Keep the Family Home Without the Family Fight, with Tanis Kluever

0:01 Welcome to the Fractional Interest podcast. Really excited to have a lady who I met actually through friend of the show Sam Price, one of the leading attorneys in Southern California, particularly in the IE. She was a guest on his podcast. I called her afterwards and said, "Please come on my podcast." We made a friendship and talked business since. And Tanis Kluever is a trust and estate loan expert. Her company is True Estate Loans. We've had her on the program weekly. Excited to have her here today to talk about how to keep the family home without the family fight. Tanis, thank you for joining us today.

0:33 Thanks for having me. It's such a pleasure. So this is a pretty unique niche in real estate loans, or I should say in loans. Or and maybe it's not even a loan. It's advance is always look at it. How'd you end up in this particular space? Cuz it's a fairly narrow niche.

0:48 It is such a small little niche and I came from actually a business management background for restaurants and franchises. I was really good with taking a not profitable store or restaurant and bringing it up to speed and making it profitable. So I've always been into numbers and customer service. I met a gentleman who said, "This is what we do. Would you be interested in it?" I took a leap of faith and found what I absolutely love doing cuz I love helping people and I love numbers. So I get to do both of those things without running around on my feet all day.

1:28 So it's really interesting this niche is so narrow. My stepfather My father who was attorney, he passed. My mother remarried another attorney. They kind of knew each other, but they had a mutual friend who introduced them. And we're married about 10 years. And I didn't realize he was a probate and trust attorney. And you know, until I was in this business for a while. He happened to call me last night to congratulate me on something and mentioned that he worked with a lender who's been in this niche for a long time. But he made it sound like he knew the only lender who did that. And so, actually, I know another one who I'm actually interviewing again on my podcast. So, it's not like I'm not familiar with the concept, but a lot of attorneys don't know that there is such a resource. And I'm not talking about hard money lenders who are like sharks in the water. I'm talking about like you people actually do this niche, do it regularly, therefore do it at a better cost. So, let's talk about this particular niche. How do you describe what you do as far as lending money to a estates and trusts?

2:27 Yeah, so there's you it you're very limited on your loan options when a trust is irrevocable or if you're dealing with a situation with probate. So, anyone can, you know, like you said, a hard money lender can say, "Yeah, we can do that." But they get to the end and then they want to deed the property out where they say, "Oh, I'm sorry, we can't close in probate."

2:45 Yes. So, you really have to know what you're doing, and it comes down to having the knowledge and expertise when it comes to lending to an irrevocable trust and probate. So, that's like one side of it, but with the actual lending side, with there's various reasons to do these types of loans. As you know, if you're dealing with probate, sometimes you just need funds to cover and close out expenses, pay for creditors, attorney fees, any other outstanding liens that may come up. If you're dealing with real estate in probate and you are dealing with a foreclosure, it's extremely important that you have someone that knows what they're doing with a foreclosure because you're on a deadline. And so, people come to you and you're like, "Hey, my foreclosure date's next week." And you're like, "Oh, great, fire drill." So, it's extremely important to have someone with that knowledge in this industry because you need to speed things along and save that property for the family. So, that's, you know, the difference in this little niche type lending. And then on the trust lending side, a lot of it is for Proposition 19 to correctly buy out beneficiaries and help that whoever's keeping the property keep their parents low property tax base. Because a lot of individuals don't know there is a correct and an incorrect way to buy out beneficiaries and preserve that tax base. Or as much under Prop 19 as possible cuz it's a cap.

4:08 Right. The incorrect way is split the property in half and then or sell it from one sibling to the other after distribution and then they get reassessed. Even if you fill out the form saying it's not going to be reassessed, they get reassessed, have a huge tax increase. And I guess the proper way is have it through the probate to one of the siblings directly from the parent. And then if they need to, they can transfer that assessment if they qualify to another property or keep the benefit under certain circumstances. So these are things that require an attorney, but more than just attorney, you need the financing to effectuate the strategy.

