How to Sell Probate Real Estate Without Ending Up in Court, with Jennifer Felten

0:03 How do you sell real estate without ending up in probate real estate without ending up in court? Well, the truth is you can't because if you're in probate, by definition, you're in court already. And no matter what you do in real estate, or what you do in California, you can still get sued, you can still end up in court. But I think the title really should be how we minimize the chances. Well, excited to have today an expert in real estate law here in California. Jennifer Felten is the owner of RELAW, and she services She's a boutique firm that works with real estate professionals and has since 2015. Jennifer, thanks for coming back to our program.

0:34 Thank you, Bill, for having me again. So, to me it seems like probate is just already a sticky wicket enough. If you have real estate in it, you kind of combine two areas where attorneys like you make a practice of specializing in and obviously there's crossover. What are one or two of the most common things you've seen in probate, specifically real estate, that cause people to end up either in court or having significant losses or problems?

0:59 Right. Well, you know, the when we're in dealing with probate, it generally means that we didn't plan ahead, right? There was no pre-planning, there wasn't wasn't a trust or some sort of estate planning done. and people get confused about the fact that a will, right, doesn't avoid probate. So, there could actually be some planning with a will, but not enough

1:21 [laughter] to avoid probate. And the reality is that probate is where no one wants to be. The only people who do well in probate are the attorneys. but the things we see are who's going to keep the property, what, you know, who's who gets what from the estate, what were mom or dad's intentions, right? All of those things are the things that start to really come out and are very public because it's a public process when we're in probate.

1:50 So, let's talk about just in standard what I call, more common, full authority probate, standard probate where you don't need court confirmation.

1:59 Yep. as a California Association of Realtors member, I use the CAR forms. I think they're great. I think they're they're efficient. I think they're great for explaining things to customers. definitely worth my membership fee, I have to say. On the standard California Association of Realtors purchase agreement, there's a couple boxes. One is to attach the probate the purchase agreement probate addendum PAPA,

2:21 Yep. that you check. And there's another one for the probate advisory. Truth is, the probate advisory in our forms package is connected to the PAPA. So, you like can't do one without the other, but either way, there's two different boxes you check. I was in a court I was in a matter recently where the buyer tried to claim that he was not made aware of the probate restrictions on this property, even though it was in the MLS. And even though on the form, we checked the box,

2:48 Right. as well as attached the documents as part of the package that he signed. Question One question I have is, how important is it the box checked? If you just enclose the form, if you attach the form in the same email with the offer, is that sufficient? What legal distinction does checking the box or not checking the box actually have?

3:04 Well, it's a big deal from a legal standpoint. There's a reason CAR forms have the probate addendum and the probate disclosure because it does change the rights and the ability of that buyer to move forward with that sale. it really depends on what type of authority the administrator or the executor has, on how big of a deal the probate is. if they have full authority, it's it's not world ending in most cases. The sale can go through. If they have limited authority, we're going to court to get the sale affirmed before we can even move forward. So, their rights are extremely limited. And the dispute resolution rights and things like that are greatly impacted by that, and they have to be because when we're in probate, the court ultimately controls that property, not the administrator, the executor, or the realtor for that matter.

3:58 Mhm. In this case, it's still before the court. It hasn't been decided yet. Right. Where the buyer is is unique where it was a full authority.

4:07 Yeah. But one of the parties who had the right to be noticed objected to the sale. It turns out it was drastically too low. I think I think they caught fraud. And I'm embarrassed to admit cuz I was a listing agent and wasn't aware of certain facts.

4:20 All of a sudden, we have a problem. Right. So the buyer's trying to say, "Well, no, I wasn't this was an appropriate sale." Mhm. And I'm like, "What's on the purchase agreement?" Right. He claims the escrow His defense is the escrow officer didn't send him the agreement even though it was included with the signature packet. So, again, I guess it's always best practice to check the box then you eliminate the room for dispute. I guess if there's still a an obligation to prove that you delivered the documents to the buyer and that they received them either way.

4:45 People fight over everything. [laughter] Not a shortage of fighting, but obviously the more that we can document that it was conveyed to that buyer, the better. Even I'll just say it from the legal perspective, even if he wasn't or she wasn't aware, the court's still going to have the ultimate say.

