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Heirs' Property: How to lose a home in three generations

206 S. 12th Street
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206 S. 12th Street

All across downtown Wilmington, there are old homes, once well-loved. But when the owners died without a will, their homes became what's known as heirs' property — divided among all the descendants. It’s a fragile ownership model, but a proposed law aims to protect those heirs.

Dolly Rheddick-White has inherited portions of two houses in Wilmington — one from her parents on Nun Street — and one from her grandparents on 12th Street. Both couples passed away without wills, so their property was split among a host of different heirs. And both properties are currently vacant.

Earlier this year, though, an investor began buying segments of her grandparents’ property from her relatives. All told, the investor got 75% ownership of the 12th Street house.

Rheddick-White was furious, because her family members only got a small bit of money for each share: Two received payments of $12,500, and one received $7,000.

“He didn't buy anything, he stole it! That's what he did,” she told WHQR.

Now, that investor is trying to trade a share of one property for another. Thomas Ray and his business partner bought up part of another Rheddick family property — the one Rheddick-White’s parents owned.

When Ray bought pieces of the property from the heirs, he said he lowered the offer price based on judgments against the property — including the $3000 in back taxes for that address.

Rheddick-White told Star News earlier this year that her brother lived in her parents' house until he died about a year ago, and her aunt lived in her grandparents' house until she died about five years ago. That matches tax records- both properties were largely paid up on taxes until their respective tenants passed away.

It’s common for heirs' property to end up with unpaid taxes, because it’s unclear who is responsible for the upkeep and maintenance. The city code enforcement agency considers all owners to be responsible, but if that responsibility is split between 12 people who largely don’t live in town, it’s easy for a home to fall through the cracks.

Clayton Hamerski, a local realtor and chair of the Cape Fear County Housing Coalition, said this kind of ownership is tenuous.

”If you die without a will, your property is conveyed to your heirs as tenants in common, and it's just a really rough ownership form to have,” He said. “I think the big thing for us to focus on is kind of number one, catching this before it becomes a problem. As they say, an ounce of prevention is worth a pound of cure, right?”

Investors buying up these partial ownership stakes can be a legitimate business practice, but it’s also prone to heirs getting low payouts.

In the case of the Rheddick family, the investors say they were trying to make things easier for the heirs, particularly since both properties are now facing fines from the city because of code violations.

An unusual offer

Thomas Ray started buying up segments of the 12th Street property in May of this year in an effort to get it back on the market — likely by bulldozing the small cottage and putting something bigger in its place.

But Ray said when he went to Rheddick-White’s niece Lydia to ask for the stake in the 12th Street house, she asked to sell off her stake in Dolly Rheddick-White's parents’ property on Nun Street, too.

"So okay, I said, ‘what do you want for it?’ And she said, ‘is it worth?’ Now, I said, ‘it's gonna be worth about $50 [thousand]. But there's no way in the world I can pay you that for it, because it's heirs' property, it’s a home, it's a home piece of property. And it's gonna sit there, and I'm not going to do that," Ray said.

Ray said it’s against his own personal code to try and buy out a property that’s someone’s home, or that’s truly meaningful to the family. He said that’s how he views the Rheddick house on Nun Street, but he paid for 25% of it anyway, to the tune of $10,000. Still, he said he would sell it back to the family for the same amount.

Ray has made the clearing of heirs' property titles his specialty in the past 5 or 6 years. He said he recently bought a property from 22 different heirs in Wilmington recently for a total of about $40,000, driving all over the East Coast to find them.

The lot had been taken over by both neighbors, and few of the heirs seemed to even know they had a stake in it. That’s what some of his cases look like: a surprise bit of money in an heir’s pocket.

The Rheddick case has become more volatile than most others he works on, and he blames Dolly Rheddick-White.

“What we do is we approach everybody that is an heir, okay, and I approached Dolly, and Dolly said they would sell.” Ray went to all the other owners and bought up their pieces, before returning to Rheddick-White.

Rheddick-White now refuses to sell her stake in the 12th Street house, and her siblings agree. Their collective 25% is what Ray is now fighting for, and he’s frustrated that they won’t go through with the sale he thought they’d all verbally agreed to. After months of run around, he and his business partner sent a letter to Rheddick-White in early November, asking to trade for their share in the Nun Street property.

“He says, ‘Well, I think that's the best thing she can do in her interest is to take this swap’,” she recalled. “But see, my thing is, when this man, Thomas Ray, first approached me, I told him at that time, no, the property was not for sale. He went behind me and he took the weakest links.”

