FAFSA and Selling Land

Paying for College
1

Currently I am an Undergraduate student going into my fifth semester of my degree. I completed the FAFSA for the 2016-2017 school year earlier this spring and since then me and my brother have open succession on some property my father, who passed away two years ago, left. Literally the only asset my father had was a piece of land, less than an acre, appraised at $10,000. Originally the land was owned by my stepdad and mom, they bought it a few years back and are still paying for the land monthly; but they signed it over to my dad in an “Act of Donation” a few years before he died. So, in short, my mom and step dad are still paying for land that has made it into me and my brother’s name.

I did not want to open succession for the land, mostly because I know its considered an asset and will affect my FAFSA, and as it is I’m on the edge when it comes to aid. My brother, who just turned 18, wanted to open succession since the property had gone up for Sheriff’s sale and when we consulted with a lawyer he encouraged us to open succession and sell the land in me and my brother’s name. The lawyer dismissed most of my questions about FAFSA and guaranteed me it wouldn’t affect it. Reading up on it, I know selling the land will affect my FAFSA for next year, and that’s what scares me.

I don’t want the land, I only signed the succession because the lawyer, who I just don’t think was the best one to use, pushed for it. But now I’m a co-owner with my brother. Me, my brother, and my parents (mom and stepdad who are still paying a personal loan on the property) all agree we want to sell it, we just don’t know the best way to do it.

Would it be better, for FAFSA, to sell it with me and my brother’s name on it? Or, since my brother is not going to college, should I give him my half to sell? Would it be better, from a FAFSA stand point to have me and my brother donate the land back to my stepdad in another “Act of Donation?”

Any insight or help would be greatly appreciated! Thank you again for your time and any help you can give.

**Also, just thought to add this (I don’t know if it matters). We’ve paid back taxes my father left already, and the property is technically “paid off”- my parents are paying a completely separate personal loan off for the land. The land is also in the state of Louisiana, where we also live.

2

If you are a legal owner of the land when FAFSA is filed, you will have to report your share as an asset (fair market value minus any outstanding debt that is secured by the property, multiplied by your ownership interest). It sounds like you will be a junior for academic year 2016-2017 (“going into my fifth semester of my degree”). If that is the case, any financial gain that you receive from selling the property this year or later will not have any impact on future FAFSA reporting, since aid for both your junior year and senior year will be based on income received in 2015.

3

The land is not an asset worth 10K if (just for the purposes of argument) there is an outstanding loan on it for 8K. The asset is worth 2K (if the property is indeed worth 10K, less the outstanding loan).

I think you need a better lawyer if you are under the impression that the appraised value of the land is in fact, what you’d need to “declare”. In the case of the numbers I made up, if you and your brother jointly own a piece of property worth 2 K, your share is a thousand bucks. And there are expenses associated with selling property- your share of the real estate agent for example.

Perhaps the bank that helped your mom and step dad finance the purchase can give you accurate advice (which will be free) rather than relying on the lawyer??? The property isn’t technically “paid off” as long as there is a lien against it-- i.e. that personal loan.

Sorry you are dealing with this and condolences on your loss.

4

Find out how much it would sell for if you had to quickly sell…then subtract mortgage

5

The proper number to start with is fair market value, not a quick sale value.

6

It doesn’t sound like the ‘mortgage’ is in the children’s names. I really doubt the property transferred to the father, and then the children, if the parents had a mortgage on the property. That’s the entire purpose of a mortgage, to prevent the transfer and locking the bank out.

I’m assuming the ‘sheriff’s sale’ was for unpaid taxes. That sale can go thru subject to the mortgage, but normally the bank will pay those taxes and take title.

You need to do a title search on the property and see who owns it, who owes on it, and if you even have the right to sell it. If you do have the right to sell, you will sell subject to satisfaction of the mortgage and you may not net that much on the sale.

7

If someone else has the mortgage on this property, it is probable that they are the owners.

You need to see who actually owns this land.