Loans to Trusts and Estates in Probate, with Justin Aldi of HCS Equity

0:01 Hey, it's Bill Gross Probate Weekly. If you follow my podcast, you know that I often talk about advances to heirs. And it sounds like loans and sometimes we use the word wrongly loans, but really when an heir is expecting to get paid in probate, but they won't collect the end of the probate process. That's in advance of their interest. Separate from that, there are times where a loan's required for the probate estate to manage the affairs of the probate. And I'm really excited to have today a friend of a friend. He's become a friend, but met him through a friend of the program, Kevin Sayles, who's a title rep. Shout out Lawyers Title in Los Angeles. A longtime friend of Kevin's and who I'm a longtime friend with, but we had never met until recently. Justin Aldi of HCS Equity. Justin, thanks for joining us today.

0:45 Thank you for having me, Bill. What's the most common problem that people have that turns them to call you or somebody like you to get a loan in a probate situation? There's usually two or three different issues that come up during a probate matter that require short-term capital. I would say number one is that there is a pending debt on the property that is due and payable prior to the property being able to be liquidated or sold or transferred. For instance, mom or dad had a reverse mortgage that was on the property. They pass the reverse mortgage provides a strict six-month window to repay the reverse mortgage. But as we all know, probates take a lot longer to go through the court system than 6 months. So in that interim, the reverse mortgage lenders used to up until about a year or two ago provide extensions to allow the trust or the probate to settle out and either sell the property or distribute it. But the lenders have become strict on the six-month term. They file a notice of default immediately upon the six-month date and that really hampers the ability to sell the property at the top dollar. So that's a number one issue where we'll come in provide temporary capital to satisfy the reverse mortgage that's due and then allow the probate estate an order amount of time to have an orderly distribution.

2:09 Let's stop there for a second because that's a very common case. Is so common that I launched another podcast called Reverse Mortgage Podcast on the subject because on one hand you're right 100% right of course that you have six months upon death to pay the reverse mortgage. The problem is customers often don't know there was a reverse mortgage until one two three four five or six months into the death period at which time that six months is perhaps limited or exhausted right I mean how many phone calls have you gotten like that where they said well my brother was living there he didn't say anything about getting a letter a week and all of a sudden we're in for closure it wasn't they'd have six months they think they didn't have six months but they had it they just used it without knowing what's going on

2:53 That's correct there's a lot maybe head in the sand mentality that there's no monthly payments due. It's just going to sit there and so forth. And the we get a lot of calls again at that last minute. They and it's us not it's too late. It doesn't matter for our purposes, but they've already filed the notice of default, which unfortunately wastes a lot of equity in the property and becomes a little bit more of a battle to obtain payoffs and so forth. But we can do it. The problem is some of these heirs beneficiaries wait until not just the notice of default but a notice of sale and they have three days or four days left to pay off this reverse mortgage. Then it becomes a little bit of a race against the clock. It's better if you are a recip, you know, an administrator of an estate to have a Realtor® like yourself or a title officer check the title. Any of these reverse mortgages are very evident on title. And know that is a ticking time bomb that needs to get satisfied. And it used to be able attorney or Realtor® could write a letter that oh we're going to sell the house in six months and the lenders would just sign off on it. That those days are gone. They are being steadfast in their foreclosure process for a variety of reasons behind the scenes. But there is no more exceptions to that six-month rule. So, it's better to know what it is, get out ahead of it, and take some debt out to buy another year or two or whatever the state needs.

4:14 If I can just correct you slightly or maybe say it a little different way because I think you're right in practice. Legally, well, reverse mortgage researchers will say, well, you have extension opportunities. Legally, they're correct. It says in the note that the lender may provide an extension. May provide the key words because they also may not. And in my experience, they do not. And so, while you're right 100%, years ago, they regularly gave extensions. My experience is they never give extension. You'll call the phone, they'll say, "Oh, yeah, no problem. We'll give you extension." Oh, yeah. We may give an extension. Says, "Write the note." And they'll say that as they're literally filling out the paperwork, they'll file the notes default and deliver on your doorstep. So again, they just be precise. The document does say may pro the lender may provide extensions, but it doesn't say they have to. And in your experience, I think in my experience, they stopped, at least in California, they stopped giving exceptions a while ago.

