Atherton, our nation’s most expensive ZIP code, is in the heart of the California Bay Area. Atherton’s median price for a single-family home in the first half of 2019 was $8.1 million. Real estate agents and brokers who handle these sales have plenty of reason to celebrate when an escrow closes. While Atherton house values are setting records the rest of the Bay Area housing market also have significant values. Median home prices for June, 2019 were $1,549,000 (San Mateo), $1,250,000 (Santa Clara), $926,000 (Alameda), and $665,000 (Contra Costa). When it comes to estate and trust transfers these high house values have significant repercussions.
California homeowners are getting older and wealthier as the value of their homes has increased. According to the Legislative Analyst’s Office, “The share of homeowners over 65 increased from 24 percent in 2005 to 31 percent in 2015.” This trend is likely to continue in coming years as baby boomers—a major demographic group—continue to age. Older homeowners’ homes are often mortgage-free. “According to American Community Survey data, in 2015, just under 60 percent of homes owned 30 years or longer were owned free and clear, compared to less than a quarter of all homes.” Given the number and value of Bay Area homes that are mortgage-free, it comes as little surprise that these houses comprise a significant share of the Bay Area house market.
A growing number of Bay Area real estate agents and brokers are concentrating their efforts on the listing, marketing, and sale of probate real estate. Capable agents have checklists that help guide them through the sometimes-intricate aspects of an estate sale.
Among those focusing on this important market are Probate Real Estate Agents and Brokers whose byline is “Maximizing Your Inheritance.” The firm focuses on probate & trust real estate sales. Its website includes “Probate Listings,” “Probate Blog,” and a “Free Probate Book” titled “What to Expect When Selling Probate Real Estate: A Comprehensive Guide for Administrators and Executors.” Andrew de Vries has a thriving probate Bay Area real estate practice. His website proclaims that he is “an expert at probate, estate, trust and conservatorship sales in all major Bay Area counties including San Francisco, Alameda, Contra Costa, San Mateo, Santa Clara, Marin, Sonoma, and Solano.” Another local broker identifies himself as Michael Freethy, Probate Realtor. Alex Lehr, author of The Unexpected Sale: Guidance for the Executor/Administrator of An Estate, is a Bay Area real estate agent with deep knowledge of the market. There are, of course, many others.
The keyword there is “experience.” Agents and brokers often get pulled into a probate or trust sale because they have a relationship with the family of a homeowner who passed on, not because they are knowledgeable about probate or trust issues. Such real estate professionals often have decades of experience, but they don’t necessarily know anything about the intricacies of probate or trust real property transactions. The skills and abilities that make someone an excellent agent or broker do not automatically make them qualified to handle a complex probate or trust real property sale. Finding someone with experience in this niche is often more important than heirs and beneficiaries might think.
Dan Collins, owner of Collins Fiduciary Broker and author of Probate and Trust Estate Administration Tips & Tricks, explains why sellers should seek out an agent or broker who has Probate and Trust experience. “Well-meaning real estate agents inadvertently cause their clients to waste valuable time and money because they don’t understand the difference between a regular sale and a probate or trust sale. It’s not just a different set of forms, it’s a set of knowledge that, if missing, can needlessly tie a client’s real estate up in court for months.” Collins cites the example of a house in probate located in Rescue, California that was originally listed for $775,000, but which hit numerous roadblocks once the court discovered that the property had unpermitted structures and multiple code violations. Because there was no coordinated assessment of the property at the start of the process to head off required court approvals, it took 8 months for the house to finally sell, and when it did the final sales price was $540,000. Delays, corrections, and Probate Court approvals can be managed, but the key is proactive engagement by brokers and agents who have expertise and knowledge.
Unless an agent is familiar with the entire probate process, it would be easy for him or her to miss a step. “It surprises me that many agents with probate listings fail to understand that something as basic as a “Date of Death Valuation” is a Court requirement,” said Collins. “For a variety of reasons, families sometimes delay filing probate, sometimes for many years, until they decide they want to sell a property and then realize that they can’t because title remains in the name of a deceased relative. I’ve seen agents who showed up in court with a current property valuation only to discover that the Court needed a Date of Death Valuation, in which case their filing was rejected, and they were sent instructions not to come back until they have a bona fide DoD Valuation. That alone can waste 90 days or more because it can sometimes take that long just to get a new Court date.
Lyon Real Estate agent, Jackie Steiner, suggests that people who are looking to buy or sell a property in Probate look to work with someone with both experience and credentials. “I am certified by the California Association of Realtors in Probate Court Sales Process, which means that I went through an accredited program put on by CAR. That designation indicates that I have studied Probate Court procedures and that I can guide buyers and sellers through the sometimes-byzantine Court rules and regulations. It also helps that I have more than 15 years of experience with Probate Real Estate transactions, but even then, I tell clients that every case is unique. In Probate real estate, there is no such thing as cookie-cutter.”