4:43 Absolutely. Because if you have a lender who wants individuals to personally guarantee the loan, Yeah. That's an issue when you're dealing with Prop 19 because that's viewed as a sibling buying out a sibling. So if the assessors request the final settlement statement and recorded deed of trust and the beneficiary's name is on that as an individual, they'll that triggers the reassessment. So a lot of times they'll say, "Yeah, we can do it." But then we they personally guarantee it and someone without the knowledge is going to allow them to do that, but then they're subject to a reassessment that's now irreversible.

5:18 And we're talking about a lot of money. I mean, the difference between a property where the mom and dad bought in the '80s and passed and are paying $2,000 a year and now the property even a standard property around here, a teardown is $2 million. The new buyer is going to reassessed is going to be 20,000, 25,000 a year. That's a big difference over three, four, five years if you're going to live there.

5:41 Absolutely, it's a huge difference and they what a lot of individuals also are they lack the knowledge on is that once the beneficiary inherits that tax base, they can now move that to another property at a future date should they choose. So, it's not just keeping that tax base on that property, you keep that tax base for wherever you want to move in California. So, it's a lifelong tax base that you can inherit. So, I have some individuals that will actually do the buyout, keep the property to get that tax base, and then ultimately move to a property that, you know, of their dream home. And have a lower tax base, which you're not going to get any other way. It's impossible.

6:21 And so, I think it's important to understand that not all attorneys know the Prop 19 ins and outs, and there's specialists in that field, and not all lenders or people who lend money to these estates and trusts know these ins and outs, and some of the attorneys know what to do, but don't have the lender, and some of the lenders the lenders want the attorneys because you're those are the ones that you're working with. So, just like in buying a house, I would say that you want to start with the mortgage lender because it doesn't matter how good your Realtor® is, how good the house is. If you can't afford it, you're not going to get it. And I'd say the same with this strategy, that I would say before you even get to the attorney, talk to a lender who knows this field because they know the attorneys, you know, like my probate business, I know attorneys who do probates poorly, and I know and I help them out, and I know which attorneys do probates well, and I refer people to them because I want customers to have good experience. I'm sure you know attorneys who know the Prop 19 ins and outs, and I'm sure you know the ones who don't.

7:11 Yeah, absolutely, and that's where our expertise, if you get an attorney who says, "Hey, I run into this once a year." Right. We can come alongside and say, "Okay, this is the normal process. This is normally what you run into." And they're grateful for it because this is what we're doing, you know, 40 hours a week, where if they're running into it once a year, they're, you know, they're not going to they need a little bit of that guidance, but you're right. It's exactly what a lot of my attorneys will do is tell them, "Okay, if you're trying to determine whether you want to sell or keep this property, talk with Tanis. She's going to give you all the financial information associated with keeping this property. Not just the short-term buyout loan, but what is the long-term loan look like? Because a lot of individuals lack the financial information to make that educated decision. So, that's where attorneys once they know that there's experts out there, it's such a great benefit because they can send their clients over. We help them determine do they want to sell it or do they want to keep it? And then they go back to the attorney with the plan of what they would like to do. It makes it very easy. Otherwise, a lot of individuals will actually just sit on it because they're frozen and they're afraid to make any decision because they don't know where to start.

8:22 I have a theory. You don't have to answer this cuz I don't want to incriminate you. But I have a theory that LA County automatically issues a reassessment on every property even if you go into the trouble of filling out the exemption form you had time exactly perfectly in triplicate, notarized, took pictures of it, took pictures of you taking pictures of it, walk it into the county office and drop it off in person, and they sign a receipt, I think they still just do a reassessment to force you to prove your case. I think every time cuz there's a lot of money involved in these cases. And if you're on the wrong side of that, you're giving up a lot of money.

8:55 Yeah, and I so I do because of what I do, I have a lot of relationships with the county assessors. Los Angeles is notorious for that, but there's a reason. The reason is because it takes them approximately 18 months to process the parent-child exclusion. So, what happens is when they come to the next the next tax year, that when they're preparing the bills, if they haven't processed the parent-child exclusion paperwork, they reassess it. And then they add supplemental taxes, they reassess the property. It doesn't mean it's permanent like you were just stating. It just means that they haven't processed your paperwork yet. So, once they get to it, they will reverse it, and then the supplemental, if you paid it, gets reimbursed, or if it's there, it gets removed. So, because of that time frame of 18 months, I always prep people for Los Angeles, do not be afraid when you get to your next year's tax bill, because it will most likely show it's reassessed. Do not be afraid, you did everything correctly, all the paperwork's in, they just need to the time to process it, because they just don't have the manpower.