5:13 Yes, it was a hard stop. We have not seen one extension, no matter how diligent are the attorneys are writing letters or Realtors® saying the property is currently listed. Zero. It's

5:23 One of the clues also is you know in any business your reputation is important right Justin came to my attention as a prospective vendor through a through a third party Kevin sales his reputation is important he's not going to take my business and encourage me to do business with Justin because that's going to hurt Kevin's business with me our reputations are critical in the reverse mortgage business you'll notice that there are companies that make the loan but they don't collect the payment or service the loan and in some now in some cases they and have the name of the statement and they're not really servicing it. That's a that's a different business. But my experience is once they transfer to a company that sounds like a law firm that does nothing but foreclose all day long, they did in fact transfer it to a company that's a law firm that does nothing but foreclose all day long. Is that your sense too?

6:11 Yes. Once it's past that bridge, you know, filing the notice of default are getting close and then again some kind of attorney firm trustee service takes over, they are there to collect the debt and there's no turning about the clock then. So then the only solution is to pay them off and they are not usually Johnny on the spot with coming up with payoffs and stopping the foreclosure. It's a hassle to get payoffs from these companies and there's only there's a monopoly on them. There's only a few of these companies that handle seems like all the foreclosures for reverse mortgages. And customer service is not their name of the game. So, leave yourself a little time.

6:48 If you know there's a reverse mortgage, plan accordingly is basically the plan. You should know their customer is not the borrower. Their customer is the investor who just wants them to get as much fees and income as they can. There's the business. Now, I think the other problem with these, and I'm sure this is where you deal with all the time also, is even if the case warrants a loan to pay off and stop the foreclosure, you really can't make the loan until you know who's in charge of the estate. Meaning you either need somebody to be approved with letters or at least temporary letters or some sort of court order in order to empower somebody if it's a if it's a probate case and that titles in the deedants's name, you need to know who you're lending your money to, right?

7:30 That's correct. So, not only do we have to have some kind of legal ent, you know, an administrator, a court order, and maybe the notice of proposed action need to go out. There has to be some timeline there. Maybe they have to go to court to get an emergency injunction or some kind of court order if they don't have full authority to obtain our capital. And then number two is we need to make sure that there is enough equity left in the property that mom and dad didn't run the reverse mortgage up for 30 years and the reverse mortgage is at 95% of the value of the property. That's a situation where we can't help with. We need to make sure that reverse mortgage that there's a cushion of, you know, 30 40% equity left in the property. And secondly, we need to make sure that whoever takes over this property, if the one of the beneficiaries has a plan to pay us off. So, they might be awarded the property in the final disposition, but they're also inheriting the property with my loan on it, which if they're don't have the means to refinance into a traditional loan or maybe they want to sell the fix it up and sell the property, that's fine. But they have to have a game plan in mind because my loan is not a long-term solution. My loan is a band-aid to fix the problem, get them through the probate process, but then they have to have a long-term plan to refinance again into a traditional loan.

8:52 They need to have, you know, their credit checked, their income checked, or maybe they're going to sell the property once they inherit the house. But there has to be a plan in place because just getting into my loan doesn't really solve a long-term solution. It's just a band-aid, but it provides flexibility to maybe they need to fix up their credit, maybe they need to fix up the house to get it into financial financing condition. So, there's tools there. And we have flexible terms during the probate process. You know, if there's enough equity in the property, since we're a very small firm, we can custom tailor loans that don't have payments due, that have extra capital being provided to the estate to fix up the house. There's all types of options that we can provide.

9:36 One of the things I've learned in playing in your space a little bit is that the players are critical. Meaning, oftentimes I'll get a customer calling me and they pick some attorney out of the phone book or some random attorney does DUIs and divorces and one probate a year and they're up against the wall in the forclosure and I don't really know them even that well. Maybe they heard a podcast or something and you know I want to say to them, look, we're going to have to all work together and your attorney's been dragging on this. I find this regularly. It's been three, four months and they the petition got you continued. That's why you have the problem. You should have already gotten approval and been able to sell the property in timely manner. You know, are you open to changing horses as far as the attorney? I can say that to a client where an attorney can't, you know, because they can't solicit somebody who's under contract to change. I would imagine as a lender at some point you need to vet the attorney because if they don't if they're not able to manage the process legally, you're stuck with the liability that you can't get out of or you know, you're not lending this money, I don't believe, to foreclose. You're lending it to get paid back through your band-aid short-term financing. Or are you agnostic? Do you not care? And if they if they don't manage it, you'll foreclose as well.

