Mom is in assisted living on Medicare. Owns home, tenant renting wants to rent to own. This is mom's asset and when Medicare runs out, Medicaid kicks in. Can I do a rent to own or do I have to outright sell it to avoid out of pocket expenses to pay for her assisted living? Asset is worth is $75K.
Then if something goes south, mom forecloses and gets the deed back. Or the tenants/buyers would be kind and do a deed in lieu of foreclosure and the deed would transfer back to mom.
As Igloo has said the sales price has to be at FMV. Interest rates are negotiable and I recommend getting a down payment that puts their dog in the fight.
Obviously this should all be dealt with by attorneys that can ensure that mom is being protected and getting the care she requires. Just a different angle to a potential solution.
Rental $ is income and if on LTC Medicaid basically almost all income is required copay to the NH. (Like Her SS $ is income and that too has to become a copay to the NH). But for rent, it’s “net” rental income that is the copay. Just what your state allows in “net”, you will need to find out exactly. Could be just property taxes allowed amortized over 12 months thats allowed to be kept by mom (so she can pay them). If what is allowed to be kept by her isn’t enough to truly cover all property costs, then just too bad & you will have to cover those or stuff doesn’t get paid. Which can jeopardize the Rent2own contract.
Rent needs to be FMV. Selling price needs to be FMV. Fair market value
& if rents are high where you live, then it can morph into her being over Medicaid income limit. Income limit set by your state. Most $2,100. So say your mom gets $1200 in SS and FMV rent is $1500, she will be over income for Medicaid at $2700 monthly income.
being “over income limit” can be dealt with but there’s stuff she’s going to need to do to make this happen. Just what depends on how your state runs Medicaid. Like if your in a Miller trust state, then mom does a miller on her SS income. (Rental $ can’t as it’s not qualified income).
it’s just not simple $ in then $ out. It’s sticky.
PLUS If mom goes onto LTC Medicaid, the house can become subject to a lien or claim on the property as Medicaid is required to attempt a recoup of costs Medicaid paid for her care (MERP). Some states have the lien done when eligibility starts; others have this as a post death placement. If lien placed & the rent to own finishes up while mom is still alive, title can’t transfer until lien is satisfied. If it takes 3-5 months to get this done, those renters are not gonna be happy. If you actually do this, you need to have the real estate attorney put in a paragraph as to finalization dependent on Medicaid lien release.
if R2Own still happening after mom dies, I think your going to have to open probate. If heirs open probate then all would need follow whatever system for assets of & claims against the estate for probate. The executor will need orders signed off by judge to move the house out of probate. Your real estate attorney needs to have a paragraph on this in the R2Own contract.
House needs to sell at FMV. If her tax assessor value is way above what Realtors comps show FMV to be, it can be an issue for Medicaid.
if they could buy it now at FMV, all would be way simpler.
if they can’t, & you cannot afford property costs if need be (like renters just move out or new roof needed) on your own once Medicaid starts, please think about putting it on the open market now with a Realtor & before ever doing her medicaid application.
if house is totally in her name, when it sells all $ is hers. She cannot gift you any house $. Getting reimbursed for house stuff you pay for will not be easy to do as it looks like “gifting”. She has $ so will be ineligible for Medicaid and goes back to doing a spend down again and then once impoverished again, you do another Medicaid application. I’m tired just thinking about having to deal with all this..... really if you, family, heirs do not really want house, do not have likely exemptions to MERP and don’t have the wallet & sense of humor to deal with the place, sell it ASAP & as close to FMV as possible & before ever submitting for Medicaid for her.
Those renters once they realize house will go onto open market with Realtor listing if they don’t come thru may, just may, come up with $.
Depending on her level of care required it may not interfere with eligibility but it will increase her share of cost, meaning she pays more and taxpayers pay less (aka Medicaid).