Unlike a regular real estate transaction in which a standard purchase/sale agreement binds a buyer’s offer to a seller, in Probate, there are multiple requirements a Court must approve before a deal can go through. For example, the selling price must be within 90% of the Probate Referee’s appraised value, it is customary for Courts to require a 10% deposit, and a Court must approve any sale with an official Court Order prior to escrow closing.
The California Association of Realtors Probate course covers many of the basics, including life estates, jurisdiction, the Court process, the listing and sales process, as well as basic information about taxes, but most realtors who have been through it will tell you that there is no substitute for experience. “Any realtor who tells you they are qualified to give tax advice of any kind to a Personal Representative is doing themselves and their client a big disservice,” says Steiner. “I would always want a CPA who is knowledgeable about Probate and Trust issues, to weigh in on any tax-related issues. The downside of doing something wrong can lead to enormous personal liability.”
Besides the structural difference between standard and probate real estate transactions, there’s another human element that often gets overlooked. Mimi Scherber, who partners with Jackie Steiner at Lyon Real Estate, says that many times her clients need a lot of hand-holding through the probate real estate process. “Most people don’t realize the twists and turns that happen in probate real estate, so my job is to prepare them for the emotional roller coaster that sometimes occurs. When a court issues an order that there will be a 90-day delay until a missing document can be procured, I try to help my clients understand that we have to play the long game, and focus on staying positive and doing whatever we can to keep things moving along. In basketball, they call it ‘moving without the ball.’ It’s what Jackie and I are especially good at.”
In one notable case, Steiner and Scherber were able to identify problems with a property at the outset of the listing and worked to fix maintenance, permitting, and finance issues that they suspected the Probate Court would flag. The property listed for $525,000 and was sold two months later for $501,000 with the full approval of the court. Less knowledgeable agents might have eventually gotten the job done, but instead of two months, it could easily have taken a year or more for the same outcome.
The key to a successful probate or trust real estate transaction is often about assembling a qualified and experienced team of professionals. Anngel Benoun, an agent and Senior Estates Director, Probate/Trust Team at Dilbeck Realtors in Encino, says she matches her clients with attorneys, appraisers, contractors, and even pool service companies who coordinate efforts and make sure that they work together to achieve the best possible results for clients. “Even while they’re sitting vacant and not available to be sold, we inspect probate and trust properties every week to identify health and safety hazards as well as security issues. In every case, we try to eliminate seller liability,” Benoun said.
The differences between a standard Trust sale and one facilitated by Benoun and her team can be stark. “To give just one example, in a standard sale all contingencies remain in effect until they buyer removes them, but we protect our clients by requiring all contingencies to be removed prior to a formal offer being submitted. Owners of trust and probate properties are often people who have never even lived in the houses being sold. They would have no better idea than a buyer what defects might be may be hidden. Placing contingencies on such transactions is an unfair burden on heirs and beneficiaries, so we work to remove them.”
A common problem facing many heirs and beneficiaries of a potential probate or trust real estate transaction is that one or more family members or caregivers continue to reside in a house that was owned by someone who died. Removing such people, especially when there is no lease in place, is always a challenge, but real property must be sold both unencumbered and vacant. In practical terms that means that somehow the squatters, who always have rights that must be respected, have to be dealt with in legal and ethical ways.
Clearly, California Trust and Probate real estate transactions involve a wide range of issues and questions that only a qualified attorney can answer. Can you contest a trust? How can you resolve inheritance disputes when one heir wants to sell a property, but another doesn’t? How can you remove an executor who isn’t doing the job? What can be done about a self-dealing trustee? Many of these issues are discussed in two books we’ve recently written, The Wolf at the Door and Alzheimer’s, Widowed Stepmothers & Estate Crimes, which are available by calling us directly for a free copy.
We at Hackard Law don’t endorse any one particular broker or agent. That said, we appreciate that there are Bay Area, Los Angeles and Sacramento professionals who understand the particularities and processes of trust and estate sales. We regularly litigate estate, trust and elder financial abuse disputes in Los Angeles, Orange, Santa Clara, San Mateo, Alameda, Contra Costa and Sacramento. Houses are often the focus of the disputes. When these cases are settled or tried, the main asset of most estates – the house, must generally be sold. We’ve handled house estate and trust matters in more than 20 California counties and have found that these sales are much more efficient when the real estate agents and brokers who handle the sales are both ethical and experienced.
If you are a beneficiary or heir of an estate or trust and your interest in a California house is at stake in a dispute, you can call us to tell us your story. We can be reached at 916 313-3030. We handle significant estate, trust, probate and elder financial abuse litigation where we think that we can make a substantial difference and there is a wrongdoer who can be made financially accountable for their wrongdoing.