10:52 No, I don't think you're going to find too many lenders nowadays, private lenders like myself or any of my competitors that are interested or have any motive to take back a property. Our motive is to collect and our business model is I think all I speak for all lenders to collect our monthly payment, our monthly interest, whether it's monthly or at the end of the term, make some money upfront, but not take the property. Taking a property back is the last thing that we want to do. There's too much hair on it. There's too much work. There's too much drama. We don't want to take a family home back. That is the ultimate, you know, if we don't get paid, that will be what happen. But from our standpoint, our business model is simply to have a loan that pays for six months or a year, three months, whatever it may be, and then gets paid off. That's our what we built our business. And I don't think there's too many lenders. I think that used to be the old mentality in private lending was that they would hope to take the property back. They're going to build themselves equity and they would kick the people out and it would be easy to foreclose on a house. Those days are gone. California is a very difficult state to navigate the foreclosure process on. We don't want to go down that route. And going back, that's the reason that we want to make sure that the ultimate person that's borrowing the money from us, the beneficiary who's going to inherit the house, has a plan in mind to pay us off. If they have horrible credit, they have no income, no job, and no goal of selling the property in a timely fashion, it's probably not the right avenue to go down to get another loan that's just going to eat up more equity and then be facing this foreclosure process with a private lender in 6 months or whatever. So that's why we focus on the long term of having a takeout plan for the beneficiaries to put everybody in a better situation and working if it is going to be a sale of the property then we need to know why they haven't sold the property yet. It's possible that's held up in court that there's problems but if they have a game plan to sell the property who are they working with which Realtor® what do they expect to sell it for? What do they need to do to the

12:55 House to sell it? And what's the timeline involved? So we kind of check all those boxes to make sure it all adds up. We do not have any intention of taking a property and if we feel we if that liability is too much that we are looking like that's going to be a dead end game, we won't do the loan. It's just not worth putting people out of their house for that.

13:14 As a real estate agent, if they don't sell, I don't get paid either. So, for me, it's become I've definitely gotten more clear on, hey, if we're going to do this, you should be out of the property before we fund the loan because the second we fund the loan, we're going to start marketing the property. We need you out to get the best value for the property. You want the equity that we're going to get by selling it for top dollar if you're in it. Yes, we can sell it around you. Yes, we can work showings and inspections and open houses around you. But oftentimes it just doesn't work. And so I try to vet people and if I find they don't want to cooperate at that level. If they need some money to move out, we could even in the loan sometimes give them some moveout money. We've done that. We've bought people land in a trailer to move them out of the property and then we market got a full dollar. That the days of being able to force somebody at the risk of forclosure, those days are over. Like nobody wants

14:04 No lender wants that or Realtor® wants to deal with getting people out of a house that are unwilling to move. It's a messy situation in California especially

14:12 California and certain jurisdictions are even worse within California. So LA County not interested in doing that. So not to badmouth the county I live in, but LA County probably is as bad as it's just it's just ridiculous. I mean

14:22 Yeah. Wow. You'll be lucky if you don't get foreclosed on your house because you're trying to foreclose on some deadbeat drug dealer in a property you own. Okay. So that's the most common scenario I see.

14:32 I'm sorry. So another scenario would be when capital is needed on a maybe a little bit of a smaller basis if they don't have a large mortgage. A lot of these properties are owned free and clear for generations. So, but the properties are in disrepair and it maybe a small amount of capital 50 grand to 75 grand will not only bring the property back up into sellable standards but actually magnify that and get a better sales price. And Bill, you can probably comment on this. How much 30 or 50 grand can go towards a house to change it from a house that's going to be bought by a flipper, a rehab company at a wholesale value versus putting in 40 or 50 60 grand and selling it to a retail buyer and maximizing the sales price. And we can provide a as small loan as $30,000 by Department of Real Estate standards up to X amount. Doesn't matter there, but that little bit of capital can go a long way with helping with your job of selling that property.

15:29 So, let's talk about that a little bit because I'm at the other end of that camp. I literally had a longtime friend call me today, an investor approaching me with he wants to do some sort of rehab and resell program. And I just said, you know, we do use money for security like gates, for evictions, for other you know safety issues you know you need to make the property so you can sell it. So whatever that means safely. But in many cases I find that either it's a fiduciary or it's an heir or petitioner administrator executive they can't invest that money and get a return on investment that's positive. Yes they'll sell for more at least that's my experience. So tell me so you're obviously in the other camp and I'm not saying I'm right and you're wrong. I'm just I can only go off of the examples that I deal with and the cards that I'm playing. Give me some a scenario or two where people have borrowed money and rehabbed and you felt they now and I guess the other truth is it doesn't matter if they actually net more money. If they feel good about it and it's their money and you get paid back then you're making them happy. So what difference does it make?

