Posted by phil fernandez on March 01, 2001 at 18:08:44:
Yes it would nullify the agreement and the life estate would end. This is all in writing in the documentation that the lawyers draw up. As I recall the document is about 12 pages in length and seems to cover everything as well it should.
life interest in real estate - Posted by J. Morris
Posted by J. Morris on March 01, 2001 at 09:19:17:
What exactly does it mean when a deed is in the name of one person with life interest to a second person? To transfer the deed to a third party, must the person with the life interest also have to sign over the deed?
Re: life interest in real estate - Posted by T Jent
Posted by T Jent on March 03, 2001 at 01:20:54:
I believe this is the answer to your question.
If a deed grants a life estate, that means two persons have an interest in the property, and both should be on title. One is the person entitled to live there and enjoy the property benefits for the duration of the life estate, and the other is the one entiled to take the property in fee simple absolute (with no limitations) when the life estate expires. (The life estate has a “measuring life.” That measuring life does not have to be the one who is allowed to live their during that time. For instance, I could grant you a life estate for as long as the Pope lives.) The person who gets the property after the measuring life expires is said to have a “reversionary interest.”
So - to get to your question - if I am the one with the reversionary interest, can I transfer title without consent of the person with a life estate? The answer is, I can freely transfer, or grant away or quitclaim my reversionary interest (and only my interest) at any time regardless of the life estate holder. Their life estate interest is totally seperate form my interest and they can no more obstruct this than I can infringe upon their right to enjoy the property now. It however becomes more complicated if I happen to die BEFORE the measuring life expires (dies). In that case, unless the grantor has specified differently, I think my prior transfer of the reversionary interest is still valid, because although not yet realized, as an existing legal interest it was still mine to transfer.
… somehow I’m not sure I’ve made things any clearer.
Re: life interest in real estate - Posted by phil fernandez
Posted by phil fernandez on March 01, 2001 at 10:15:09:
It’s usually called a " life estate " where the party that has the " life estate " has an interest in the property that runs as long as they are alive. It usually involves possession also. The party with the " life estate " has the right to occupy the property until death.
I’ve done a few of these where I have bought houses cheap in exchange for me giving the seller a " life estate."
Yes the person holding the " life estate ’ would have to sign off on it if there were a transfer to another party.
Re: life interest in real estate - Posted by Suzanne
Posted by Suzanne on March 01, 2001 at 12:17:46:
How would you handle a situation like this?
I just found a property where the owner died and left a house that he and his girlfriend lived in to his son, but with the provision that the girlfriend be able to live in the house rent-free as long as she wishes, or until her death. At the time of the owner’s death, the house was free and clear. The son has since refinanced the house, and it is now in foreclosure.
I am interested in purchasing this property, but am not sure what rights, if any, the girlfriend would have for remaining in the house.
Any ideas or advice?
Thanks,
Suzanne
Re: life interest in real estate - Posted by JHyre in Ohio
Posted by JHyre in Ohio on March 01, 2001 at 10:23:30:
Phil,
Any examples of life estate deals and the present value analysis done to put a deal together? Any insurance against a Methusulah? Fascinating angle.
John Hyre
Re: life interest in real estate - Posted by phil fernandez
Posted by phil fernandez on March 01, 2001 at 16:26:24:
Interesting scenario. The deceased might have wanted his girlfriend to be able to live in the house until her death, but was a document ever executed and recorded showing this. I would first off chewck the title to see where things actually legally stand.
I would think if there were a legitimate life estate for the girlfriend, that would be a cloud on the title so how could the son have refinanced the house to get a mortgage that is now in foreclosure.
After saying all that, there may be a few lenders that would still loan on the property with a life estate. But my guess would be a very few at that.
My sense is that there is no recorded life estate for the girlfriend. But the only way to know for sure would be to check it out. Even if there was a life estate, that life estate like any lien on a property could be bought out at a discount.
Keep us posted. This is an interesting one.
Re: life interest in real estate - Posted by phil fernandez
Posted by phil fernandez on March 01, 2001 at 16:18:42:
Hey John,
Methusulah ? Now I’ve never heard of that term. LOL.
I don’t really have a formula for putting these together. I know that the life insurance companies have their actuarial tables and graphs on life expectancy etc. And your deal should be based on the time value of money.
The three that I have done were buying a $50,000 house for $30,000 and giving the 89 yr old woman the life estate. The $30,000 was in the form of a low, very low rate owner financed mortgage. She lives to be 104 before I get the house out to rent. Now as she is living there, she has to pay all property taxes and other utility expenses plus repairs. Of course no repairs were done. LOL. When she passed at 104 and I got possesion the house was worth about $75,000.
The next one I did. I bought the $72,000 for $12,000 cash. You can see now I’m smartening up a bit. But not much. This woman lived there for about 8 years. When I gained possesion it was worth about $85,000 Again she had to pay taxes etc.
The third one I did was about 2 years ago. I gave this party not a life estate but a 17 year estate. I’ve learned it’s probably a pretty good idea to somehow install a cap for the time limit. I bought this one for $3,500 cash plus I have to pay the property taxes on this one. House is worth about $70,000. This one could go another 15 years as the couple aren’t all that old.
This type of investment strategy should not be the corner stone to your investing and you do need patience, but it’s neat to be picking up big chunks of equity.
Above all make sure your sellers who participate in these life estates have their own legal council so no one can come back on you. To date I have not had any problems.
Re: life interest in real estate - Posted by Kate (VA)
Posted by Kate (VA) on March 01, 2001 at 17:47:29:
Phil,
If the person with the life estate were to fall behind in the tax payments, would that nullify the agreement?
Thanks,
Kate