5:03 Right. The judge is going to decide either way. Like you like you can't argue with the judge, but you know, good luck with that, I guess. Exactly. That's how far along. You want to argue with the judge, good luck. Go to court and get argued with my lawyer, but we're heard, but it doesn't really matter.

5:17 Yep. So, the Another issue that I see in probate where there's disputes that I haven't seen in [unclear] litigated is as is and making concessions. And I think that you know, we sell property as is.

5:34 Right. And we're we have notice of proposed action we send out if it's full authority. And often times buyers come back and say, "Well, you know, we need this fixed, that fixed, you know." And as a seller, we usually in the position to do the work, we usually give them a credit.

5:48 Right. Do you need to go back and get that re-approved? Meaning, let's say we have a purchase price of $800,000 and we get to very end and the buyer says, "Okay, I'm I'm ready to waive contingencies and close, but I want a $4,000 credit." Do we need to go back and get that a credit approved as well by the NOPA? Or could the could an objector say, "Hey, I didn't agree to 796, I agreed to 800 and you get didn't get $800,000."

6:10 I you know, in a perfect world, we want to give notice of any significant change. You know, is $4,000 on a $800,000 sale significant? Right? Like, that's a you know, an open question. The best answer is let them know when things are changing. They're you know, if we have a $800,000 purchase price, how much of that is closing costs? Right? Like, think about when you're looking at a percentage of that transaction. so, the worst-case scenario in that situation was that they would claim the administrator acted outside their scope and it might affect that administrator's relationship if they're a beneficiary to that that small portion. So, best case always advise, but you know, I wouldn't blow up a deal like that over $4,000 either. Right? We don't want to wait you know, 3 more weeks to close that sale over $4,000.

7:05 We had a case recently where we had 15 notified parties, of which eight had emails and seven didn't. Right.

7:13 I think I think just I don't know, but I would imagine the cost just to notify 15 parties is probably going to be close to a couple thousand dollars by the time you have fees and documents and time spent and all that. So, it's one of those things you want to plan ahead time. Now, I'm something I just learned recently, a couple things that I'd love to run by you and get your input on. One is that an attorney that I really respect a lot has a very interesting strategy on NOPAs where she says, "Let's just do it when you list the property,

7:39 Mhm. but come down from your list price." Meaning, if you're going to list a property, a million dollars, and maybe you're very intentional of selling for a million or more, Mhm. you still can if the heirs would agree, you can still do the NOPA at 900 or 925, and that way if it does come below, your NOPA's already done. If you had Do you have concessions? It's already done. If they've already given you that kind of leeway to get the job done. And you should explain that ahead of time. Is that a good practice? I've never heard of that, but I thought, "That's brilliant." Cuz it makes sense if the heirs give you the flexibility, why not take advantage of it and speed things up?

8:10 You're going to get my total attorney answer, which is it depends. [laughter] In a family situation where everybody's getting along and the administrator's not getting pushed back on things from the other parties that are entitled to notice, then being proactive makes a lot of sense. If we're in one of those estates where they're fighting over everything, that's just going to trigger another reason for them to complain about what the administrator's doing and

8:36 Right. object and cause problems. So, I think it really depends on what kind of estate we're administering and how well everybody's getting along.

8:45 Yeah, we're in a case right now where that this that particular case, the NOPA the title company's had it for 2 weeks. They declined it. What? Declined? They said, "Well, there was an objection filed." I said, "Well, that was before we got appointed. That's That's just called probate." And I don't know if the title underwriter knows what they're doing. They're with a big company. And it's been 2 weeks and we To me, it's just a standard NOPA.

9:07 Right. And we gave them the 15 days and it expired 2 weeks ago. And even today, I don't know I don't even know where we stand, but I think if we can get these things done ahead of time, great. But at the same time, we don't open up our administrator to claims. So, we'd be kind of have to guess case by case and make the attorney make that decision.