Ray remembered it differently, and said Rheddick-White went back on her agreement to sell. Now, he said his swap idea is a more than fair offer, but Rheddick-White feels like her home is being held hostage.

Dolly Rheddick-White received this letter in reference to her two family properties in Wilmington.
Shared by Dolly Rheddick-White
Dolly Rheddick-White received this letter in reference to her two family properties in Wilmington.

After a summer of trying to negotiate a sale, Ray said he was fed up. He hired a law firm to offer the swap, and if the family doesn’t agree, he’ll seek a partition sale of 12th Street property. That would force the remaining heirs to sell the property at auction alongside the investors, and they’d all split the profits.

Clayton Hamerski said it’s not an uncommon end for heirs' property, especially because it can be difficult to get every heir on exactly the same page.

“What they end up doing is they go to partition by sale. And the remedy that the courts use for those partition sales are public auctions," he said.

Below: Hear more about heirs' properties, why they can be complicated to buy and sell, and some proposed legislation that might make the process more equitable.

Heirs Properties Part II: Problems and Solutions

Essentially, any part-owner of a home can file a partition action in civil court, and it usually leads to the home being auctioned off. For an investor who bought a portion of the home from a family member at a low price, there are two profitable outcomes — they can either purchase the property at auction, or they can sell off what they’ve already invested for a profit.

But with partitions, the option to buy the property is often available to the investors, but not to lower-income heirs. That’s because auctions require cash buyers, and many heirs don’t have those means.

“Forced sale and the public auction and everything kind of sets up the holdout heirs for failure as well,” Hamerski explained. “They don't consent to this arrangement, but they can lose fair market value in their interests. And they, unlike the other heirs, didn't ever consent to that. So that's kind of the main issue there.”

Once a partition action is filed, it’s hard to stop outside of a settlement, generally with one of the partial owners buying out the others. If it comes down to it, the courts can decide the details of a sale — and they actually have a lot of leeway, according to Jesse Williams, the clinical fellow at Wake Forest Law School.

“I think that a lot of courts in North Carolina have sort of surrendered their duty and their power in this regard. The law is really clear that partition is what's called an equitable action. And in being such, it is a sort of exercise in which the Court has an enormous amount of latitude to do what it thinks to be justice," Williams said.

Williams said the courts could look deeper at the facts of a case to find an equitable solution (what the courts call a "remedy"). That would account for the heritage of the property and who has put work and time into the upkeep and improvement of a home.

But without accounting for the property history, proceeds instead split by ownership stake. That kind of auction is a way for a family to lose a property they might have kept otherwise.

The investor in this case, Thomas Ray, said the family might have been heading towards losing their home regardless. The property in question, 206 12th Street, has code violations for damaged siding, long grass, and other problems.

“You can look at it and say, well, that white man’s taking my parents' house. Well, no, I'm an investor, okay? This house is in trouble. Okay, it's in trouble. It's gonna fall down here in a few years," Ray said.

And with the back taxes unpaid for several years, it’s just a matter of time before the home faces foreclosure — if the family doesn’t act, that is.

For low-income homeowners, there are often resources available to address these kinds of issues and bring homes up to code. But since heirs only own a portion of the property, they're often excluded from that kind of assistance, according to Brian Renner from Wilmington’s Code Enforcement office.

“Many, many programs, including the cities and WARM, often have requirements that there needs to be more of a clear title, not necessary. You can't just come with 15% ownership and say, I want you to give me a loan to fix my house, because of the liabilities and things that go with that," Renner said.

Renner said addressing the heir property problem in downtown Wilmington would involve a lot of pro bono legal services to track down heirs and mediate familial disputes. He’s not sure whether that’s something the city would foot the bill for, given that it would be taxpayer money going to benefit a specific person.

But it would have multiple benefits: it would help turn derelict, vacant homes into usable housing, and it would help keep intergenerational wealth within families. Given what many longtime downtown Wilmington Black residents see as a gentrification crisishappening in their neighborhoods, that’s a meaningful change.

Ray, who bought up segments of the Rheddick properties, said that’s his aim: to get this property back on the market.

Acquiring heirs' property like this is a niche industry with a lot of specialized knowledge, and a significant amount of risk. Most investors typically aim to buy out properties from each family member consensually to clear the title — partitions in court are relatively rare by comparison, and Ray said this is the first he’s ever considered filing.

He paid out Rheddick-White’s extended family for parts of their properties. If they hadn’t sold, he said they might have lost that value through foreclosure, or if successive generations passed away without wills.