16:43 I don't think we're talking about I think what I'm talking about is taking a house that is literally unfinancable. Mom and dad were hoarders. There are seven dilapidated cars, broken windows.

16:53 Yes. Missing kitchen cabinets. Just a disaster. We're talking about taking that house and barely making it financable, taking the cars out, mowing the lawn, fixing the broken windows, changing the locks, those type of 30 to $50,000 repairs to hopefully bring that house into conventional financable standards. Now, if the house is completely, there's no flooring, there's been mold and dry rot, yes, that house should be just bolted shut, sold to an investor that's going to buy it for cash, and it is what it is. We are not talking about doing a full rehab on these houses with, but if it's a matter of a coat of paint, putting in some fresh carpeting, and we have bene multiple beneficiaries that would benefit from an extra $50,000, $100,000 off the sales price, that might go a long way. But it's mostly the bare minimum to get these houses into financable standards is what it is.

17:49 I do find the family members always like to hear that scenario. And you know sometimes I feel like you know part of business is giving people what they want whether I like it or not. Right? If I was a if I was a vegetarian could I you know work as a waiter at a steakhouse. Well yeah if the people are happy I don't have to eat the steak. I just have to serve it and make them happy. Right? So, I feel like in real estate there'll be people tell me, "Oh, we know that if we put in $50,000, we'll get $100,000 more for the house." And I'll say, "Oh, well, okay, it's your money and you can afford it. How about it?" You know, I if they ask my opinion, I'll give it to them, but I'm not going to argue with them about it because in some regards they're the customer. Give them my opinion and they can take it or not. But it's it also might be geography where you are because if you're in a lower income area, there's it's harder to make those numbers work. If you're in a higher income area, I think there's more bandwidth for somebody to go from, you know, a million one up to $2 million. I think with the house and if you can just get it into 1150 and it's a little prettier, a little nicer, they're going to buy it and put the extra time and effort into it.

18:48 I think Yeah, that's some of it. Most of it is just the bare maintenance. Like I said, just getting some gardeners out there to trim everything back, getting the cars gone, fixing the broken windows.

18:58 Yeah. And spending a minimal amount just to get the house even presentable. But if it's too far gone, then you're right. Then you're stuck. You're not stuck. You're just going to appeal to an investor base and hopefully have a bidding war from the multiple people that are out there flipping homes.

19:11 And agents don't realize you have multiple cars. Often times they've gasoline them. They have batteries in them in many cases that are still operable. Those are fire hazards. You have you have overgrown weeds.

19:22 You have to pay for it. You know, the estate, even though they might be selling a house, it might be a drawn out process. During that time, the estate's going to need money for insurance.

19:31 Yep. They're going to need money for property taxes. They're going to need money for the basic some maintenance on the house, you know, water, power, test control,

19:40 Power run, to test the electrical, test the water systems. Yeah. Right. So, there's going to be some bills, illegal bills during that time. Some attorneys want their money up front, especially if it's a contested estate and there's heirs that are arguing among each other. These things can drag out, as you know, for quite a while. So, those are those short-term loans that are relatively small dollar amounts. We can forego payments on those loans until the estate is settled. So that helps with the cash flow. Evictions is another reason. Sometimes you need money to pay people to leave. Sometimes that's the easiest way to get people out of a house is simply to do cash for keys, especially in some of these jurisdictions, right?

20:16 As you know, you have uncooperative tenants that might need the eviction process. So that takes months and a lot of legal fees or cash for tease again for these people. So, a variety of reasons when this estate is in a distressed condition, we can come in and relieve some of that with some short-term capital.

20:34 The other cash for keys you mentioned, I'm thinking, you know, years ago, I did cash for keys. I would give people I would advance on behalf of my client. I had a separate credit card just for this. I mean, credit line on my bank account so I could track it because I found if I didn't keep it separate, I didn't track it the same in advance. 2,000 $3,000. Now cash for keys is 20,000 50,000. I've had requests for 100,000. I'm not advancing that money as more of my real estate commission on a deal. So those days are over. It does require a loan. In some cases, it makes sense if you can get a house sold vacant. You can enhance the value of the house by in some markets, you know, in Tarzana and a house that's worth a million dollars only sell for $800 with a problem tenant. Even get that client out for $50,000 or so, you've made the state a lot of money.