9:24 It is a case by case, and also, you know, people get confused by what title companies are doing when they're making these underwriting decisions. What is legal and what they're willing to underwrite are not always the same thing, right? They don't need to get sued. They don't want to get sued. So, they're going to be they're going to be conservative in their interpretation and managing of any sort of objection or complaint.

9:48 Yeah, but if a title company said to me, "We're not going to ever insure full authority probates where there ever was an objection." I would never do business with them because so many of the probates I didn't know they had an objection by the time I get the listing. We don't you know, it wasn't really relevant. They're just two brothers and one filed and the other one objected and the court is went along with it. Everybody's playing nicely now. and the title company's going to have a problem. We just pull and take it to another title company. That's what we're going to do here. It's just There's other title companies that won't give us a hassle on that. You know, another area is on trusts where, you know, different set of laws, obviously. you know, it's interesting that I often get attorneys to say that for a probate we need to do a notice that we're going to list a property. Now, I get if something's very contentious, you want court approval on everything.

10:34 Right. But as a general rule, at least by the by the letter of the law, it's not required in a probate to list the property. Agreed.

10:42 On a trust, you need the 45-days notice of proposed action. I think that's why people tend to do that notice when they list a property. Is that what's going on there, you think?

10:54 I again, I think it's just going to depend on a case-by-case of how the attorney is handling the trust administration when they're handling the sale. the reality is a lot of people go do it on their own cuz they think, "Oh, I have a trust. I don't need an attorney." So, a lot of times trusts

11:11 Go wrong? aren't handled the way that it would be handled if an attorney was involved. whereas when an attorney's involved, they're going to take a conservative approach to protect the successor trustee, right? Give notices, let everybody know what's going on, and make sure that there's not going to be an issue with that sale.

11:30 Is the 45-day notice proposed action required in trust sales? I would say no. it's not required, but it's definitely good best practice.

11:40 Is 45 days? Yeah. Best practice. I mean and as far as you're concerned that mean when you list a property or does that also mean when you have a cuz a purchase contract you ask goes these days go you know 3 days don't go 45. So that seems like a long time for once you have a buyer in a contract price. Is it at the sale time or is it the listing time?

11:57 I think it the I'm not too worried about the timing from a practical standpoint. The as far as long as we've lodged everything and done what we need to do and we've given notice, then I'm not too worried about 45 days, 30 days, right? Like again, when we're in a contentious situation, we're going to know.

12:16 [laughter] And when we're not, nobody really cares. and as long as you know, there's not a low value sale, this you know, insider trading, things like that, I'm not too worried.

12:29 Tell me about the you know, we our technology changed so much since COVID so fast. You know, when I before COVID, I was always trying to get customers on board with electronic signing. Now everybody has electronically signs everything. And you know, the packages of information we send out to customers are so large

12:46 Right. that that even if you had the paper and you sat down with a with a glass of wine or a cigar or something and want to make a whole thing of it would take you hours and hours to get through it all. And we send it to them via email. We know they're just clicking through.

13:02 Right. Where are our responsibilities for pointing out things that somebody really needs to notice? You put it in writing of course. You have disclosures as a agent we do an agent visual inspection of it visual inspection disclosure. you know, we write things out, but at what point am I saying, "Hey, before you click, just make sure you read page 12" or what are the require Obviously it's good practice to always advise your clients of things, but if it's the other party, I don't know that I really care and I want to jeopardize my sellers situation. Is there any issues as far as they get 200 pages at the e-sign? If they e-sign it all, then that's pretty much it.

13:38 I wish it were simple. [laughter] Again, this is an area where, you know, I would say that that practice and reality and social generational issues are all impacting these discussions today.

13:55 Yeah. Yeah. so, you know, you and I, right? We used to hand sign and read and do that, right? People of our generation. Young people are not going to print out paper, read it, you know, things like that. But, the case law is starting to develop because then they will come back and say, "I didn't know." Right? I mean, old people do it, too, but the difference is significantly greater in the younger population who are going to court and saying, "Yeah, I signed something, but I didn't know what I was signing, so it's it's not enforceable." I mean, the lawsuit against realtors over commissions is literally that argument, right? That

14:33 Yes. Yes. signed agreements, but we didn't know what we were signing and we didn't mean it, right? And the court sided with them, right? So, Unbelievable.

