Aug 9, 2026
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Add us on GoogleIn 2025, inherited homes accounted for around 7% of all U.S. property transfers. In total, 340,000 properties transferred through inheritance, marking a new record high, according to Cotality.
Unfortunately, inheriting a home is not always a straightforward proposition. In fact, in some cases, heirs may think a home is theirs free and clear, but that may not necessarily be the case at all.
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Let’s pretend, for example, that Lauren and her two sisters “inherited” their grandmother’s house because her grandmother specified in the will that they would become the new owners. Unfortunately, as the family was coping with the aftermath of a death and going through the probate process, the bank seized the home and sold it at auction.
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Now, Lauren is wondering how this could have happened. Unfortunately, experts say this is more common than you might think, although there are ways to prevent it from happening.
How can you lose an inherited home?
For Lauren and her sisters, it probably seemed like their grandmother’s will was enough to ensure the home would become theirs. But that’s simply not the case.
“It comes down to one basic point that surprises a lot of families,” Raul Gastesi, founding partner of Gastesi Lopez Mestre & Cobiella, told Moneywise. “You inherit the house subject to whatever is owed against it.”
Gastesi explained that many people die with a mortgage, and when this happens, someone must continue making payments.
“A mortgage is a lien on the property itself, not a personal IOU from your grandmother,” Gastesi said. “Her death doesn’t erase that lien, and it doesn’t pay off the loan. The lender’s right to foreclose follows the house into your hands, and inheriting the property does not, by itself, give you any right to stop paying.”
Unfortunately, Gastesi said this scenario happens often, usually because the family is grieving or arguing about what happens to property, or because no one is sure who is in charge. The family ends up not making payments, so the loan goes into default, and the bank can foreclose.
Gastesi also said that reverse mortgages can cause a similar issue. “Many older homeowners have one, and the entire balance becomes due and payable when the last borrower dies or permanently leaves the home,” he explained. If heirs don’t act within the allowable time, which could be six months or so, the lender can foreclose.
Finally, he warned that other claims against the property also survive a death, including property taxes, HOA fees or code enforcement liens. If a creditor decides to foreclose because of these unpaid debts, heirs could lose the house if they don’t act.
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What can heirs (and property owners) do to prevent this
The good news is, this type of situation can be prevented, especially because, as Gastesi explained, “federal law prevents a lender from calling the loan just because the property passed to a relative, so the fear that inheriting the home will automatically trigger the full balance is generally unfounded.”
The key is for heirs to act quickly by reaching out to the loan servicer, providing proof of the death, and asking to be confirmed as a successor in interest. This gives heirs the right to request payment info, apply to assume the loan, or request a loan modification if needed.
The estate or the heirs should also keep making mortgage payments, or should find out what their obligations are with a reverse mortgage. And if the estate or the successor in interest receives a foreclosure notice, they can’t ignore it.
“Heirs are proper parties, and they can appear, raise defenses, seek mediation, or negotiate a payoff or short sale,” Gastesi said.
Unfortunately, these steps should all be taken before a property is sold, because getting it back after foreclosure could be impossible. The good news for Lauren is that according to Gastesi, “if the property sells at the foreclosure auction for more than the total debt, that surplus belongs to the owner of record, which after death generally means the heirs.”
Lauren may have to claim that money within the state’s deadline, though, or she and her sisters risk losing it. They should talk to a lawyer about doing so ASAP to protect what’s left of the inheritance their grandmother intended to provide.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