10:02 You know, you say that with a straight face. I have to give you congratulations. I tell people I'm in Los Angeles, okay? They take 18 months to process. It's like two pages, like a two-sided form that you fill out. Can't do electronically, you got to do it by, you know, e-signed at best, but it's not a fill the form electronically form, it's a paper form. It's just It right out of the 1980s. I mean, it's just really And like you say, because they don't process that for 18 months, all this extra work and heartache and customers call in a panic. When you get the supplemental bill, and I paid the attorney extra. I You said there's a And now you're the one affirming me. I just say, "Hey, talk to the attorney." Cuz I really, you know, I don't know the law that well. I know what you're supposed to do. I know the procedures, but, you know, at some point you have to protect your You know, I don't know what the rules are. If you get that reassessment, how do you protect your interest that you filed it properly 18 months ago? You're making it sound like it's automatic, and it should be, but there's nothing that the city or county by you do that's done properly. I mean, I just can't believe that you would not want to file some sort of protest to be on record. Hey, we filled this thing out 18 months ago, and you guys are so backlogged, you should know that. But I don't know. I don't know what to say there, but okay, you're

11:21 Yeah. A better attorney than I am, I guess. It's an unfortunate situation with Los Angeles that they got a lot thrown on them and no additional resources to adapt from Prop 58 to Prop 19. They did not. And so, what happens is then when they're it takes 18 months, now what's happens happening is when they actually process it, they have that extra work of now going back and fixing everything. So, then that's backlogging them even more.

11:48 Right. So, it's almost backwards, but the you know, the good thing is with Los Angeles, I have spoken with them and said, "Hey, what can we do to just send everything in, make it easier, maybe prepare something and do education for how to send everything in perfect for everyone else, so that it's taking a little bit of a load off, maybe how can we collaborate?" Because yes, Los Angeles is severely behind because of their volume. They're you know, the largest assessor. They manage the most amount as well.

12:17 Well, and the legislature passes so many bills and they don't really understand that these bills have to be implemented by somebody downstream. They made a change in the probate case where there's certain lower value probate properties that can be theoretically distributed more easily. In fact, they passed a law, it took months for the you know, the county or the state to issue the forms and then the attorneys have to review the forms, title companies have to digest the forms. It took months before people started even considering using this and I see very little of this being done. So, I think last year the state passed 75 new laws affecting real estate. You can imagine what's like at the county and you know, we as Realtors®, we go through this and I'm sure you see it, too. So, yeah. Okay. But that's the game, right? On the one hand, it's complicated. On the other hand, if you play the game right and you get the lower assessment and maybe you can take that to your next home. You're talking about saving 10, 20,000 dollars a year for 10, 20 years. That's That adds up.

13:17 Absolutely. And that's you know, essentially what you have to look at and what someone who specializes in this type of lending is going to show them because you need to you need to know where are the taxes going to be at if you're, you know, if there's a partial reassessment under Prop 19 because of the million-dollar cap. What is your new tax base? What's your tax saving? What's the cost of financing to buy them out? And you have to look at all of that. And you have to say, "Does this make sense? How long are you keeping the property?" And then you can even show them, "This is how much you're saving over 10 years." The and those are the numbers that a regular hard money lender they're not going to know how to produce very easily to show these clients and that's those are the figures they need. They need that.

14:03 So, let's talk about the process. I imagine I'm the little the bit I know about you is that I believe most of your business comes from people referring you the estate, not the actual administrator. So, I'm presuming the vast majority of business comes from attorneys or fiduciaries or accountants or professionals and not from the actual heir or administrator of the estate. Is that Is that fair?

14:30 Yes, we do get a small percent of individuals that find you online and call, but majority of it is from the trust and estate attorneys and fiduciaries. Because anytime someone passes, they go to them first and they say, "My parent passed. What do we do next?" And so, that's where they look, you know, is it a liquid trust? Is it illiquid? Or is it probate? Do you need funds? And that's where they say, "Okay, here's a you know, a trusted referral source for this type of funding." So, it really is, like you said, just educating attorneys, fiduciaries, CPAs, anyone who runs into this kind of stuff, that there are individuals and companies out there that actually specialize in it.

