Do I have to pay off my parent's mortgage before selling their house?

Do I have to pay off my parent's mortgage before I can sell the house?

Usually not. In most sales the mortgage is paid off at closing out of the sale money, so the family doesn't pay it down first. Confirm the payoff, any liens and any costs with escrow and a real estate attorney or CPA before you count on that.

When the house sells, the buyer's money goes into escrow. The escrow or title company pays the lender directly, pays other liens recorded against the property, and sends what's left to the seller or the estate. The payoff and the sale close on the same day.

Whether money is left over, or whether money has to come in, depends on the numbers. Things that can affect it:

• The full payoff amount, including interest and fees
• A second loan or home equity line
• Unpaid property taxes or other liens
• Any closing costs the seller is responsible for
• A sale price lower than everything owed

Ask escrow for an estimated closing statement early. Have a real estate attorney or CPA look it over so you know whether any cash will be needed at closing.

How do I find out how much is still owed on the loan?

Ask the lender for a payoff statement. Escrow orders the official one before closing, but a rough number early tells you where you stand.

The balance on a monthly statement is not the payoff. The payoff includes interest up to the day the loan is paid and can include late fees and other charges.

One seller in Oildale was a full-time caregiver for a family member and wasn't sure of her loan payoff. Fees had pushed the balance up over the years. We kept following up on her schedule and sent the contract when she was ready to move forward.

Expect the lender to ask for proof you're allowed to see the account. That might be:

• A signed authorization from your parent
• A power of attorney
• A death certificate and court papers naming the executor or administrator
• Trust documents naming the successor trustee

Who has the legal right to sell my parent's house?

It depends on whether your parent is living and how the house is titled. A living parent can sign, or someone with a valid power of attorney may be able to. After a death it's usually the executor or administrator through probate, or the successor trustee if the house is in a living trust.

Figuring out who can sign is often harder than the payoff.

• Parent is living and able to sign. They sell like any homeowner. You can still handle the calls and paperwork.
• Parent is living but can't manage it. A power of attorney that covers real estate may let you sign. Without one, you may need to go to court.
• Parent has passed and the house is in a trust. The successor trustee can usually sell without probate.
• Parent has passed and there's no trust. The house usually goes through probate in Kern County, and the court-appointed executor or administrator handles the sale.

In one Oildale sale, the owner had health issues and needed to move out of state, so her sister handled the sale for her. We've also bought inherited houses mid-probate, working with the executor and their attorney.

If your parent is moving into care, I wrote more in selling your parent's house when they move to assisted living.

Confirm who has authority to sign with a real estate or probate attorney before you agree to anything.

Should I keep making the mortgage payments until the house sells?

Keep mortgage payments current if possible while the house is being sold. Missed payments can add late fees and interest to the payoff, and enough of them can lead to foreclosure. Ask the lender and an attorney what applies to your parent's loan.

Once a parent moves out or passes away, it's easy to lose track of who is paying the loan. The loan keeps running either way. Steps to take:

1. Call the lender, explain what happened, and ask what they need from you.
2. Ask an attorney whether federal rules that generally limit a lender from calling a loan due after a relative inherits the house apply to you.
3. Ask an attorney if you're personally responsible for the debt. Children usually aren't unless they cosigned, but confirm it.
4. Keep property taxes and homeowners insurance paid. A vacant house may need different coverage, so call the insurance company.

If the payments aren't possible, talk to the lender and an attorney sooner rather than later.

What if my parent owes more than the house is worth?

Then the sale won't cover the loan on its own. The usual options are a short sale with the lender's approval, paying the difference out of pocket, or letting the lender take the house back, and each one has legal and tax consequences.

Check for a second loan, a home equity line or a reverse mortgage. Any of them can leave a house with little or no equity.

A short sale means the lender agrees to accept less than the full payoff. That takes lender approval and usually more time. A deed in lieu or a foreclosure are other paths. All of these can have tax effects for the estate, so talk with a real estate attorney and a CPA before picking one.

A cash buyer can't make an underwater house work by magic. If the payoff is higher than what the house is worth, I'll tell you that straight.

Does it make more sense to sell to a cash buyer or list it with an agent?

If the house is in decent shape and you have time to prep it, listing with an agent will usually get you more money. A cash sale makes more sense when the house needs a lot of work, is full of belongings, or you need to close on a set schedule.

A real example. A family in Oildale was selling for a sister who had to move out of state for health reasons. They estimated about $20k in repairs and had thought about listing around $305k to $308k. They took our cash offer of $225k because they wanted it done fast and as-is. The sister's husband, a real estate agent, walked through the offer with us. That was right for them. For a family with more time and money for repairs, listing could have been better.

How we work, so you can compare:

• No fees, no commissions and no closing costs for the seller.
• We buy as-is. No cleanup, no repairs, no showings.
• We make a cash offer within 24 hours of the first conversation.
• We can close in as little as 10 days, and the seller picks the closing date.
• The mortgage payoff is handled through escrow, same as any sale.

The stuff inside often stalls these sales. In South Bakersfield near downtown, we bought an inherited house a dad had used to store his business inventory. The heirs wanted to sell with everything in it. We filled 2 containers with old cash register equipment and supplies, cleared it out, fixed it up and resold it.

Frequently asked questions

What if my parent has a reverse mortgage?

A reverse mortgage usually comes due when the borrower moves out for good or passes away. It's generally paid from the sale at closing like a regular loan. Contact the loan servicer early about their timeline, and confirm your options with an attorney.

Who pays the mortgage payoff and closing costs if we sell to Bakersfield House Buyers?

The payoff comes out of the sale money through escrow. We don't charge the seller fees, commissions or closing costs. What's left after the loan and any liens are paid goes to your parent or the estate. Have an attorney or CPA review the closing statement.

Can we sell my parent's house with their belongings still inside?

Yes. We buy as-is, so you don't have to clean out or repair anything first. Take what matters to your family and leave the rest.

Will the sale money go to me or to my parent's estate?

It goes to whoever owns the house. That's your parent if they're living, the trust if the house is in a trust, or the estate if it's in probate. How it's split after that depends on the will, trust or court, so confirm with an attorney or CPA.

How do I talk to Brad about my parent's house?

Reach out through the site or give me a call. My brother Justin and I grew up in Shafter, and we've been buying houses in Bakersfield since 2015. I'll ask some questions, tell you what I see, and you decide from there. No pressure either way.