BC-glink 12/28 TMS Original

Staff Writer
Columbus CEO

REAL ESTATE MATTERS For release 12/28/13

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More on siblings inheriting property

Tribune Content Agency

By Ilyce Glink and Samuel J. Tamkin

Q: I have a follow up question regarding your article about siblings who inherited a home.

I am in a similar situation and want to purchase my sibling's share of inherited home. I understand your calculations regarding how to subtract for closing costs/broker's commissions, etc.

My question is: Hw does the payoff amount (of the existing mortgage) get addressed/paid off in this situation? I assume that my sibling and I are responsible for the existing mortgage. Thank you.

A: One of the biggest mistakes siblings make when they inherit property is to forget that they are siblings first, and business partners second. It's a problem a lot of people have when they come into an inheritance. The money falls from heaven and suddenly everyone gets a little money-crazy.

So, kudos to you for taking care with the relationship as you begin to navigate your way through this inheritance.

In your case, it sounds as though you and your sibling have inherited a property. And it sounds as though there is a mortgage attached to the property. If you were to sell the home outright to a third party, you would take the sales price, subtract the amount of the commission plus any other costs of sales, and then subtract the mortgage. The remaining amount would be divided between you and your sibling.

What typically happens with the payoff amount is that the title company or the attorney would request a payoff amount as of the specific date of closing. That is the amount that would be factored into the HUD-1 form. If you delayed the closing or even moved it up, the payoff amount would change. Attorneys will often err on the side of paying too much to the lender, but excess amounts will be returned to you through the closing agent.

However, if you're buying your sibling's share, you don't have to be quite so exact, and there will be fewer expenses. If you're paying off the loan entirely, then you'll want a final amount as of the closing date. But if your sibling is paying off his share of the mortgage with the cash you're providing, you would still get a payoff amount as of the closing date. If you're refinancing your half to a new mortgage in just your name, the lender will add the amount of the cash to the cash you're providing and the loan will get paid off that way.

The title company or escrow closing agent can handle all the details. Just be sure to choose a reputable company that can work with you and your sibling. Or you may be able to use a real estate attorney who can help with the contract (yes, you need a contract) and these sorts of closing details.

Good luck. And remember, a little kindness will go a long way toward preserving the relationship.

(Ilyce Glink is the creator of an 18-part webinar and ebook series called "The Intentional Investor: How to be wildly successful in real estate," as well as the author of many books on real estate. She also hosts the "Real Estate Minute," on her channel. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce and Sam through her website,