21:24 We've seen as more as jurisdictions get involved on rent control, we've seen more and more of a v a delta between an occupied house and a vacant house that even investors, flippers, a lot of them are unwilling to take the risk of having an uncooperative tenant. I mean, unless you're really giving away the property. So, it's sometimes better for an estate or a trust to deal with the tenant, whether it's cash or keys, a formal eviction, or whatever, and then sell on the property because even the rehab guys are really hesitant to buy houses with uncooperative tenants and bad tenants and so forth. They know the problems that I had on those.

22:01 You know, as a listing agent, I don't really care. But I have to say, not only you right, the ones who are buying the properties are probably paying too much. They're paying too little of a delta for taking on a tenant, even a good tenant. Because with rent control now, you're never get inside the property. You never get the return on the value that it's worth. And as an as a listing agent, I'm often surprised at the prices people will pay for a property with a tenant situation in there. And in some cases, I've lined out all the facts. And if you read it's obvious the tenants's militant. It's like, do you really want to buy a property with a guy who's doing all this stuff? And they do.

22:40 Well, that's a that's a risk that's I don't think is worth it for a lot of these investors. And I don't know if it's a desperation to buy properties or they're just not aware of the how difficult it is in a lot of these cities to and how many rights tenants have and how much help they have from nonprofits and tenant right organizations and so forth to help them protect their rights in the property. And the landlord or the landlord or potential buyer is going to be the one facing real legal bills to get them out and does not have the law on their side. You know, I go to court only occasion. I used to go every day, but when I do go to court for probate matters and they're in a court that has usually eviction court near where the probate is somewhere, you can't walk into an eviction courtroom without being solicited by tenants rights agency. There's so many of them. I mean, you don't have anybody, you know, associating for anything else. You're not even allowed to list in the courtroom. I mean, in the court building, it's technically violates the rules, but somehow they allow them. And there's multiple. They all wear uniform. They work like a uniform publisher.

23:44 I am not aware of that. You can't even get into the door without at least one. Now, if you dress like an attorney, they're not going to ask you, but if you look like a tenant, you know, if you dress casually or whatever, you cannot get in the door without being solicited at least once. It's just it that's how many there are. I don't think people understand how. Now, this is LA County. I don't think people understand how far we've gone on that area. And like I said, I see people buy properties and I come sometimes shake my head, but my job is to sell it for my sellers. So, I don't I don't want to say I don't care. It's not It's my job not to care about the result, but as a human being, I used to feel like gh I hate to see it happen. So,

24:21 No, most people that are buying these things on the discount with tenants involved are considered real estate investors, property, you know, professionals. And

24:29 It's a g it's a business and they know the risk. So y yeah. So one of the other occasions that I get involved with loans is when there's multiple heirs. Let's say a house is you will use a round number million dollars. There's three heirs each inherit a third 33,000 but none of them have cash to buy out the others. There's not other let's say there's no other cash assets. And so unless one can pay out the other two it forces the sale. But there are occasions where one wants to keep the property and they use a loan to at least on paper u buy out the other party or two parties and then once it's transferred to them personally they get a conventional loan and pay off the estate loan that looks like a bridge loan. Do you do that product? Is that a case that you get involved with?

25:14 Yeah, that is our bread and butter. That this is not only for probate estates but for trusts that have gone irrevocable under it used to be under Prop 58 and now under Prop 19 as of 3 four years ago the Prop 19 dictates that the heirs the beneficiaries the children are able to buy each other out. It's what's called a non-pro-rata distribution. They're able to buy each other out. As in your example, the $1 million, we will come in and finance $666,000. The one beneficiary that wants to retain the property. There's very narrow rules under Prop 19 of when they're able to absorb the tax base for mom and dad. Mom and dad had to live in the property upon death, prior to death. The beneficiary that wants to keep the property, it has to be his or her primary home. But they're able to do this and keep mom and dad's old Prop 13 tax base. So if mom and dad bought the house in 1955 and their property taxes are 800 bucks a year, which is very common, the one beneficiary that is going to keep this million-doll house will be entitled to the $800 a year tax base on that property. This is a humongous savings. There's very narrow rules and ways that the board of equalization mandates that this be done. This is what we specialize in. Our loan documents are compliant with it. So, what we'll do is we will come in and provide a loan to the trust or the estate under the name of the estate or the trust under the tax ID number of each entity. The money will go into the estate bank account. Then upon disposition of the property, the heirs will get their $333,000 each in your example and the other heir will get the deed to the property subject to our loan. Again, back to the last part of our conversation, the one beneficiary that is keeping the property needs to have a strategy to pay off our loan once the property is received because our loan again is a little bit