14:41 That's that's the real world today of where you and I, it's like, if you signed it, you're on the hook. You know, if you didn't read it, that's on you. That's not the world today, right? We're in a society where if you didn't understand it or appreciate it or read it, you might be able to get out, right? So, from our perspective, it's like, how do I mitigate against that? If there's things that are of high importance, so, one of the things I tell realtors, make sure you advise the buyers about wire fraud, right? Don't don't just think there's a wire fraud advisory, they're going to know, right?

15:17 [laughter] You know, because if their deposit goes missing, promise you're going to get sued. And they're going to say, "I didn't know I needed to call escrow to manage my money." Even though they got a wire fraud advisory that said it, right? So, if there are deal points that really are important, put them in your email. Again, doesn't mean they read your email, either, but it's one more piece to be able to defend when they're going to argue, "I didn't know."

15:43 You know, I did a podcast episode with an attorney who was talking about the wire fraud disclosure. And I mean, I'm I'm very sec- you know, I take security seriously for cyber, personally. Just like I came from a secure world. I came from a defense department world of electronics. I kind of pooh-poohed the wire fraud. He said, "Well, I'll just let you know that I have a client who had, I think it was like $1.5 million wired through a phishing scam where somebody went into his email and gave him a fake escrow paper, and he filled it out, and he That's where he wired his money to or where his proceeds went to, I guess it was in this case. And there's escrows that, you know, I had a you know, the esc- the escrow that I use regularly, they call me and every wire I've done 20 escrows a month I mean, a year with them, and they call me every time to verify my wire versus

16:29 Right. you know, the buyer's agent in this one was saying, "Why does your escrow require my buyer to verify the wire on the phone? Can't they just give me the instructions the realtor, and I'll give it to my customer?" No, we can't No, we're not going to I don't care that my escrow is strict. I don't want your money your buyer's money missing. He's going to sue me, too. He's not going to stop with you. He's going to fill the form, throw my name on there. I don't want that.

16:51 Exactly. So, sometimes we have to just be proactive and mitigate risk even when our clients don't appreciate what we're doing.

16:59 [laughter] I think so. Or the other In my case, this is my client with the other agent, which is again, but if we're seen as too compliant and we follow the rules and we're too safe, I'm willing to be charged by that.

17:08 Right. You know, obviously, there's a very, you know, a big topic in every business is artificial intelligence and technology and computers. And literally, we have people now who are connecting their computer to their personal accounts to save them time. So instead of having to go in and write those pesky checks, like how long does it really take to write a bunch of checks? They go in and have their computer access their bank account and download their statements and things. I'm thinking, "This is not going to end well. There's going to be machines that are going to go in and just grind stuff out." So I definitely think we want to be, you know, planning ahead of time. Talk a bit about in your practice, what are kind of what kind of the best practices that you see that people aren't using that you say, "Hey, you really need to step up a bit." Not that we want to become tech heads or anything, but there's there's reasonable practices now that business people should employ.

17:57 Yeah. Well, some of the basics. I do I do a whole webinar or class on fraud because it's such a huge issue in real estate. And some basic hygiene, don't use the Wi-Fi at Starbucks or McDonald's, right? Like those are not secure Wi-Fis, right? Have a hotspot. Have a Wi-Fi in your car. Use a virtual private network, right? Don't use a public network at any time, personal or professional, right? have different passwords for every single thing, every single account. Do you know, Bill, the number one password?

18:35 I do. It's password. Right? Do not have password as your password. I think the second most popular is 12345678.

18:44 Do not. Come on. I know it's a pain to remember passwords. I'm I promise you, if you have to call me because a million dollars is missing because you had a bad password, you're going to be annoyed.

18:55 [laughter] Yeah. Trust me, right? multi-factor authentication, right? Like it's a huge one. every program nowadays has the option to do it. Turn it on. I know it's annoying that you got to go to your phone to get a code to log into something. It's an extra step. I promise you again, when you're safe and someone else isn't in your stuff, you'll be glad that you did it, right? So, those are just like three basic ones.

