I am trying to buy a house and am being told that it HAS to be sold at appraised value due to owner going on Medicaid. Is this true?

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Sandy Hill - How wonderful and with a bow on it too! Medicaid should not have any problems as the family can show the documentation as to the appropriateness of the sale. Hope you are able to fix & flip within your time constraints for best profit!
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Update: I paid for part of appraisal that real estate broker working for the owner hired. We settled on the appraisal price which was almost 1/2 of original asking price and still under what the town had it assessed at - after their third lowering of their assessment. Thank you for the advice.
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So SandyHill - does Aging Care win Miss Congeniality award for insight?

I have a new suggestion for you somewhat different from my inspection & appraisal path. The house, is it a real POS? like run down enough that it has code violations or blight notices done by the city? if so, there should be a paper trail down at the courthouse or city's Safety & Permits type of office on the property. I'd bet you can go online and print these out or maybe go in person to city/county and get the violations. The you take some photos on the house to show issues (take a couple of levels to set on windows sills or steps to show settlement foundation problems). If there is mold anywhere be sure to shoot photos of that. Ditto if asbestos flooring. Shoot images of Trees that need removal and within fall line of other properties or lines.

I'm assuming this in not your first rodeo on property investing. So you have vendors to get estimates from and they will be glad to do this for you. Get them to do rough estimates for you on the house. Mold remediation alone will be a lot of $$$. Ditto on asbesto$$ removal. Tree removal by transmission lines can be really expen$ive too....Package the whole thing up with your bid on the property along with your contact info and give to the DPOA to present to medicaid caseworker. Put in that yours is an ALL CASH bid is good for 60 days with a release from Medicaid. There should be a specific form done for this btw.

Also check to see if it's gone up for tax sale or other liens on it. If so, get the amount due and interest on it and the redemption date for tax sale & include this as well.

If DPOA & family will not pay house costs, it will go up for tax sale redemption eventually. Medicaid cannot make family pay on their parents home. Property becomes caught up in tax sale ownership with city / county. Medicaid isn't designed to buy or maintain property so they loose out totally imo.

Your just giving the DPOA something to provide to the caseworker and his superior valid documentation to allow the sale below FMV & get past regulation roadblocks.

For my moms Medicaid application there were glitches with her life insurance and her car. Caseworker has like 10/15 minutes to review stuff so anything that is not easily dealt with is a problem. So whatever you can do to help the solve the problem (with documentation) makes everybody happy. For insurance I got an LA broker who held TX insurance license to do an on letterhead statement with license # that it was aTerm policy. Problem solved. For old old policies they are like 20-30 legal pages long and inital medicaid caseworker can't read each line or evaluate the policy (they are basically clerks with a check off list to verify) so its an issue. For the car, it was sold to worthless nephew for under FMV at almost the edge of end of year 4. So I got moms accident report & old repair checks to show work done and got the mechanic (real licensed biz) to give a resale estimate. Got its transfer value to be within the 2k asset limit. Problem solved. Medicaid just needs something reasonable and valid to document or justify. Comprende?
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Freqflyer - I googled a short version of my original question and this is one of the top sites that came up.
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SandyHill, I am just curious how you found this website to ask said question about a Medicaid lien property. It just seem so out of the norm, but a good question.
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SandyHill - the parents home Medicaid asset situation & SOC (share of cost) often come as a total surprise. Here's some info that may be of help. Gonna be long:

Homestead & 1 vehicle are usually exempt assets for Medicaid. Although that seems terrific, once on Medicaid all monthly income less personal needs allowance ($ 35-105 mo), must be a their SOC (share of cost) paid to NH. Due to SOC, elder realistically has no $. Family will need to pay ALL house costs (taxes, insurance, whatever) from day 1 of Medicaid till either home is sold OR till they die & through estate recovery/MERP & possibly probate if they want to inherit house or keep till its sold. Medicaid is required to get any assets to either be a spend-down (if they are alive) or to reimburse medicaid for costs paid if feasible and cost-effective via MERP from their estate (after they die). Families seem to place house for sale within 6 mo of NH admission as that’s the tipping point for $ & patience, with all proceeds from the house going for spend-down. Some states allow for a diversion of some of their SOC for 6 mos IF house is listed with a Realtor btw.