27:17 Higher rate and not a long-term solution. But we work all that out with a conventional mortgage lender beforehand. Right? One big advantage to Prop 19 and even though it took away tons and tons of opportunities to keep the property tax basis on commercial properties and rental properties and got a whole host of other things, the other side of Prop 19, which really is effective and you can utilize both sides. Number one, you inherit the property, you inherit the tax base, but then there's something called the portability issue of Prop 19. If the child that inherited the property is over 55 years old, they can now, even if they don't want to live in mom and dad's house or there's bad memories or they need to move on or move closer to their children or whatever, as long as they're 55 years old, they can then once the portability once they've inquired mom and dad's house, they can then and they move in, they can then move right back out and buy another property using the portability of Prop 19 and move that $800 tax base to the property of their dreams.

28:20 Wow. So, there's no time limit under Prop 19 on how long the inherit the inherited property needs to be owner occupied. They can live there for one day.

28:32 Wow. And obtain the portability which helps so they can have then they can sell that house right away and move to a new house anywhere in the state of California. This is only California. Move anywhere in the state of California and still take that $800 tax base with them up to a million-doll new home. So, this is a huge benefit to think about that, oh, a lot of heirs say, "We don't want mom and dad's house. We don't want mom and dad's house." But if they can use that $800 tax base, move in, file the homeowners exemption, the exclusion for reassessment, their attorneys will work them through this. It's very simple. And then they can have that portability. So, this is the two sides of Prop 19 to really make it effective. And it's a very useful tool to help people that are 55 years and older have their dream home yet still have mom and dad's old tax base.

29:24 And you're talking about saving $10,000 a year at that point at least, right? At least. So, it could be a phenomenal savings. I do think there are some things that should be done during the stay plan to kind of set this up. And so Justin, you're not an attorney. I'm not an attorney. So I have a separate podcast to say planning weekly where we do interview attorneys on Prop 19 particular. I'd be glad to introduce you if you have questions. If you want to talk to an attorney, reach out to me. Be more glad to make an introduction to one of the attorneys I work with who can walk you through it. But the this is big money. This is kind of worth paying for experts and not fooling around with it, not doing it on your own. I'm a big, you know, believer in taking responsibility for own finances, but there's a case where you really need to play with professionals and this is an area that's one of them. And so a great opportunity for savings, but let's get the right decisions made. So Justin, obviously you must like all professionals occasionally you know get inquiries with people who it doesn't work like they missed the boat. They should have planned ahead. They should start earlier and you're a place now where you can help them. What's the most common mistake or two that you see either families make or professionals make that cause them a loss of opportunity?

30:43 Most common mistake I would see is the ignorance of the rules of Prop 19 or the former Prop 58, which means that beneficiaries have gone to an attorney possibly that has been that's not as up to speed on this nuances of Prop 19 or they've gone to an inexperienced Realtor® or an inexperienced most importantly mortgage broker, banker, maybe even when a bank a mortgage person that works at a large national bank that's not knowledgeable about the nuances of Prop 13 and Prop 19. We see constantly people coming to us after the fact after they've gone out and gotten a conventional normal mortgage loan or use their own capital. Sometimes people have 500 grand in the bank or going back to your example of the $333,000. They go out and get a conventional loan. The property's taken out of probate or taken out of the trust. They get the deed. They put it in their name, then they go out and pay off their siblings. Or they use their own money to pay off the siblings and think, "Why do I need to get a loan? I have a million dollars in the bank. I'm gonna pay off my two siblings." You can't do that. There is very specific order of operations from the board of equalization. The assessors check each one of these. They don't get that many of them across their desk, and it goes way up the chain at the assessor's office to people that know what they're doing on this. This is not a rudimentary transfer sale of a $500,000 track home. This goes up the chain a little bit that people know what they're looking for and they will look for all the documentation and they will look at our loan documents to make sure they have compliance issues such as no personal guarantees. It's done the our borrower has to be the trust. There's lots of little nuances they look for, but that's our common issue that people come to usually they don't even know it until about six or eight months later when they get their reassessment. I say I filed reassessment.

