Every once in a while we run into some strange real estate myths. How they get started is a mystery.  Here are a few:

RE Myth: When someone inherits real estate, which was the deceased’s primary residence, the mortgage will be wiped out at the time of death and the property title passes to the heirs free and clear of all liens.

RE Truth: Some homeowners have an insurance policy that will pay off the mortgage on the house if they die.  However, when you inherit real estate, you receive title subject to all the existing recorded liens and encumbrances against the property.  If you inherit a house that has a first mortgage, a home equity loan, a mechanics’ lien, unpaid property taxes, or homeowner’s association dues, you must pay all those obligations according to their terms or lose the property by foreclosure or forfeiture.  

RE Myth: You can get a really good deal on foreclosures from the bank.  

RE Truth: Though the bank is anxious to get rid of any repossessions it may have, it has a fiduciary obligation to its stockholders to get as much out of the property as possible, and is obligated by its relationship with the mortgage insurance company to keep its claims as low as possible.  Most foreclosures are sold at a “fair market value”.  

RE Myth: If I buy a fixer-upper, I can fix it up and make money.  

RE Truth:  Fixer-uppers are for people with the time and skills to do the fix-up.  In a rapidly rising market, almost anyone can make money fixing-up, but in a marginal real estate market, it takes a pro to make money.  Many people spend more on the fix-up than the house will sell for.  

RE Myth:  I learned at a seminar that I can buy a house for more than it’s listed for and get the extra money back from the sell in cash after close of escrow.