Lenders: How do you handle loans for life estates?

By
Real Estate Broker Owner with Erica Ramus - Ramus Realty Group - Pottsville, PA RM420589

We have a property in Berks Co that is being sold with a LIFE ESTATE (elderly woman must be able to live there till she dies).

What in the heck happens with financing on that one?

Buyer is interested and write an offer… accepted… then what?

What kind of loan can a buyer get? 

 

I don’t have a deal yet, just getting prepared. 

 

 

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Comments 15 New Comment

Rainmaker
1,753,817
Gita Bantwal
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
RE/MAX Centre Realtors
I think you should talk to an attorney . There might also be tax consequences. I will bookmark this to see other comments.
March 24, 2008 01:28 PM
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Erica Ramus
MRE, Schuylkill County PA Real Estate
Erica Ramus - Ramus Realty Group - Pottsville, PA
Gita, I think that's what I'll need to do here. At first it looked complicated, but after reviewing everything I don't see how we can do it.
March 24, 2008 06:26 PM
Rainer
38,000
Julie Jalone
MagnumOne Realty

Hello Erica - That is an interesting question and I enjyed the answers but had to laugh when it came down to "talk to an attorney."  I will be watching to see what you learn....not that this pops up every day!

Thanks for droppin by my site and leaving a comment on my blog.

March 24, 2008 07:20 PM
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Jennifer Fivelsdal | Call 845-758-6842 Helping you achieve your real estate goals
In Dutchess Columbia and Ulster Counties
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Erica - I agree with Gita you need the involvement of an attorney in a case like this.
March 24, 2008 11:46 PM
Rainmaker
44,559
D. Bass
Blog: Ask The Underwriter
Alpha Mortgage Training

This would be a purchase, It should be treated as a lease hold see the definition of a life estate from Wikipedia (http://en.wikipedia.org/wiki/Life_estate):

A life estate, is a term used in common law to describe the ownership of land for the duration of a person's life. In legal terms it is an estate in real property that ends at death. The owner of a life estate is called a "life tenant".

Although the ownership of a life estate is technically temporary because it ends at a person's death (a tenancy), it is treated as complete ownership (fee simple) for the duration of the person's life, subject to limitations. Because a life estate ceases to exist upon death, the owner of the life estate cannot leave it to heirs, and the life estate cannot be inherited.

An owner of a life estate cannot also give a greater interest than is owned. That is, a life estate owner cannot give complete and indefinite ownership (fee simple) to another person because ownership in the property ends when the life tenant dies. If, however, the original grantee has sold his life estate [ex. from A to B], B's interest lasts until A dies, allowing B to bequest his interest, sell the land, etc. until that point. Once A dies, however, whoever possesses the land loses it (with the land likely reverting to its original grantor). This is a life estate "pur autre vie," or the life of another. Such a life estate can also be conveyed originally, such as "to A until B dies."

Another limitation on a life estate is the doctrine of waste, which prohibits life tenants from damaging or devaluing the land, as their ownership is technically only temporary.

March 25, 2008 09:42 AM
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Erica Ramus

MRE, Schuylkill County PA Real Estate
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