Spend-Down & Estate Recovery has been a part of Medicaid since 1990’s. What was done varied wildly. Some states did zero. In 2005, Bush signed Deficit Reduction Act. DRA required states to now have a codified asset/recovery program & uniform transfer penalty format for Medicaid. Within Medicaid application (& renewals) now there is some sort of “Acknowledgment of Participation Agreement” so by applying for and accepting Medicaid, you agree to MERP, spend-down, etc. Spend-down & MERP are understandable as LTC are budget busters for states and Medicaid is an "at-need" entitlement ("need" medically & financially). Few elders can pay 100K a yr NH. Most elderly live on modest SS income. If they live long enough & need care, they will flat run out of $ & apply for Medicaid. One issue with Medicaid – based on posts on this site – is that families & applicant do NOT fully realize what this means for assets/income. Most kids do not document costs over years paid on parents property &/OR have an agreement to repay; so are at a total disadvantage to either be reimbursed for outlay; or file for exemptions with MERP or to file in probate as their own claim. Most families are not going to have the patience, reason or wallet to pay months or till forever on house.
You maybe repair the broken window but you don’t get new windows. Often neither elder or family have $ or interest to even do repairs.

Add to this that elderly homeowners -since taxes are lower & fixed- do NOT challenge valuation increase by tax assessor over time so "value" is totally inaccurate.

If Medicaid gets very fixed in requiring tax assessor / FMV for a sale...Family will just walk on dealing w/their parents property and it’s then city or county's blight & problem.

Personally I think home sales & MERP will not produce the $$ expected. MERP planning was done in early 2000‘s when real estate was all a go-go. Signed into DRA in 2005. Back then, houses would quickly sell for huge sums of $$$ and supposedly would sell even more so in 2006, 2007…… Medicaid/MERP could be paid/repaid w/$$$ left over for family as mom’s house -even crappy- was a little goldmine. Totally different real estate mkt. now.

Often family & Medicaid recipients make the mistake of assuming admission person @ NH or Medicaid caseworker is the final & absolute authority on all matters pertaining to Medicaid. Ditto for contractors who do MERP. That is, family or heirs accept at face value whatever they are told by "staff" regarding rules or whether a claim or lein will be filed. It is whatever state authority who gets the federal Medicaid money who is the final in all this and there is an appeals process that can be done in addition to whatever is allowed by state laws. It is important to remember that Medicaid, MERP or NH staff does not necessarily represent the interests of the applicant, their family or heirs. It represents the position of the state. For this reason, their position may be in direct opposition to the interests of the applicant or their family.

If DPOA present valid legal appraisal to justify sale, Medicaid needs to accept it. Can appeal if need be. If deceased, you do this within probate. The problem is going to be is it worth time, $ & effort for family to do OR just walk away from parents home. Medicaid can't force family to deal with the house or do probate. House can become the govt's problem. We all likely have abandoned house in our area. I'd bet some have owner on Medicaid so no $$ & the condition, past due taxes, etc. are such that they aren't worth dealing with. Likely to happen more & more too. Not pretty.
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Not intended for a flip, yes investment but long term in the town in which I live. House is in pretty advanced decline and needs overhaul before it would even be insurable. Thanks for the input all. I will post update when I have news.
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Hmm....I'm going out on a limb but I'd bet that SandyHill is an investor of sorts. So SandyHill is not either going to deal with Realtors as there's that pesky 6% commission with AND he's doing a cash sale so no mortgage co or conventional banking needs and their pesky title insurance requirements. If so, he has the $$ all totally liquid but his profit margin needs to be so he gets the house as cheap as possible to flip it within 10 weeks or so. It's not going to be his homestead but a short term investment or long term rental.

Sandy, if the appraisal could come in at the figure you need and you can wait the 90 days to do this deal to clear the medicaid stuff, I'd make the sale contingent on the owner selling it to you via warranty deed and family pays for all legal to get it sold that way. Absolutely NO quit claim deed type of sale but they have to do via a warranty deed. If there's a glitch, it's on them to get it worked out before act of sale. good luck. Btw if you do this could you please post an update of how it went. We all learn from each other, thanks!

Freqflyer - oh my it does sound like quite the deal. Hopefully all is done, sold & transferred soon as that would be such a perfect Fathers day gift for your dad!
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If a house is selling "as is" then any type of home inspection would be for "information only". I would put a clause in the contract that if something major is found in the home inspection that the Buyer could back out of the contract.
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Definitely hire your own home inspector. Your bank will also do an appraisal. Then you have to worry about liens the seller may not be aware of. Be sure you get title insurance paid for by the seller.
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