15:10 So, what's the process look like? Meaning, this is not Rocket Mortgage going online, fill out a form, you get a little email, you attach your documents, you get pre-approval, and then you go and buy a house. This is a much more personalized service and a I imagine you know but also at the same time less pieces of the puzzle. You're not looking at the income, you're not looking at the credit of the administrator. So what's the process look like for you on these transactions?

15:37 Yeah, so there's two sides of the trust and the probate side so we'll kind of separate it just a little bit. For the trust side, let's say you're dealing with the Prop 19 and you are doing a beneficiary buyout. Someone wants to keep that property. So it's whether they're keeping it or selling it, loan documents what we need is all they're all the same. So standardly because it's not personally guaranteed, we're not looking at anyone's credit, debt, or income. It's a loan to value. So we just need the property value, estimated loan amount which we can help them calculate by you know a sample distribution schedule based off of assets, liabilities. So if they don't know, we can come up with a ballpark what figure they need. And from there if they fall within the range of loan to value, the only items needed associated with this are with the property. So you need the trust, any amendments, you need trust tax ID number because this belongs to the trust not an individual, homeowner's insurance, appraisal if they have it, and ID of the trustee because the trustee will be responsible for signing loan documents on behalf of the trust. Acknowledging we're putting a lien on it but again not personally guaranteeing it. So that's pretty standard for the trust side for Prop 19. Now if there is an individual that's keeping that property, it's extremely important that on the secondary side you can make sure that they're pre-approved for long-term financing because the trust loan's short-term, it's meant to correctly buyout beneficiaries and preserve that tax base. But once it's once the trust loan's completed, the property gets deeded into the individual's name that's keeping it. Now they need to apply for long-term financing. So the last thing you want is to put them in a short-term loan, they get to the long-term financing and they can't qualify.

17:23 So, ideally with those, we pre-approved whoever's keeping it in advance to ensure that they have the ability to keep this property long-term and so they're comfortable with the payment associated with keeping that property cuz that's extremely important. So, that's like on the Prop 19 side for it. It operates the same exact way if you're dealing with probate and a buyout for Prop 19. The only difference is you don't need a trust, you need letters of administration, a notice of proposed action, and the administrator signs it because there's no trustee. So, the Prop 19 side operates the same. If you're dealing with stopping a foreclosure or just paying off debts, it again, it's a collateral-based loan, it's loan-to-value. So, with those, if they're just if they intend on selling the property, it's a simple letter of explanation. We just write that the payment method of this loan is the sale of the property. So, all it's all loan-to-value. Most lenders in this industry are their comfortability is around a 65% loan-to-value. But, if you're dealing with someone like my company who specializes in this, let's say there is a circumstance where it's higher than 65%. I've had circumstances where we have funded a loan because there was multiple six beneficiaries.

18:45 So, we did an above-an-80% close to 90% loan-to-value loan to a trust buy out the beneficiaries the correct way preserve that tax base. Contingent upon the fact that once the property is in the acquiring beneficiary's name, they pay down that trust loan with their own money to a more comfortable level. So, individuals that are keeping a property but say, "Hey, I have, you know, $400,000 to contribute." You can't because the minute you contribute your own money to the buyout, it triggers the reassessment because that's viewed as a sibling buying out a sibling. So, that's where a lender who knows what they're doing with trust and estates, they will make exceptions like that saying, "Oh, this makes sense. We understand. You're going to have an 80% loan to value, but you are going to pay us down right away." So, that's where we have a lot of flexibility with our with our loans, especially being in this industry. But, if you go to a normal hard money lender, they're going to say, "Nope, sorry. Can't go above 65%. We're not comfortable with that." Because they don't really understand the magnitude of you have you kind of have to make those exceptions sometimes. And it's really, you know, we've been doing this for a long time and we've had zero issues, no foreclosures.

