs. Your county court has more information about mediation options. But if all else fails, a deed holder has the right to petition the court for a partition sale.

That is, if co-owners won’t decouple themselves voluntarily, a judge will have to order it. You can’t be forced to co-own property with your sibling if you simply don’t want to. If there are no exceptional facts in play, a court will grant the partition.

A Tough Process

It’s sort of like going through a divorce. It will involve time, interruptions to your daily life, court fees, lawyers’ fees…

Start your due diligence by looking up your state’s partition law. Check the home county’s court procedures and fee schedules. Get ready to line up not only your co-owner, but also any other impacted parties.

Anyone with liens on the title might attend and participate in the hearings. In fact, a mortgage lender with an interest in your co-owned home might be allowed to begin a foreclosure even when you’re going through a partition case.

Prepare to hire an appraiser and commission a survey, just as you would if you’d both agreed to sell the home. Prepare to list the contributions which the co-owners have paid to the lender, insurers, tax collectors, and contractors. As with a divorce, the judge will need to know what each person has invested in the home in order to fairly distribute the proceeds from a partition sale.

It’s rare for a court to order a residential property to be literally split down the middle, although it does happen. More typically, the judge orders a sale of the real estate as a whole parcel. The home might be listed through the normal channels, or it might be auctioned by your county. The co-owners have to let the property go to auction if the court orders that. (They will likely be allowed to bid at the auction if they wish, and use their equity interests to back up their bids.)

Remember: The co-owners will have to pay off any remaining mortgage debt after the forced sale.

A Note to Parents

Good estate planning takes diligence. If parents have more than one child, they’ll need to be sure the children can handle whatever is left to them. Parents who hope and expect that the children will want the family home may be better setting up a trust that accounts for the needs and situations, now and in the future, of each child. Every beneficiary has to adhere to the instructions in the trust. This takes some sitting down with the family and talking things through. It’s best done with an estate planning lawyer’s guidance.

A tax professional or a financial adviser can also explain how to help your beneficiaries preserve the value of what you hope to leave them.