Your Client's Family Inherited a Property. Now What?

A parent passes away, and the phone starts ringing. Siblings who haven't agreed on anything in years suddenly have to agree on what to do with the house they grew up in. One wants to keep it. One wants cash. One wants out of the conversation entirely.

If you're a mortgage broker or real estate agent, this is the moment your client calls you, usually with more questions than answers. Here's what needs to happen before that loan can close, and where a lender who's comfortable with trusts and estates makes the difference.

Start With Title

Nothing moves until you know what you're working with. Order a title report first. Until any title issues are identified and cleared - liens, unresolved probate matters, missing signatures, old judgments - the loan can't close, no matter how motivated the borrower is or how much equity is in the property.

This step also tells you who has authority to act. Is the property in a trust? Is it still in probate? Is there a successor trustee with clear authority to borrow against it? Title work answers these questions early, before anyone gets too far down the road on a deal that isn't ready to fund.

Get the Trust or Will

You'll need a copy of the trust, will, or both. This isn't paperwork for paperwork's sake, it determines who's authorized to sign, how the property is meant to be distributed, and whether the person sitting across from you has the legal standing to take out a loan against the asset in the first place.

If the trust names a successor trustee, that person typically has authority to borrow on behalf of the trust. If there's no trust and the estate is moving through probate, the timeline and the paperwork look different. Either way, this document is the foundation for everything that follows.

Order the Appraisal

Once title and ownership are sorted, get the appraisal moving. An inherited property has often sat untouched for years. Deferred maintenance, dated finishes, sometimes a full renovation's worth of work needed before it's market-ready. The appraisal establishes real value and helps everyone, including the beneficiaries who disagree about what the house is worth, work from the same number.

Yes, We Lend to Trusts

Ownership sitting in a trust isn't a roadblock, it's simply the structure. We can lend directly to the trust, with the trustee signing on its behalf. This is common with inherited property, and it's one of the reasons traditional banks often pass on these deals: they're not set up to underwrite around trust and estate documents the way an experienced private lender is.

Multiple Beneficiaries, One Property

Most inheritances involve more than one heir, and rarely do they all want the same outcome. One sibling wants to keep the family home. The others want their share in cash. That's where a buyout loan comes in: the sibling keeping the property borrows against it to pay out the others' interests, and everyone walks away with what they need. One with the house, the rest with liquidity.

Structuring this correctly matters. Who's on title, who's the borrower, and how the payout is calculated all need to be worked out before you're deep into the loan process, not during closing.

Is There a Reverse Mortgage to Pay Off?

If the parent had a reverse mortgage, that loan comes due when they pass away, and it has to be paid off before the property can transfer cleanly. This adds another layer to figure out early: how much is owed, what the payoff timeline looks like, and who's going to be the borrower on the new loan that resolves it. This is exactly the kind of complication that stalls deals with lenders who aren't used to working through it.

Getting the Property Ready for Sale

Sometimes the plan isn't a buyout, it's a sale. But an inherited property that's been lived in by an aging parent for twenty years often isn't sale-ready as-is. Heirs may need capital to clean it out, make repairs, and get it in front of buyers. A short-term loan against the property can fund that work without anyone having to front the cash out of pocket while they wait on an estate to settle.

The Common Thread

Every one of these scenarios comes down to the same thing: who has the authority to borrow, and can the deal be structured around the real situation instead of a one-size-fits-all template. Title issues, trust documents, multiple beneficiaries, a reverse mortgage payoff, a property that needs work before it sells, none of these should be dealbreakers with the right lender.

We've been solving difficult real estate deals for over twenty years. If your client's family has inherited a property and you're not sure where to start, send us the scenario. Mark Crawford reviews every one personally, and you'll get a straight answer, yes or no, fast.

Call Mark Crawford at 310-273-3333 or email Mark@cpfre.com.

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This article is for informational purposes only and does not constitute an offer or solicitation to lend. All loans subject to underwriting approval.