32:38 I filed my exclusion notice. Yes, you paid off your siblings. They're $666,000 yourself with your own money or this or you sold the house and you forgot to get the prop, you know, the exclusion so you can take that Prop 19 tax base and move it someplace else. So, per your comment, having an experienced, well seasoned trust and estate attorney that you pay up for, they're not the cheapest professionals, but you don't want to. This is a very regimented operation and it works. It is not there's no gray area here. This is within the law. It's very spelled out in the board of equalization. But you need an attorney and a Realtor® and a mortgage person that fully understand the process because if you goof up, it's too late. There's no going back and fixing anything. There are very specific rules on this. I believe city of LA challenges every such what's the form you fill out the

33:36 Exclusion from reassessment exclusion form I believe they challenge everyone to make you provide the defense the documents and look for the holes at that because even people who go through attorneys I find I've written a couple attorneys they get that notice in the mail anyhow and then they respond and they provide the documents and package and it goes away but you're right customers assume because they filed the form when they closed escrow on the mortgage or the purchase or whatever it was. They said, "Well, I filed the form. Didn't the county just take what I do and run with it?" Well, no. They're looking for money and they smell it on you. They're going to go after it. That's their business. That's what they do. And so that's great advice that

34:17 That's what Yeah, that's the number one problem. We get it after the fact or we get mortgage brokers and we or attorneys will stop a mortgage broker sometimes at the last a traditional mortgage broker banker at the last minute. No. You can't do the loan and you cannot do the type of loans that qualify for this through any type of traditional mortgage lender. You'd have to have a specialized lender that knows what they're doing on this and has the correct certified documents that have been checked by the board of equalization. So, not to toot our own horn, but we are one of the leading providers of this in the state. So, that's a number one issue. And I think a number two issue is that we see a lot of people that are not that are administrators of the estate that are trying to do too much on their own and avoiding the assistance of a professional, you know, getting professional legal advice and trying to do stuff on their own. Whether that's using an online legal service type of thing where you have to do all your own stuff or trying to go into probate court on your own and really goofing up the process just try to save the attorney's fees andor the real estate fees or trying to sell a house while it's you know themselves at the administrator.

35:36 It's a disaster. There's too many landmines to step on that you can't undo once you've gone across that bridge. I agree. I, you know, I when somebody's on their own, you on the legal side, I just tell them I really can't help them because I don't get paid unless everything gets done. And I'm in business. I'm glad to answer questions and be of assistance. But to spend the time listing a property, getting in escrow, you know, the notices and there's procedures you have to go through. If they're not going to do it properly, then it's just going to be a mess. And I'm not I'm all for I'm all for saving money, but sometimes saving money is getting the best professional to do it properly, not doing on your own improperly and delaying and having other issues that come up. I've seen people on their own delay long enough that some sibling pops out of nowhere and objects. Now you're into a contested probate rather than a simple one that could have been done early on. So let's talk a little bit. Let's shift a little bit from kind of the business to consumer to business to business. I know I asked the question most your business comes from other professionals whether it be attorneys, title representatives, real estate agents. Talk a little bit about your business development process and what you've done in order to be successful.

36:51 We have become a leading provider of trust and estate lending and real estate lending within the legal community. It's been a good 25 years that we've been in this market. We've been developing our, you know, our connections within different bar associations throughout California. We're very active in the fiduciary association of California. We have many courtappointed conservators and other state type county agencies that work with elderly people or deceased states that need capital. So we're a very small operation. It's myself and a couple partners. We know what we're doing. We stay in our lane within the legal community and I think that attorneys appreciate our expertise within the Prop 19 world and within the trust and estate lending world. We understand what we're doing. We have fellow partnerships with somebody like Kevin Sayles that's a key partner and helping with title issues and an escrow department that we don't own. We have an escrow company that we've been working with for 25 plus years. So, it's just a long-term steady involvement within the local real community that not local all the legal community throughout California. And that we are control our own funds. So, if we feel confident in a particular situation, we will lend on it. So, that is the bread and butter of our business.

38:17 We are not a nationwide lender. We lend strictly in California. We lend only in situations where we feel comfortable with the players involved and with the endgame of whether that's going to be a sale of the property or refinance or something of that case. So, and that's it. We just run a good old-fashioned business. We charge fair rates and fair points and are very happy to work with attorneys and trustees and administrators that are aligned with our goal of getting the house and the loan paid off. One of the things that I'm surprised isn't more frequent is the use of professional fiduciaries in that attorneys will sign on a customer and as a real estate agent, I'll start working with customer and I'll realize they can barely manage the paperwork and the business of selling the house, let alone what other steps they have to do. They have to get a bond. They have to open a bank account. Maybe there's other assets they have to deal with. And so increasingly my business has been either with fiduciaries and or pushing attorneys to allow their customer to have a fiduciary to get the customer out of the business that they really don't they don't really know how to run or want to run in many cases. Yet there's not that many fiduciaries. So talk a little bit about your work with fiduciaries.

