In my Dad’s will he left me the house in Las Vegas that my grandma is currently living in. But unfortunately it’s not the windfall it might seem like.
My Dad had taken out a second mortgage on it in 2005 or 2006 during the real estate bubble. So now there is more owed than it’s worth. I figured this was the case even before I knew details. My Dad didn’t shy away from borrowing!
At this point we haven’t done a thing with the house. It’s still part of the estate, we haven’t even started a Nevada probate at this point. My step-mom has been making the payment. A few weeks ago my step-mom called me and said that my grandma is going to move out and she (my step-mom) is going to stop making the payment at that point, which is fine with me.
So I called a Realtor in Las Vegas to see what my options were.
Option 1: Rent it
This would be the option I would most hope for. The tenants can pay off the mortgage for me and when I retire I can have rental income or sell it for cash. The real estate agent said that it would rent for about $1,100 per month. The mortgage is $1,300 per month. I’m not willing to take the house if it’s cash flow negative.
So keeping it as a rental is out.
Option 2: Sell it
With renting out of the question my next choice is to sell it. I didn’t figure this was an option since a year ago, when my Dad passed away, the house was underwater. But it’s been a year so I asked the real estate agent to run some numbers for me.
We estimate there is approximately $160,000 owed on the house. I can’t find out actual numbers since the bank won’t talk to me until I get a court document proving that I am a trustee of the estate. I could do that but it costs money, of course. Estimated numbers are fine for our purposes. The agent thinks we could sell the house for approximately $175,000.
So on the surface there is about $15,000 to be made here. But not so fast. It’s not free to sell a house you know! My Realtor estimated about $14,278 in fees. Which leaves me a big ole’ profit of $772.00! Wohoo.
Of course to take true ownership of the house, which I would have to do to sell it, I would have to refinance the mortgages into my own name. Plus all the lawyer and court fees I would have to pay to actually have everything transferred over.
So selling the house is out.
Option 3: Walking away
If my grandma doesn’t want to continue to live in the house, and my step-mom doesn’t want to continue to pay the mortgage our only option is to let the house foreclose.
The only reason we haven’t done this already is because of my grandma. She needs a place to live. My Dad and her had an agreement that he would provide her a place to live. Whether this responsibility transfers over to my step-mom upon my Dad’s passing is a whole other story. But my step-mom has taken this on, for now at least.
Rent in that area is about $1,100. If my grandma moved into a rental that would save my step-mom $200 a month. I think she hasn’t asked my grandma to move out in hopes that someday I will be able to get something out of that house if we can hold on to it until the market improves.
You’d think inheriting a house would be a good thing financially. Hey, a free house! Unfortunately, it’s not that simple. I basically have to buy the house for the amount owed. And in this case, it’s just not worth it.
Side note: I suppose I could let it get foreclosed and then buy it when the bank puts it on the market. I would avoid lawyer, court, and Realtor fees. If the house had sentimental value maybe that would be an option, but it doesn’t. I would take it if it were a fantastic deal, but it’s not.