19:24 You know, in I know that you're you're real estate attorney primarily, not a probate administration attorney. one of the things I deal with probate administration attorneys, I feel like they sometimes can be too focused on just being the attorney interpreting law and not enough on the business person helping your customer get what you want using your legal skills to assist them. And for example, when an administrator needs to open a bank account, I think just sending your client to Wells Fargo is not practice because they're going to go, then they then they have to come home, get a copy of the letters, go back, well these aren't certified, they come back, we serve a copy, we need wet certified copy, where there are banks who operate online that are focused on probate and trust related business and where attorneys can sometimes dual sign checks to maintain control. [clears throat] And yeah, I have attorneys who say, well I don't really want to get involved in that, and I feel like, well yeah, but to me that seems like the job is A, helping your customer get the banking done, and B, getting it done efficiently. Where am I off of base on that, or what do you think the best practices are for attorneys?

20:25 So, I think it really goes to customer service and risk, right? They're both real things we have to think about. and so, one I'm I'm going to say this as an attorney, right? Customer service isn't always something we think about, right? We're trained you know, from a technical standpoint, and the service aspect sometimes falls away. so, it's just about technical checklists instead of service. attorneys who know the difference and who exhibit customer service tend to do really well, because we outpace our competitors, not on skill, but on service. I joke, the number one complaint against attorneys is that we don't respond to emails and phone calls,

21:07 Right? No doubt. Just answer the ding phone. Respond, right? Provide resources, right? So, for me it's about, you know, who do I know? Right? I'm a prolific networker. I have a whole network of bankers who do focus on managing probates and managing trusts. So, if a client asks me, you know, I need an you know, a bank, I would give them specific people who to contact, where to go, and I'm I have all people like we've held money in a the trust and estate situations, right? We're going to accommodate as best we can. Again, it's a service position versus a technical rules and regulations position. And it's just going to be attorney by attorney.

21:50 You know, another [clears throat] area that I'm surprised isn't more popular than it is is online notary services. Now, again, this became urgent during COVID, but it seemed to me that it's lost its momentum. I know that virtually every title company has a at least one vendor, if not multiple, that they will allow that to be It's so much cheaper. You know, you're saving a couple hundred bucks, more convenient. Why is there a pushback on that? Is it just it seems too techy, or is it the notary's going to make the notary fee? What do you think the issue is on that?

22:21 The virtual notaries are not cheap either. So, the pricing as a general rule, like for a like for an estate plan or for a set of loan documents is probably going to be comparable with a virtual notary versus a in-person notary. I would say it really goes The biggest thing is two things. One, California still doesn't allow California notaries to do virtual signings. Right? So, California is one of two states that doesn't allow it. Every almost every other state allows it. California Secretary of State, which is our regulator, has just been extremely conservative on this issue. We're not going to get authority I'm a notary I've been a notary for 30 years. We're not going to get authorization for California notaries to do virtual into till 2030. So, we're still 3 years away from California notaries being able to do it. So, that's one of them. And the other is people are scared of technology. I actually like remote notarization, virtual notarization because it has a level of vetting that happens with that notarization that doesn't happen in person.

23:28 Yeah. I'm a notary. If someone comes from to me to sign a document, I'm going to look at their ID. I'm going to look at them. I'm going to look at their ID and I'll be like, "Yeah, that's you." Right? Like, that's the level of vetting that happens. With a remote notarization, they actually get asked security questions. The same security questions that you get asked when you're trying to get a copy of your credit report, right? So, they pull that data and if you can't pass those security questions, the notarization doesn't go through. So, I like it. and that notarization is videotaped, right? So, there's

24:00 Yes. record of it. Whereas, when I notarize something, I ain't filming it. [laughter] Right? No one's No one's recording that. So, I think time and comfort over technology, I think it will become the norm in the next 5 to 10 years, but we're just not there yet.

24:19 It just seems like every fraudulent deed I've ever seen, there's a notary and they just disappear. You know, and it just seems to me if you had the online, you'd have a company, you'd have some sort of maybe they can require bond, you know, they regulate it, require bonding of some sort. The video part is obviously helpful. It just seems there's so much more it'd be easier, I think, to fraud somebody with a with a notary. Not to besmirch notaries. And I'll say good notaries are very valuable. when they go out and explain documents to customers, which really isn't their job, but they make it seem okay or they call if there's a problem. I don't mean to put them out of business, but I do think the online service is more secure, I feel like, than having to send some stranger out, perhaps, or getting a document with a stranger signing it already.