39:42 You mentioned you're involved with the association. It seems to me that's that there's one industry that has not enough people. It seems to be aging out and if somebody came to me with a background in either law or accounting, I would say you should check this out. I think this might be something that you can make a contribution in and create a good business around. Am I off base here or is that something you're seeing as well?

40:04 I think you can hit the nail on the head about the aging out of the fiduciary association. I'm not it's not a job where a lot of young people it's not an appealing job. I think it like you said it's a combination of a lot of accounting, a lot of handholding of elderly people that are a little bit maybe confused about financial obligations and all the tools and I think it's becoming a very complex job. Just imagine walking into somebody's life dead or alive and trying to get even a simple thing as access to their mortgage account online or access to their bank accounts and online access to this and you've done it yourself. We all have trying to call a nationwide company, an insurance company or a lender or a bank and saying, "I'm now the fiduciary in charge of this and you're speaking with somebody overseas possibly or AI nowadays." And you can spend the whole day on the phone and get nowhere for one simple account. So there's and there's I think some fiduciaries do have added liabilities nowadays. So, and risk, but in terms of a solution and having a professional involved in the situation, when we have a fiduciary involved, it takes a lot of emotion out of the situation, especially if you have multiple family members that have emotions about the house or emotions about the family or emotions how what should happen to the house. And it puts it into more of a business perspective. Their fiduciary has a obligation to treat everybody, you know, obviously in their fiduciary capacity, but they don't have emotions involved.

41:40 And once you remove emotions from the equation, oftentimes the results are much fair, much more fair and accurate results of what should happen. So, you know, whether it's spending money on the house or not spending money on the house or whether it's doing this or doing that, a fiduciary is going to look at it from a business standpoint

41:58 And make a unemotional decision and probably stop a lot of the bickering and the go and the legal fees between heirs sometimes

42:10 Or minimize it or Yeah. Push through it. Some of those bickering never I was just at a funeral where it's just never the bickering just never stops for some people. It's

42:20 Forunately it's not my family but Bill you see it in your career I see it in my career it is you know an unfortunate situation in families of how siblings you know they might be older than us 60 70 80 years old and they're still arguing about something that happened in 1965 and it's

42:40 And by the time they're done with it they've you know unfortunately some of the family estate's been used up with legal fees and time and stuff like that. So, but in terms of getting new fiduciaries in the business and getting that, I don't know if that's it should be an attractive industry for somebody that has a background in accounting and is extremely methodical. And I think with some tech with the technology advances nowadays, I think there's going to be a lot of advantages to having some technology behind that industry,

43:13 But there's still a lot of handholding and a lot of patience that's involved with being a fiduciary. Let's put it that way. No doubt. Yeah.

43:21 Well, look, Jose, I kept a little overtime because I really enjoy this and I feel like we could talk about pretty wide range of things. You're obviously an expert in the area. So but we I'm a little past, so we're gonna have to wrap up a little bit. But if somebody's interested in getting more information from you, I put on your let's see I have the right one there.

43:37 There you go. There you go. So there's your phone number, your email, and your website. What's more information? And primarily the website hcsequity.com is the company name. So I mean when somebody calls in, are they getting you? Is there an integ?

43:52 They're getting me. I'm an oldfashioned guy like just like you, Bill. I actually answer my phone day and night. Send me an email. I answer every email. They're not getting AI. They're not getting a receptionist. I'm That's my cell phone number right there. We're a small operation, so just call me. And just like yourself, Bill, I'm happy to give out advice or talk or discuss a particular scenario. So, anybody's welcome to call anytime.

44:14 Fantastic. Well, Jess, I really appreciate your time with us today. Look forward to I know you and I have a chat on my other podcast on fractional interest coming up as well and looking forward to continuing our relationship. Thank you so much.

44:24 Thank you, Bill, for the time. Great being with you. And for everybody else, this is Probate Weekly. We get together every week with professionals in the industry, oftentimes probate attorneys, but also vendors to help us be more productive. You can continue the conversation on our Facebook group. Probate Weekly is a Facebook group. You can put questions there if you're looking for referrals for attorneys, for real estate agents, for loans in other states. Feel free to participate there as well. If I can help anyway, I'm at Bill Gross Probate on social media. And as always, make today your best day ever. Thanks so much.