Preparing Real Estate for Sale During Probate, with Attorney Robert Silverman

0:02 So, oftentimes people say, well, in a standard probate, you know, there's not going to be a problem. And I always reply, well, it's not a problem until there's a problem, and then there's a problem. Well, one way to avoid problems is taking certain proactive steps that with the help of professional realtor, and more importantly, with professional attorney who's focused in these areas can help you avoid or take ahead of time. Well, look at what I have today, Robert Silverman, attorney who does both probate and estate planning, past guest in the program. Robert, thanks for joining me back on the program.

0:31 Thanks for having me again. So, selling real estate, you know, it can go easy, but there's also problems come up. What are the proactive steps you recommend clients take when selling property during a probate, even during a simple probate?

0:44 Right. Well, I think the very first and foremost step that you can take is when the petition for probate is filed, the attorney should seek independent administration powers under IAEA, that's full powers, so that the court does not need to approve the sale of the real estate. Otherwise, you need court approval, and as anybody who has experience in California handling probate sales, where the court approval is required, it's a hassle. There are a lot of extra steps, and a lot of hoops to go through for the client, for the realtor, and those steps are largely not necessary when there's independent administration.

1:40 You know, I used to go to court every day pre-COVID when court was a more active and live in person, and I would regularly see the court approve a petition, and then turn to the attorney and the client said, do you want full authority or limited authority? because that's going to determine the bond. And they say, well, what's the answer? Well, limited authority, you don't need a bond, or you need a $20,000 bond. Full authority, you need one for $800,000. The client would always say, "Oh, let's go with the cheaper bond." I'd say, "Well, it sounds cheaper, but it's not cheaper." So, talk a bit about what are the extra expenses and timetable involved on getting with limited authority, getting your property sold versus with full authority. What are some of the details?

2:18 Yeah, so there's lots of you know, extra hoops that you have to go through. there's there's hearings, of course. The court has to approve the sale, which involves evaluating the sale, making sure that that you're getting you know, getting the highest possible price. And that all sounds great, but there's there's bidding and overbidding. And you know, it's a matter of does the buyer have qualifications? are they pre-approved? you know, all those kinds of things. And frankly, to be honest, I've I've handled hundreds of probates, but very few that require court approval. and so off the top of my head, I can't tell you a lot of the details, just because I don't get involved very much in the you know, 98, 99% of the probates that I handle are full authority, and therefore we don't need that court approval.

3:18 Now, when you have full authority, essentially as a real estate agent, on our California Association of Realtors forms, there's two boxes. One is needs court approval, that would be appropriate for the limited authority. And then the box doesn't say does not need court approval, it says may not need court approval. And what that describes is the full authority process. That still may require a notice of proposed action, and it kind of details that on the forms. In a practice, as long as everyone's on the same page, you're not going to need court approval. You send out the notice of proposed action, it gets signed. but if somebody objects to the price through the notice of proposed action format, one of the remedies is to get court approval. So, talk about how is it that you help advise your client, and I'll ask more detailed question on as a follow-up, how do you advise your client to get through the notice of proposed action when there's multiple heirs perhaps and maybe they're not on the best terms? What are some of the best practices? Do you Do you do that before you sell the property and set the price minimum? Do you wait till you have the contract or wait till you clear contingencies? What's your strategy on that?

4:20 It's a great question and it really does involve strategies. Some attorneys do it one way, some do it another way, and some it depends. meaning, you can, property's going to be listed for $800,000. and, you can at that stage go ahead and do a notice of proposed action that says, essentially, we are, proposing, you send it out to the required folks who are the beneficiaries and heirs, and you say, "We are proposing that, the property is, to be listed at $800,000 with a 5 or 6% commission, whatever the case may be, and a, and that the property be sold for no less than 90% of that listing price." or 85% or whatever you want to do. So, that gives room, and if there's no objections at that stage, the advantage is no objections, then, you don't have to, be under pressure as to, "Gee, is somebody going to object when an offer comes in?" So, that can be an effective strategy and I do that some of the time.

