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Probate sale presentation
- 1. The California Probate Process and Real Estate Sales Presented by David Wade WADE LAW OFFICES www.wadelawcorp.com
- 2. Plan for Today • Quick Probate overview • How do you avoid probate • Small Estate options (mini probates) • Probate (focus on real estate sales) • A few thoughts about probate leads
- 3. What is probate? • Generally speaking – Court involvement • Usually someone has died • Usually someone didn’t plan properly • Goal is to clear title to assets • Different probate court options
- 4. Probate happens because… • No written plan at all (oral plans and emails don’t work) • Wills – Simple but some type of probate required when there is real estate • Unfunded living trust • Deed holes (spouses or errors)
- 5. Probate can be avoided • Living Trusts • Deeds – joint tenancy or gifts • QPRTs and other irrevocable trusts • Business Planning (LLC’s, FLPs and corps) • Beneficiary deeds (new as of 1/1/16) • Beneficiary and POD on banks
- 6. Probate can be avoided • Living trusts are important in California • New tax laws have nothing to do with probate • Trusts protect at death and at disability • Trusts are private • Trusts are flexible
- 7. Beneficiary Deeds • Beneficiary deeds started January 1, 2016 in CA after at least 10 years of official discussion • Lots of uncertainty • Title insurance problems • Not recommended at this time
- 8. Small Probate options (NOT probate real estate sales) • Under $50,000 affidavit to transfer real property • Under $150,000 succession to real property • Spousal property petition • Heggstad Petition – for unfunded trust • Lost Trust ABOVE TAKE ABOUT 6-12 WEEKS
- 9. Under $50k Affidavit • Under $50k in value per probate referee valuation • Fractional interests in real estate • Timeshares • Filed with court 6 months after death • NOT a hearing in court – just court clerk • Affidavit recorded with county recorder
- 10. Under $150k Succession • Court hearing • $150k or less in gross value • Probate referee valuation required • All people entitled to receive the property must sign the petition • 40 days after death
- 11. Spousal Property Petition • For property that is to transfer when one spouse dies • Community and/or separate property • No probate referee valuation needed • Hearing in Court • Always first option if a surviving spouse • Mortgage in deceased spouse’s name • Can be problematic if step-kids
- 12. New Law • Effective January 1, 2017 • CALIFORNIA CIVIL CODE 2920.7 • Allows access to mortgage company information • Requires two things: – Establish death – Establish successor in interest
- 13. Heggstad Petition • Used for unfunded trust • Intent of person is key • Writing important for real estate • Re-fi is a common problem
- 14. Lost Trust • House is deeded in trust • The written trust document is lost • Prove words of trust or distribute to probate estate
- 15. Full Probate • Formal Probate is a 8 month (or more) process • The probate code (PC) and the Judge create a formal process • The PC lays out strict guidelines for collecting assets & dealing with creditors • Strict rules for real estate sales
- 16. One take away for today If Probate real estate sale Use Form PPA (probate purchase agreement)
- 17. Full Probate • Court procedure for: - gathering assets - liquidating assets (i.e. selling real estate) - determining liabilities - determining taxes - confirming who should receive the money - Then, at the end, distributing money
- 18. The players • Decedent • Personal representative • Probate attorney • Probate Judge • Probate referee • CPA • Realtor
- 19. Full Probate Court appoints a Personal Representative (PR) Executor = a will Administrator = no will Special Administrator = temporary
- 20. When Can you List Real World Question: “What day can she sign the listing agreement?”
- 21. When Can You List • Nothing can be done until letters issue • Other than “perishable” or “depreciating” items the Personal Representative can take no action • Officially can not list property for sale until letters issue by the probate court • Officially can’t clean or fix house • “Special” letters possible if emergency
- 22. When do letters issue? • Typically about 6-12 weeks after filing in Court. • Client might not want to wait. • Probate code 8003 says “The hearing on the petition shall be set for a day not less than 15 nor more than 30 days after the petition is filed.”
- 23. Ex Parte Petition • Letters of Special Administration • Seek specific powers • Authority to clean, fix and list house • Authority to communicate with mortgage company • Authority to lease rental • Authority to run decedent’s business • Authority to file tax returns
- 24. Letters? • What are “letters” in a probate case? • Magical piece of paper!? • Recorded at time of sale of real estate. • Full IAEA = GOOD for real estate sale • Limited IAEA = Not good for sale
- 26. If limited IAEA • If limited IAEA then need court confirmation of sale • Court confirmation takes time and is to be avoided when possible in my opinion • Will go through process in a few minutes….