19:58 Yeah. Yeah, and this is why I think as a real estate agent, you know, you just mentioned the whole process which can sound ominous to the administrator, but the reality is as a real estate agent, I probably have all those items already, right? I run a premium when we file the probate or once the decedent passes, we're going to need a date of death appraisal of some sort, either a court-ordered one, pro per reorder appraisal. Anyhow, we need insurance on the property regardless of what we do with the property in most cases. There's exceptions, but generally speaking, we have that. The trust documents, the title company's going to need that eventually as well to sign anything, the same things we normally need. Affidavit of death, you're going to need one of those. Probate letters of administration, you need one of those. Notice of proposed action, again, that can that's a there's a longer discussion there, but all of that we would have as a real estate agent theoretically or the attorney at the time that we decide we want to do this. The key is to explore the possibilities, bring tenants in if it seems like it's tight, maybe there's an exception, maybe there's some room to push something. And but as a real estate agent, I would urge anybody here on this call, that's kind of our job is to package this together cuz we're now helping everything get ready for the eventual sale of the property that we get involved with.

21:10 Yeah. So, you mentioned loan to value and obviously everything's, you know, case by case. I get that. Talk a bit about the pricing on a loan like this. And again, I know it varies, but I'm sure you have a range of the most common both in terms of the interest rate, the length, and then the what kind of points and fees you normally charge.

21:26 Yeah. And just a quick mention, these loans they are designed to close we can close 5 to 10 business days. So, just an important factor if someone comes to you and they're dealing with that foreclosure, just know we can get it closed quickly, get them paid off. This is what we do.

21:42 The payoff takes about 2 years to get from the lender, but you guys can close it in 5 days. No, we can because we have our processors are like, "Nope, not happening. I will get that." And they do.

21:54 No, I was going to point the opposite that the lenders they just don't give out the payoff statement. They just drag it out forever to get those extra days of interest. I literally got one today that we requested 2 weeks ago. You think, "Why would you take You're in foreclosure. Why would you take 2 weeks to tell me how much it takes to cure the foreclosure?" Cuz they're getting a better interest rate and they're in no hurry. But anyhow, that's me. That's just me hating on the loan services. Sorry about that.

22:15 I know. It is frustrating. It's one of our headaches, but we do it. We figure it out. A smile. We make fun. And then make fun of the servicer. That's kind of how I get through it. So again, going back, so what are tip the most common rates, points, fees for a transaction like this?

22:30 Yeah, so typical's going to be around 2% 2 and 1/2% of the loan amount. That's pretty average. If you start going into a second position loan, you're closer to 3 and 1/2%. And interest rate can range anywhere 9.99. And then once you get into a second position, 11.99. Sometimes 12.99 if it's a very high CLTV between the two. So again, we're not stuck in a box. It's kind of, you know, for the standard trust and estate Prop 19, it's going to be the same across the board with the rates because that's pretty standard. But once you start getting into, you know, if you're dealing with one that's for a fix and flip, you just want money to, you know, fix up this property, sell it for a little bit more. Sometimes with those, we have flexibility and options of giving you, for example, let's say you need 100 you know, 80,000. We can give you a loan amount of 300,000. And there's an option for like a one-time draw after the initial in the event you had run out of money and need more because sometimes that does happen.

23:35 Yeah. So, you also have the option of building into it. Yeah. Like every time on a flip. Let's be honest. And flip, I love that I have that product and option now because fantastic. I'm like, "Hey, it doesn't hurt you to take that loan of the larger line. You take this much now, you have it if you need it." So, and we can do deferred payments if the first mortgage is, for example, in default. We don't need to pay off that first mortgage in order to close the second. We can close the second, give you enough money to cure the first. And those ones, you know, are going to be the ones that are probably around like 11.99, 12.99. But there is We try and make the scenario based off of, you know, let's not just pay off the $600,000 first because you need 50 or 100,000. Because now you're paying fees on 700,000 when it doesn't make sense. So, that's what I mean. When you get into the second position, you're looking at a little bit higher interest rate, but it makes more sense because you don't want to pay off that massive first. So, safe range, 2 and 1/2 to 3 and 1/2%. Typical third-party fees like title, escrow, recording, notary, and then interest rate can range 9.99 to 12.99 depending on CLTV, LTV, and items like that.