25:06 There's fear of like deep fakes, where it's a impersonation. there's fear of maybe there's someone in the background under duress, undue influence, things like that. There's Look, there's arguments both ways, and neither system is perfect, and frauds have happened both ways. it's about communication and knowing who you're you know your customer. Those are the things that are going to manage the fraud, not whether it's virtual or in person, per se.

25:37 So, I say this towards the end, but knowing that you could talk about this for hours, but let's talk about capacity issues. I'm a real estate agent, and often times my clients are older, like me or older than me, or, you know, various reasons, estate planning, or whatever caused them to sell property. And you know, I can meet people and you know, people have bad days, people have medication, and you come in at the wrong time or after they took it. people have, you know, late in the day, people are more tired. I know personally I get more tired at 6:00 or 7:00 than I used to when I was younger. so, if you're advising real estate agents, of course we're not here making judicial decisions, but what are the best practice for us if we notice something? At what point do we raise a red flag and follow up with something? At what points are we, you know, being too particular or getting too nosy in the situation?

26:26 It's Look, attorneys have the same issue, right? If a client comes in and wants us to transfer title to a property or prepare a trust, part of our role is to make sure they have capacity, right? And that they understand what they're doing, they're not being unduly influenced, right? A large percentage of the fraud that happens on seniors is done by family members and people in their in their little community, right? They're It's you're Yes.

27:08 [unclear]

27:58 Right. Right.

28:50 Odd. It was It was all odd. It wasn't I've seen horrific. It wasn't horrific. Right. And he was a little slow, but seemed competent to me.

28:59 Right. I got a phone call from the son in the afternoon screaming mad at me. He said, "Well, didn't you notice the place?" I said, "Well, yeah, but I mean I try to be not be judgmental." He goes, "Well, how about how we acted?" I said, "He seemed okay." He said, "Well, to be honest, he you know, he gets up at 9:00 and you saw him at 11:00. He starts to fade around 1:00. So, you know, but he had decided to list with me on the phone the prior day. And so, it was one of those things where I said, "Fine, I'm I'm glad to cancel it." And you know, walk away from it. But it's one of those things where I think we have more of these situations which you're aware of and I think as real estate agents you're you're you're right on. It's It's certainly not worth it to get in that fight unless you want to develop some business for your attorney friend to defend you in court. There's no real upside.

29:39 No. And you know, our population is aging, right? The largest number Hey. Hey. Hey. Hey. Who you talking to? It's the real world, right? And so, this issue is going to be an issue for the next 10 to 15 years. Look, we're going to see the largest transfer of wealth ever in the next 10 to 15 years. And there's a lot of opportunity with that, but there's a lot of risk.

30:03 Right. And so, we need to be managing it properly so that we're not in the crossfire of the bad deals that are going to happen. Well, one great way for all of us with your attorney or real estate broker like me is pay attention to Jennifer Felten who's one of the leaders of real estate I think thought and good practices here in Southern California. She's the owner of RELAW APC, a professional corporation. And you can find her web Let me get her contact info. You find the website relawapc.com is the website. and you can call her [phone number shown on screen]. and if you can't write that down, feel free to call me. I'd be more than glad to be honored in fact to make a connection to get you guys together. Jennifer, thanks again for coming on and helping us understand the legal risks in real estate and probate real estate in particular. We appreciate your help today.

30:52 Glad to do it. Thanks, Bill. Thanks so much. And for the rest of you, this is Probate Weekly. We get together every week. Usually with an attorney in the probate or trust administration, but in this case crossover so much of what we do is in the real estate. I thought it was really helpful. She's been on before. I know I learn a lot every time we talk to Jennifer. I hope you did, too. give me your comments, review, like, subscribe. Send me a note if you have any questions. You can reach out to me at Bill Gross Probate on social media. As always, make today your best day ever. Thanks so much.