*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016. Please refer to the EPM for current health care program policy information. ***
Effective: April 1, 2013 |
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19.25.15.10 - Non-Homestead Real Property |
Archived: June 1, 2016 (Previous Versions) |
Non-homestead real property is real property that does not meet the definition of a homestead. Non-homestead real property is generally counted as an asset; however, it is considered unavailable during the time the client makes a reasonable effort to sell the property. For more information on homestead property, see Homestead Real Property.
See Self-Support Excluded Assets to determine if non-homestead real property that is used in self-support qualifies for exclusion.
Evaluating Non-Homestead Real Property.
What is Reasonable Effort to Sell?
Verification of Reasonable Effort to Sell.
Good Cause - Reasonable Effort to Sell.
Evaluating Non-Homestead Real Property
Count the equity value of non-homestead real property that is not excluded toward the asset limit, unless:
l the property is determined to be unavailable. See Availability of Assets.
l the client is making a Reasonable Effort to Sell the property.
To determine the equity value, subtract encumbrances from the estimated market value (EMV) found on a property tax statement.
An encumbrance can be:
l the balance owed on a mortgage, loan or contract for deed.
l the balance owed on a Mechanic’s lien.
l other legal encumbrances.
Request an estimate of fair market value (FMV) from a licensed real estate appraiser if the applicant or enrollee disputes the EMV.
What is Reasonable Effort to Sell?
A reasonable effort to sell has two criteria:
1. Attempting to sell the property, which means:
n Listing the property with a real estate broker, or
n Advertising the property for sale using one or more public forms of advertisement available to residents of the geographic area where the property is located. Some examples are, but not limited to: posting a readable "For Sale" sign on the property with the owner’s name and telephone number, advertising by newspapers or distributing "For Sale" flyers, or posting the property for sale on commonly used community internet listing sites.
2. Listing an appropriate price for the property. The asking price should be the estimated market value (EMV) on the tax statement, except when the accuracy of the EMV is disputed.
The asking price can be the fair market value (FMV) determined by a licensed real estate appraiser if the client disputes the accuracy of the EMV. Neither a letter from a real estate agent with a recommended market price nor comparable listings from the immediate neighborhood are acceptable. A client who disputes the EMV but cannot afford an appraisal can request a new EMV determination from the county in which the property is located.
Note: The asking price must be the FMV if the client provides an FMV from a licensed real estate appraiser that is higher than the EMV.
Example:
Jerry and Esther apply for health care for themselves and their children. They own a lake cabin with an EMV of $20,000. They state that comparable property in the area has been selling for at least $30,000.
Action:
Allow them to list the property for the FMV if the FMV is determined by a licensed real estate appraiser.
Example:
Leroy has been in a long-term care facility (LTCF) for six months and expects to remain permanently. His home has an EMV of $55,000 and does not meet a condition for exclusion as a homestead. His authorized representative wishes to list the property for $40,000 on the grounds that the real estate market in Leroy’s town has been slow and the home needs some repairs.
Action:
Allow the authorized representative to list the property for the FMV if the FMV is determined by a licensed real estate appraiser.
Reasonable efforts to sell the property must continue until the property is sold in order to continue the exclusion.
Require the owner to attempt to get offers for the EMV, or the verified FMV if the client disputes the EMV.
l There is no minimum length of time during which the owner must try to get offers close to the EMV (or FMV). Base the reasonable length of time for getting offers on the local market, or the time period designated in a real estate contract.
l The property must be offered for sale on the open market before the owner may accept an offer lower than the EMV (or FMV) without penalty.
l An offer for less than two-thirds of the EMV (or FMV) is not considered reasonable.
Document in case notes whether there have been reasonable offers to buy the property since the last review. Document the amount of the offer and whether the owner accepted it. If the owner rejects the offer, document the reason for refusing the offer.
If a client accepts an offer without following the criteria above, the difference between the EMV (or FMV) and the sale price is an uncompensated transfer. See Transfers.
Example:
Gordon has resided in an LTCF for more than six months and does not intend to return to his home, which is valued at $275,000. His nephew wishes to buy the home for $184,000, which is two-thirds of the estimated market value. Gordon’s authorized representative agrees with the $275,000 estimated value and does not wish to get an appraisal.
Action:
Instruct the authorized representative that the property must be offered for sale on the open market for the EMV before Gordon can accept an offer of less than the EMV. The authorized representative must provide an appraisal if she disputes the EMV. She may accept the nephew’s $184,000 offer if there are no higher offers made within a reasonable length of time based on the local market.
Example:
Mary has been in an LTCF for six months. Her son applies for MA on her behalf. Mary owns a home valued at $365,000. Her son offers to buy the property for $245,000, which is slightly more than two-thirds of the market value.
Action:
Advise the son that if he buys the home for this price without attempting to sell it on the open market, the difference between the market value and the sale price will be considered an uncompensated transfer.
Require him to make a good faith effort to sell the property at an asking price of $365,000 for the length of the real estate contract if he chooses to list the property with a realtor. If he chooses to list the property himself (through advertising in the newspaper and placing a sign on the property) at an asking price of $365,000, require him to continue the efforts for the same length of time as a realtor’s contract would run in the same area. At the end of that time, he may purchase the home for $245,000 without penalty if there have been no offers higher than $245,000.
Example:
Loretta resides in an LTCF. Her home is currently unavailable because she is making a reasonable effort to sell it. The asking price is $60,000 which is the EMV.
Loretta’s authorized representative documents that there have been three offers on the property. They are:
l $55,000. The prospective buyer could not get financing and wanted to purchase on contract for deed. The family refused the offer because of the prospective buyer’s limited income and poor credit history.
l $49,000 and $45,000. The family refused both offers because they were too far below the asking price.
Action:
Advise the authorized representative that the family must accept any future offers of $40,000 or more (two-thirds of the EMV), subject to the prospective buyer’s ability to finance the purchase. The lack of offers closer to the EMV indicates that the property is unlikely to sell for that amount.
Verification of Reasonable Effort to Sell
For MinnesotaCare, do not require verification of reasonable efforts to sell.
For MA verify reasonable efforts to sell at application and at each annual renewal.
l Do not require applicants who are requesting coverage for any months before the month of application to verify reasonable efforts to sell non homestead real property in the retroactive months.
Note: Consider the property to be unavailable during the retroactive eligibility period if the applicant documents reasonable efforts to sell non-homestead real property as part of the application process.
l If you discover the client has not made a reasonable effort to sell the property at the time of the annual renewal, document whether good cause exists.
Good Cause - Reasonable Effort to Sell
Good cause exists if the person cannot make reasonable efforts to sell the property on his or her own and cannot make arrangements for someone else to act on his or her behalf.
If good cause exists:
l Continue to consider the property unavailable.
l Refer the client to Social Services for help managing his or her affairs.
Example:
Herbert resides in an LTCF. He has been in the LTCF for longer than six months, and his home does not meet any of the other conditions for exclusion as a homestead. The equity value exceeds the asset limits. Herbert has no relatives willing to assist him in making reasonable efforts to sell the property.
Action:
Consider Herbert to have good cause for not making reasonable efforts to sell. Refer Herbert to Social Services or another appropriate agency to attempt to have someone appointed to help manage his affairs.
Consider non-homestead real property available and count the property as an asset if good cause does not exist.