24:57 And they will say, while sounds expensive compared to me buying a first-time home on a 30-year fixed-rate mortgage with an FHA guarantee, and it is more than that, for the circumstances, it can be very cheap because they're facing foreclosure, there's legal fees to try to fight that, ex parte is cost money if you're going to file that. The lender's charging typically penalty rates and fees on top of it. You're avoiding those by paying by curing the loan, bringing it up to date, and maybe financing the payments as well. So, again, it this is a business decision, and as a real estate agent or anybody who's watching who's an attorney, you need to make the case why it makes sense economically, but if it does, and in many cases, it makes a lot of sense. This is a way to save people a lot of money. So, Tanis, just kind of wrapping up here cuz we're kind of towards the end of our time, and I really appreciate the time with you today. Let's step back a little bit and talk about it as a businesswoman, you work primarily with attorneys and with fiduciaries and accountants and people with free business. And this is a very specialized field, and I'm sure you see people who are, you know, not as good, and I'm and like me, you're glad to work with them and help them. They need you, they need me more than the average. But then also, we work with some who are really good, and those are the people we aspire to either be like or learn from and be better in our field. What are the common characteristics of the people that you see who are on top of their game, that you have the chance to work with, whether it be attorneys or Realtors® or accountants or free business? What would you say are the one or two things that the top people do consistently?

26:19 Yeah, I think a lot of it is repetition. So, again, like I mentioned earlier, you may have attorneys, and a lot of them only run into it maybe once or twice a year.

26:30 Right. But then you have some offices that they run into this seven to eight times a year. So, those offices are going to be they're, you know, they can do it like you know, in their sleep because they're it's on repetition at that point. So, some of those offices that specialize in Prop 19 for clients, not just on the administration side, but also like on the planning side. They're going to really know because they're plugged into the county when it comes to Prop 19.

26:58 Yeah. On all matters, you know, front and back end. So, those are typically the offices that are like, you know, they're great because they specialize in all Prop 19 stuff. They're very familiar with it. But again, I you know, because of this is what I do, even dealing with attorneys that they just maybe their first time ever doing it still goes flawless because this is you know, where I've had guidance. I've worked, you know, over the last 7 years also with a tax consultant who was an assessor for 25 years. So, if you get something complex, I tell my attorney, let's get my, you know, my contact my tax consultant on the telephone because he's going to tell you what you can and can't do. Let's say missed a deadline on something. He know he can he can spit that out within, you know, 2 minutes. So, it's been really I say, you know, some offices specialize in Prop 19 are great, but at the end of the day you get someone like a lender like myself that really knows what they're doing, all of it's going to be great. We have 100% success rate, zero issues with our parent-child exclusions, and I've been doing this for over 7 years.

28:01 Wow. Well, and the fact, you know, I've done enough to warn customers every LA County gets reassessed automatically. Didn't know why, but I knew it was happening. You've been another level up that you knew the reason why it was happening. Not only am I right, which I love being told I'm right. I've been married 39 years to my wife. I've never been right with her, so it's nice to be told I'm right. But to have a reason behind it, which is, yeah, that's how the county is dealing with this backlog and this is kind of a unique situation. So, you really showed us your professionalism. You're definitely cut above, Tanis. It's been a pleasure. I heard you on Sam's podcast and we started working together a few months ago or a month ago or so.

28:38 Yeah. I really appreciate the chance to meet with you, share with you with my with my platform as well as look forward to continue the business with you. Absolutely. Same. Thanks for having me.

28:48 If you want more of Tanis, her contact info's on the screen right now. [phone number] the phone number. [email address] and there's a website as well. Keep the family home without the family fight and there's other reasons why you might do that and there's her website with all kinds of good information. You get a free cost benefit analysis. And again, I think the key here is you have to wonder whether or not this thing makes sense or not. Talk to professionals, she'll walk you through the numbers or if I can help, please reach out to me as well. Tanis, thank you so much for being with us today.

29:17 Thank you. And for the rest of you, thank you for being on the Fractional Interest podcast today. We do this we have a new episode every week working with attorneys and other professionals that work in this unique space of how do we transfer property when there is multiple parties involved. Sometimes it gets sent out in fractions, sometimes we buy them out, avoid that to get the best benefit for the heirs. I'm Bill Gross at Bill Gross Probate. If I can ever help, please reach out. As always, make today your best day ever. Thanks.