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Effective: December 1, 2006 |
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19.25.15.10ar1 - Non-Homestead Real Property (Archive) |
Archived: December 1, 2008 |
Non-homestead real property is real property that does not meet the definition of a homestead. These assets are generally counted unless the client makes a reasonable effort to sell and accepts a reasonable offer from a prospective buyer. For more information on homestead, see Homestead Real Property.
If non-homestead real property is used in self support, see Self-Support Excluded Assets to determine if the property meets criterion for exclusion.
What is Reasonable Effort to Sell?
Verification of Reasonable Effort to Sell.
Good Cause - Reasonable Effort to Sell.
Count the equity of non-excluded non-homestead real property toward the asset limit, unless it is either:
l Determined an unavailable asset. See Availability of Assets.
l The client is making a Reasonable Effort to Sell the property.
Note: The sale of a property is a conversion of an asset from one type to another (to cash or an account) and will be evaluated as the new type of asset.
To determine the equity, subtract encumbrances from the estimated market value found on a property tax statement.
An encumbrance can be:
l The balance owed on a loan or contract.
l Mechanic’s liens.
l Other legal encumbrances.
If the applicant or enrollee disputes the estimated market value, request an estimate of value from a licensed real estate appraiser.
What is Reasonable Effort to Sell?
A reasonable effort to sell has two criteria:
l Properly attempting to sell the property which means:
n Listing the property with a real estate broker.
n Having a readable sign on the property with the owner's name and telephone number and advertising it in the official county newspaper, the newspaper with the largest circulation in the county, or the local shopper newspaper.
l Asking a reasonable price for the property. The asking price can be no more than the estimated market value (EMV) on the tax statement.
Note: If the client disputes the EMV the price can be no more than an estimate from a licensed appraiser. The appraisal may be either higher or lower.
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 more than $20,000 if a licensed appraiser places a higher value on the property.
Example:
Leroy has been in an 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:
The worker must request an appraisal. Allow the authorized representative to list the home for the amount of the appraisal if less than the EMV.
A reasonable offer is defined as no less than two-thirds of the estimated market value.
Require the owner to attempt to get offers closer to the market value before accepting the two-thirds offer.
l There is no minimum length of time during which the owner must try to get offers close to the market value. Base the reasonable length of time on the local market, or the length of 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 without penalty.
l Reasonable efforts to sell the property must continue until the property is sold in order to continue the exclusion.
l 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, the difference between the EMV and the sale price is an improper 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 she must attempt to sell the property for $275,000 and must accept any bona fide offer higher than $184,000. If she receives no higher offers within a reasonable length of time based on the local market, she may accept the nephew’s $184,000 offer.
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 improper transfer.
If the son chooses to list the property with a realtor, require him to make a good faith effort to sell the property for the length of the real estate contract. If he chooses to list the property himself (through advertising in the newspaper and placing a sign on the property), require him to continue the efforts for the same length of time as a realtor’s contract would run in the same area. If at the end of that time there have been no offers higher than $245,000, he may purchase the home at that price without penalty.
Example:
Loretta resides in an LTCF. Her home is currently excluded because it has been listed for sale for one year. The asking price is $60,000 which is the estimated market value.
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 market value), subject to the prospective buyer’s ability to finance the purchase. The lack of offers closer to the estimated market value indicate 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 and GAMC 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: If the applicant documents reasonable efforts to sell non homestead real property as part of the application process, consider the property to be unavailable during the retroactive eligibility period.
l If you discover the client has not made 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/her own and cannot make arrangements for someone else to act on his/her behalf.
If good cause exits:
l Continue to exclude the property.
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.
If good cause does not exist, non homestead real property is considered available and non-excluded, therefore counted in the asset total for the client.