California Probate Code Section 10360 - Reducing Mortgages in Probate by Court Order
So you just lost a loved one and now, to add insult to injury, you learn the house is upside down. That is, the house is worth less than your deceased loved one owes on it. Your first instinct, particularly if it's the only "asset," is to walk away. However, could you earn yourself some money and, at the same time, close out your loved one's affairs in a proper way? Well, you might have guessed that is a leading question. You might ask 10 or 20 probate attorneys about this and they may all tell you to walk away. However, I have personally used probate code section 10360, et seq., successfully, since 2006, to reduce mortgages and get money into the pockets of the grieving loved ones! How does this work you ask!? Ok, let's say your mom owned a house with a loan of $500,000 on it at death. It's current value is $400,000 let's say. There are no other assets subject to probate. I can put $11,000 into your pocket! Yes, really! Ok, ok, you want to know how it works. I should add, before I go on, this is a technical probate process, and one false move can create a foreclosure sale and you get nothing so act fast and act carefully! The first thing we do is find a buyer who wants to pay whatever it's worth. Let's say $400,000. You can hire a Realtor to find the buyer and the Realtor will also get paid just like any other sale. Yes, really, I promise! At the same time we file a petition in probate Court under California Probate Code Section 10360, and the following sections, which basically reduce a mortgage by Court order to pay "costs of administration" directly related to the sale. What are these costs... well, it includes the costs of sale like back property taxes, liens, Realtor fees and title/escrow fees. Also, it includes an Administrator's fee (that's what you get), Court costs and attorney fees. Do the banks like this code section? Probably not but they have enough foreclosed houses on their books so I don't think they are that upset by the petition by and large. They usually squawk a lot but, in the end, agree to honor the Court order. It is, after all, a Court ORDER! I have successfully gotten Court orders, under this probate code section, in multiple counties in California. I have no reason to believe it won't work anywhere in California. It is an incredible tool that most probate attorneys do not know about!