“People will, you know, will say I'm taking their wealth, but if you don't do something, she'll lose a whole house. You know, she will lose right away. It's not like they keep these houses up," Ray said.

Rheddick-White disagrees with that assessment. She said she hired contractors to make repairs on both her family properties. She thinks he underpaid her family members, giving them a small fraction of what their parts of the home are really worth.

“What they're doing is they're going to black folks stealing their property for a little amount of money,” she said. “And don't get me wrong when you don't have money. $12,000 looks like a lot of money. What could I do with 12,000? If I could spend it in a day? I really can. Paying off bills, buying some of the things I want, doing whatever, traveling.”

Ray paid a total of $32,000 to get 75% of the Rheddick house on 12th Street. That home is valued at $133,000, according to tax records.

Ray said his payment to the family members was fair, basing the payments on the value of the land alone for what he calls a tear-down property. And he said he’s done everything he can to work with the remaining heirs, but they won’t budge. This partition action will be the first he’s ever filed, he said, because most families are much easier to work with. And he’s done a whole lot of these transactions.

“I also have a company we call Clear Title Heir Property at which we will come in and not buy your property, just put it where you can get title insurance. That's the problem with a lot of the properties. They can't get title insurance on it. And it just sits there and falls in," Ray said.

A Legislative Fix

In the last fiscal year, more than 800 partition actions were filed in courts across the state, with 19 filed in New Hanover County. Hamerski hopes to see a legislative fix to the problem, and he’s been advocating for the Uniform Partition of Heirs’ Property Act since 2021.

It’s made it through parts of the legislature in two different sessions, and he has big hopes for it to move forward next year. Hamerski said there are three components that protect heirs: first, it gives them the first right of refusal to buy out the property.

Second, “The courts order an independent appraisal. And that way everybody knows what the fair market value is for the property, he said. “And then thirdly, and I think maybe most importantly, it would replace the public auction part of the process with actually marketing it, you know, on the open market with a licensed real estate broker, I think that would do a whole lot for preserving the market value," Hamerski said.

That would at least ensure that the heirs get the appreciated value out of the property, rather than a fraction of that value at auction. That would be a lot more than what they’re paid by investors, typically, who likely look to pay as little as possible for fractional ownership.

It would go a long way in preserving wealth in Black families, and helping those families keep their homes when one or two relatives disagree. Hamerski said the bill has faced opposition from the association of elected Clerks of Court in North Carolina, because hiring appraisers would be time consuming and costly. Still, he hopes the legislature can iron out the details and pass the bill into law next year.

In the case of the two Rheddick houses, Thomas Ray owns 25% of one, and 75% of another. He said he’s only really after the one on 12th street that he has a bigger stake in, which is why he offered the family a trade. He said he won’t do a partition on the other property he has a 25% stake in.

“I will never take a home property you know what I mean? That is their family home. And I will never do that,” he said.

Ray said he bought his cut of the family home from a family member who was estranged from Rheddick-White, and he’d sell his cut to the family for what he bought it for. He said he’s not interested in taking houses that the families still have strong ties to.

Hamerski said the trade offer would be a good deal for Ray and for the Rheddicks- he’d be getting the last 25% of the 12th Street house for the $10,000 he paid on their other property, and the family would get full ownership of the other property again without paying him a dime. That would mean Ray paid $42,000 for the 12th Street property; all-in-all really good deal given what Hamerski thinks the property is worth.

“I mean, I haven't been in the property. So I don't know for sure,” he said. “But I would give it a give it kind of a range between 140 and 160.”

If the partition action goes through and the property goes up for auction, Ray and his business partner at Sell it Quick Real Estate LLC are likely in for a tidy profit. He can either buy it at auction, with only that 25% going at close to market value, or he gets a significant profit on the 75% he’s already bought. The Rheddick siblings would each get 1/12th of the proceeds. But to Rheddick-White, it’s not really about the money, and never has been. It’s about the memories.

“We grew up in that house, because my father lived in New York City, he would come home on weekends. And that's why my mother and all of her children stayed with her mother and father. So we all live in that little tiny house,” she said.

She wanted her niece to live there, instead of paying rent. But that niece sold her part to investors for $12,500. And now, the family seems likely to lose the house altogether.

Kelly Kenoyer is an Oregonian transplant on the East Coast. She attended University of Oregon’s School of Journalism as an undergraduate, and later received a Master’s in Journalism from University of Missouri- Columbia. Contact her on Twitter @Kelly_Kenoyer or by email: KKenoyer@whqr.org.