- 27. Letters issue – Then what? • It’s a regular real estate sale except: 1)Probate listing agreement (now optional) 2)Probate sales form* 3)Less disclosures in probate sale 4)Possibility of court auction * Most important
- 28. Listing agreement • Probate listing agreement recommended but not required • Probate listings are limited to 90 days by the California probate code • Standard commissions (generally)
- 29. Form PPA • Mandatory use • Important (especially for listing agent) • Has protections for your client • Ask for offers on form PPA • Ask for offers to be re-submitted • Counter-offer with form PPA if not used
- 30. Form PPA
- 31. What can YOU do? • Signed contract to probate attorney. • Title company info to probate attorney. • Keep good track of marketing efforts. • Try to ascertain if price will be modified as quickly as possible and tell attorney. • Beyond that regular real estate sale. • Get attorney final closing statement. • Make sure son/daughter have place to go.
- 32. Lawyer forms • Notice of Proposed Action (NPA) • Petition to confirm sale (some cases) • “Letters” • Tax ID number • Comfort letter to title company • Inventory
- 33. Probate sale options • Most common probate sale takes place by the PR sending out a notice of proposed action (NPA) (or waiver of npa). • Other option is Court auction.
- 34. NPA • Notice to all heirs/beneficiaries • Notice to anybody who requested special notice (creditors / interested parties) • Basically it’s notice to everybody who could be adversely effected by the sale • People can consent, object or do nothing
- 35. NPA Real World Question: “My realtor would like to know the last day that my brother can contest….”
- 36. NPA • NPA gives all interested parties 15 days to object • If no objection then sale can go through • If there is an objection then court auction / confirmation required
- 37. NPA Real World Question: “The buyer wants $5,000 in repairs. Do you need to know that?”
- 38. Auction - Overbids • Court date about 6-12 weeks, or more, after contract entered into • If buyer hasn’t walked away from deal yet they are entitled to notice of auction • Interested parties are entitled to notice • Plus publication in newspaper about sale • Going once, going twice… SOLD!
- 39. Auction - Overbids • Occasionally people overbid • First overbid is approximately 5% above contract price • Listing agent gets their commission • Overbid agent gets buyers commission • Commissions not paid until sale completed • Listing agent should be involved
- 40. Does 90% Rule Apply? Real World Question: “I heard the sale price has to be 90% of the appraised price is that true?”
- 41. Does 90% Rule Apply? •Sales in court must be 90% of current appraised value by the probate referee •Sales out of court do not require 90% rule •Getting a new appraisal is sometimes required in court sales (1 year from death) •The probate referee has to do it (not a private appraiser)
- 42. Self-Dealing Sales • If the personal representative or the attorney is buying the property then Court confirmation is required and consents by all interested parties. • Realtor can not be buyer if they want a commission (PC 10160.5)
- 43. Remember to… • Document pricing work very carefully • Document all marketing work very carefully • Don’t be connected to the buyer in any way • Use form-PPA Your client has a fiduciary duty so you need to be extra careful!
- 44. Disclosures – NOT required • The Transfer Disclosure Statement • The Seller’s Questionnaire • Earthquake Booklet • Earthquake Questionnaire • Smoke Detector form • Signature on the Natural Hazard Disclosure but the report needs to be provided
- 45. Disclosures - Required • Lead Based Disclosure • Data Base Disclosure (Megan’s Law) • Water Heater Disclosure and strapping… and • anything actually known.
- 46. Upside Down House In Probate Three options: 1)Let it go to bank; 2)Negotiated short sale; 3)Forced short sale (pc 10360).
- 47. Is probate over…. • Proceeds from sale go into “estate account” (not to our client’s pocket.) • Probate final hearing is always at least two months after real estate sale closes and often 3-4 months.
- 48. The rest of the story • At end of that time a final petition is prepared for the court • Details everything that happened during the probate process • Court date 6-12 weeks later • Write check$ • Close file
- 49. Probate Leads • Maybe you want to be a probate specialist? • Experience is important. • Will take substantial time investment to become THE probate Realtor. • Marketing to probate attorneys.
- 50. Marketing to probate attorneys • Wow the probate attorney • Network with probate attorneys • Go to Court sometimes and learn • Search court files (some on-line) or use consolidator service • Contact attorneys
- 51. Probate Leads
- 52. Probate Leads • Probably best luck will be with out of town attorneys and/or out of town PR’s • Search obituaries/real estate records • Contact PR directly • They often want full service (estate sale, clean out, organize paint/carpet, etc…)
- 53. Probate Leads • Personalize – don’t automate • Don’t add every single lawyer to your email newsletter list • “Let’s meet for coffee” email • PR gets lots of phone calls – figure out a way to stand out