So, magically, before our moms house actually went on the market, we had a very serious buyer. We had a coming soon sign. He contacted the realtor, had a contractor out, yes all things he wanted to do were possible. We had a contract on the house, after he made offer, I called Medicaid rep, they said no you can't take that offer. We even had the house appraised.
So, fast forward. Their insurance company says no we won't insure roof is toast. We made claim in mom's insurance. They sent inspector who got on roof and said this needs maybe 1k at most repair.
New roof estimate was 8k. They still wanted house if we replaced roof. Ok. We will do that, but nothing else, because this house is sold AS IS!
More inspections. It did not pass structural. Will take about 40k between roof and structural. A contractor is requisite. This is without electrical and plumbing inspection yet.
Our first responsibility is to pay for her care. She does not have 40k to spend on this. So we walked. Medicaid requires the house to actually be on the market. I will talk to Medicaid tomorrow. We have not yet applied.
This house is sold AS IS. Doing all of this work does not change the fact that it a 2 bedroom house, with both bedrooms upstairs. It was custom built in 1942 for the founder of an oil company, his wife and one child.
Before we moved our mom out, her bedroom was the downstairs dining room.
My plan is to talk to Medicaid tomorrow. I can submit roof and structural reports to them which would allow us to lower price to attract investor class of buyer.
Have you dealt with this?
your situation is that there is an anticipated FMV issue with selling of your mom’s house and her applying for Texas LTC Medicaid, that’s it isn’t it? if that is what this is all about, my suggestions are:
- your Medicaid contact, is it local caseworker? If so, bypass them. I’ve found initial caseworker to be very helpful & knowledgeable but dealing with property reduction of value is not within their purview. They go by whatever figure in the states database and based on tax assessors office. This property is in TX right? If so you want to contact Medicaid legal team in Austin. Not LTC state processing over in Lubbock or HMS in Irving who is the MERP outside contractor but Medicaid legal in Austin. They are state employees. The local caseworker likely has never interfaced with them, but they should have a name & contact number for that division in Austin.
But before you do this, I think you need to readdress property value.
- for the appraisal, was it done by appraiser & done for a mortgage / bank as it’s being securitized for upcoming loan? These in my experience tend to skew appraisal higher. It benefits the bank, Realtor, the insurers etc as they get more if its worth more.
Can It be totally accurate, yes, but likely not & it’s more best possible value. If house in an area with Reno’s or teardowns, assessor value is going to skew higher for both improvements (house) & land value.
Another way to get more accurate to property appraisal is first have it inspected. Inspector is licensed & their report will be in detail on the Property.... they get into rafters, get under house if its pier & beam, walk roof, look into ceilings and baseboards, determine if electrical & plumbing is at current codes. Inspection report is given to Appraiser who does their own report and has the inspection report to use in their determination. This appraisal will be specific for property, warts & all. It will likely be significantly lower than the appraisal you have now. It may come in at close to just land value. All this sent to Medicaid to provide documentation as to why to allow lower value sale.
Caveat: If you do inspection/ new appraisal & there’s foundation issues, has to be disclosed in listing. Property is likely toast being sold FHA or VA mortgage (3.5-5% downpayment) as foundation keep it from qualifying. FHA & VA like 90% of sales. Other option is conventional w/20-30% down or someone wants to buy it cash. Could be on market a long time.
could it be underwater for mortgage & heloc?
You mention selling to “investors”. My experience is they pay close to land value. Or land + 20/30% improvements value. If house in historic or conservation district, those are real bothersome for investors as code & permit guys are strict, so harder to flip. “Investors” need property redone & sold in 120 days. Foundation work usually needs months to settle before interior work done.
But BIGGER issue is there’s BOTH mortgage & HELOC on it!?!
Is that right? I’m guessing between mortgage, heloc payment, property costs & MC costs, mom is hemorrhaging $. Is that it?
Your mom, assuming still living in TX, does not need to sell it to be eligible for TX LTC Medicaid. She can do right of return statement. Now she personally will have no $ for upkeep. But a home owned outright, family can pay for taxes & insurance & mom continues to own it. It could be a manageable if selling cannot be at what Medicaid demands or other reason to keep it exists.
Your mom doesn’t have that option.
Personally I’d look at just flat walking away on property. Stop any payments house related. Let it foreclose & asap so all done in 2019. Let primary & secondary lenders fight $$ out. If it has roofing & foundation issues, OMG it will be beyond a beast to sell. What you went through with first interested buyer will happen again & again.... Experienced Realtors will loose interest in listing it. It’ll get redlined by Realtors.
Had great convo with Medicaid rep today. And since each state different, don't use mine as benchmark for you.
So, if not sold at time of Medicaid application, It goes to foreclosure. We stop paying anything on it. Nada. She owes 25k between LOC. And mortgage. Most importantly, we take property out of her trust.
We need to have as documents. Appraisal, roofing estimate, structural engineer report, and allowance for known plumbing issue upstairs. Subtract all of that from asking price. That's what we can sell for.
They were very helpful. Also said don't apply for Medicaid until you have one month left in ability to pay. Takes 45 days to process.
Again, this is THIS state.. YMMV.
Of the 3 - inspection (done 1st) appraisal (done last) and S.E. report (done 2nd). SE was most $. Appraiser can use the inspection and S.E. to help do their appraisal.
If the foundation comes in at a F grade or low grade, house - is my understanding- cannot get FHA or VA lending so it will sit on the market till forever. Cause their like 90% of mortgage lending, and the other just leaves the conventional buyer with 20% down or mortgage co zeros it out and sells to a flipper. It could sit in limbo forever.
So OK makes you try to sell it first before she can let it go into foreclosure?
If it’s unlikely to sell and will end up going foreclosure route, I’m not sure why you need to get & pay fir some of these things.
If she does have to try to sell it, as it’s associated with your mom’s name, she’s (you!) will get sent the blight, safety & permits, whatever her city has for bad property upkeep notifications. Keep the notices as they may have fines which become liens attached which will decrease $ at Act of Sale. Also keep her tax bills, I’m assuming she didn’t pay the last one.
The penalties for being delinquent can be big. Keep the notices as these too will impact house sale price.
Also if she does foreclosure or defaults on heloc, they both will 1099-c $ as income for 2019 taxes. It can be the full amount walked on plus interest and fees, for even more fun. She’ll get it like Jan, 2020. She’ll (you! Again!) imo need to plan and set aside $ to get her to file taxes; it’ll be a 1040 and form 982 combo filing. To me it is not a TurboTax project but tax pro who ends to do the forms. So that she has zero tax liability & owes no taxes.
why? Cause the irs is a supercreditor and can attach a portion of her SS$. (Kinda like a wage garnishment) she can’t have that happen as Medicaid requires their SS$ as the copay to the NH.
The old 982 forms had a way to offset the 1099-C “income” from foreclosure. I don’t know if new tax code do these anymore. The HELOC will be for full amount walked on and they will add whatever fees that they can to the final write off 1099-c amount.
ETA she is in memory care now.