Excess real property is any real property that is not exempted as one of the following:
- homestead
- business real property
- other non-business real property
- income producing real property
- non-business real property used to produce goods or services essential solely for the participant’s daily activities
- equity in a life estate
NOTE: Refer to 1030.010.10 Real Property as Available Resource to determine if real property should be exempted.
Participants must report all property in which they have an ownership interest. Excess property may be discovered at application or if an active participant acquires real property by any means, such an inheritance or other gift.
Good Faith Effort to Sell
20 CFR § 416.1245, allows excess real property owned by a participant, or his/her spouse, to be excluded as an available resource. To exclude the property, the participant must show a good faith effort to sell (GFETS) the property at fair market value (FMV) during the months that they are requesting MO HealthNet coverage.
In order to show GFETS, an applicant or participant must:
- complete and sign a Good Faith Effort to Sell Declaration (IM-70); AND
- provide verification of either of the following:
- listing the property with a real estate agent and cooperating with the real estate agent in marketing the property (i.e., showing the property, setting a price at FMV, etc.); OR
- selling as “For Sale by Owner” by:
- setting a sale price for FMV
- placing “For Sale” signs at the property
- publicly advertising the property for sale such as online real estate listing sites, advertising in newspapers, or using other available “For Sale By Owner” resources; AND
- accept all reasonable purchase offers (i.e., meeting FMV).
NOTE: If the participant is unable to sell the property because it is jointly owned, provide proof that the joint owner has refused to purchase the participant’s portion or proof that the property is inaccessible as the participant cannot sell it without the cooperation of the joint owners, and the joint owners are not cooperating. In this situation, the property will be excluded as inaccessible to the participant, as a GFETS cannot be made.
The Family Support Division (FSD) must monitor good faith efforts during application and annual review. Participants are required to report all changes within 10 days. The participant must report the following:
- proof that property is offered for sale by either:
- a statement from the real estate agent regarding posting of property for sale; OR
- proof of regular advertising as for sale by owner on online listing sites or other appropriate resources; AND
- all purchase offers and their disposition, including providing proof of why offer was not reasonable; AND
- proof of reasonable but unsuccessful efforts to sell, such as:
- offer that was accepted that doesn’t result in a sale
- incapacitating illness or injury that prohibits actions leading to a sale; OR
- part-owner dies and estate administration or probate delays efforts to sell
EXAMPLE: Mr. Damian owns a house that he had previously used as a rental home. Due to the condition of the house, it is no longer able to be rented. He lists it for sale at the FMV. Mr. Damian then receives a purchase offer of the full FMV price for the house. However, as a condition of the sale, the buyer requires extensive repairs to qualify for a FHA loan. Mr. Damian is unable to complete the repairs, so the offer is rejected. Mr. Damian must provide verification of the offer and the reason the offer was rejected. This may be a letter from his real estate agent.
NOTE: Failure to provide proof of GFETS will result in the real property being counted as an available resource for the eligibility determination. If this causes the participant to be over the resource limit, action must be taken to reject the application or close the active case due to excess resources.
Applying GFETS to Active Participants
If an active participant is no longer eligible due to excess resources after receiving an inheritance or gift of real property, the participant can have the property excluded if they are making GFETS the property. The property would be excluded as of the date it is listed as for sale at the FMV. The participant must provide proof of the FMV, the property being listed for sale (with a real estate agent or For Sale by Owner), and complete a Good Faith Effort to Sell Declaration. Normal timeframes for changes of circumstance apply according to policy, 0840.010.00 Changes in Circumstances.
Applying GFETS to Applications
If a participant applies for MHABD benefits and he/she is eligible on all other factors except for resources due to excess property, he/she will be allowed to have the property excluded due to GFETS. The property will be excluded beginning the month that it is listed for sale at the FMV. The completed Good Faith Effort to Sell Declaration (IM-70) and supporting verification must be received prior to application approval. Normal application and verification request timeframes apply.
Applying GFETS to Requests to Prior Quarter Coverage
If the participant is applying for prior quarter coverage, he/she could be eligible to exclude an excess resource if the individual can show proof that he/she was trying to sell the property at 100% of the FMV during the prior quarter months. This must be verified before approval to exclude the property.
EXAMPLE: Ms. Samuels owns 20 acres of land that was previously used for cattle. She no longer has cattle on the property and it is not income producing. The land was appraised for $10,000. She applied for MHN vendor coverage in June 2019 and requested prior quarter coverage. Ms. Samuels provides a letter from her real estate agent showing that the property was listed for sale on January 15, 2019, for $10,000. The property is excluded beginning March 2019 as that is the first month of MHN eligibility in the prior quarter.
Selling Excess Property and Transfer Penalties
Any transfer of property is subject to transfer penalties if the property was sold at less than FMV. If a property is being excluded for GFETS, the transfer of property may be exempt from a penalty if certain conditions are met:
- The property must be listed for sale with a real estate agent or for sale by owner for at least 12 months at 100% of the FMV. The 12-month conditional period starts the first month of MO HealthNet eligibility.
EXAMPLE: Mr. George owns a retail property that was appraised for $50,000. He applies for MHABD on May 14, 2019. He requests prior quarter coverage and shows proof that the property was listed for sale on January 10, 2019. Mr. George’s 12-month conditional period begins in February 2019, the first month of his prior quarter eligibility.
- After the 12-month conditional period, the property may be sold at a price below the FMV, but no less than 75% of the FMV. As long as the property is sold for no less than 75% of the FMV, no transfer penalty will be imposed.
EXAMPLE: Ms. Heron owns an empty lot with no buildings appraised for $8,000. She applies for MHABD on April 20, 2019; she does not request prior quarter coverage. She shows proof that the property was listed for sale for $8,000 on March 1, 2019. Her 12-month conditional period begins April 2019. She is unable to sell the property for $8,000 due to the property location, but in May 2020 she accepts an offer on the property for $6,000. There is no transfer penalty because the 12-month conditional period has passed and she received 75% of the FMV ($8,000 x 75% = $6,000).
- Any sale during the 12-month conditional period below the FMV will be reviewed for transfer penalties. See 1040.015.10 Fair and Valuable Consideration.
EXAMPLE: Mr. Norbury owns a house that he was using as a rental property. There are currently no tenants or income, and Mr. Norbury can no longer maintain the rental property due to his health. The property was appraised for $100,000. Mr. Norbury lists the house for $100,000 on May 1, 2019. He applies for MHABD vendor coverage on May 7, 2019. He sells the house for $80,000 to his son on July 2, 2019. FSD staff must review the transfer of property for a $20,000 penalty as he sold the property for less than FMV during the 12-month conditional period.
- Any sale less than 75% of the FMV after the 12-month conditional period will be reviewed for transfer penalties. The penalty amount is equal to the difference between the 75% FMV and the final purchase price.
EXAMPLE: Mr. Duval owns a retail property that was appraised for $100, 000. Mr. Duval applies for MHABD Supplemental Nursing Care (SNC) coverage on June 10, 2019, and requested prior quarter coverage. He provides proof that the property was listed for $100,000 starting on March 1, 2019. Mr. Duval is unable to sell the property for $100,000 during his 12-month conditional period, so on March 1, 2020, he lowers the price to $75,000. On April 15, 2020, he sells the property for $65,000. FSD staff must review the transfer of property for a $10,000 penalty ($100,000 FMV x 75% = $75,000. $75,000 (75% FMV) – $65,000 sale price = $10,000 transfer penalty).