5:35 You know, I'm I literally I'm battling on a closing right now where, we decided to wait cuz we're concerned we had we had multiple heirs, a couple were very problematic, and we wanted to get the best price possible, and we wanted to wait to get concessions so we could be as accurate as possible. So the attorney said let's wait till we get all that done. So we sent out 15-day notice. There's in this case I think 12 heirs. Five don't have email. So we have to send out with 15 days. The title company still even though 15 days is up still hasn't cleared title. We gave them the NOPA. We told them the day it would be done. And they're asking me for the copies of documents on the on the case and the marriage certificate for the see it's like the title company didn't you know this was coming? Like isn't this a routine matter? And the answer is my experience there's no routine matters with title companies in real estate. They're all they're all different and they're all subject to kind of problems that you have to be available to resolve. Is that just my business or is that everywhere?

6:28 Well, I think it may be regional actually. I'm not sure about this but you know Southern California the customs and so forth are different than Northern California Bay Area. You know, I'm up in Bay Area. I do I handle some probates in Southern California as well. But pretty rarely my experience is pretty rarely do we have problems with title companies when we can show that the 15 days have expired and nobody has filed an objection or we better yet we get the consents before even before the 15 days expire. you know, sometimes they you know, title companies of course want what's what we call a comfort letter which is there's no federal state tax due and there's no other impediments that the attorney sees to a to transferring clear title and that sort of thing. but just for the NOPA the notice of proposed action itself most of the time title companies they you know, they don't run you through the wringer to other than the normal stuff.

7:40 I think it's going to be like [unclear], just everything here is tougher. You know, we have title companies who will who will you know, want to make sure certain liens are you know, going to be cleared and I'm like, well, it's an escrow. Of course, we're going to clear everything through the escrow. That's kind of what that's there for, but it just seems non-stop. And often times I can take a decline from one title company and go somewhere else to get it approved. So, just to me I just think that we're just dealing with a tougher market than you're doing in your area. Do you Do you get cases where clients come to you and maybe you see the administrator trying to self-deal a bit on the property, like he's selling it to his family member, friend, you know, I know I see these cases all the time. But, you know, as a trade, do they come to you and do you advise them about the challenges there of you know, selling it to Maybe it's a you know, it's an arms length transaction, but it also could be perhaps dishonest or cause problems there. Does that's that comes up in your practice at all?

8:41 Absolutely. I feel strongly about it. Now, I mean, not only am I have I been practicing for 33 years, but I've been a real estate broker for more than 40 years. So, I understand the real estate aspects of it probably better than most attorneys. And so, you hit the head on the nail on the head when you said, "Hey, it could be a particularly perfectly fair transaction, but that doesn't mean that it's not self-dealing." The other big problem is, "Hey, that you know, we it's just a lot easier. We got a neighbor who offered a fair price, so we don't have to do, you know, all the things that you need to do to market it to the world." Well, yes, that's true. While that's true, anybody who's been around real estate for, you know, just a short time or a lot if not a lot longer, knows that the best way to ensure that you get the best price and you never know what the market's going to bear, is our friendly multiple listing service. If you if you put the property on the MLS, even if you have the neighbor or a friend who offers a fair price, which hey, 650,000 is the fair price, and that's what the neighbor offered. Well, you that's fine. Put it on the multiple listing service, and see if it you know, see what it's going to go for. You put that out at $650,000, and all of a sudden you have you know, 17 offers, and the property ends up selling for 700 quarter. You would have left on the table $75,000 had you not had you just sold it to the neighbor at a fair price. We don't know what a fair price is until we open up to the world.

10:25 And I've sometime offered attorneys, look, I'll list the property and exclude that buyer. So, I'll only get paid if I find a better deal that covers my commission. So, I can't list it for 650, I can list it for you know, 685, 690, but if I get 690 or higher and the state nets more money, is that what you want? And it's always by way more. My experience always is well, it's it was the friendly neighbor, who is such a nice guy. Oh, it's so much he says it'll be so easy. Oh, it's all cash. Turns out it's not really all cash. He says it's all cash, but it's not all cash. So, those are the things where those simple deals you need somebody like you and me, I think, to keep an eye on these things, make sure they don't get away. And the other collateral I always find is when they when they market the property, almost without exception, when an agent double ends the deal, there's money left on the table. And I can tell you as a randomly speaking, you should get about 10% of your own listings, you know, that you get the best buyer if you're really fair about it. I just know that in probate it's very common that the probate listing agents sell 50% of their own listings. And I know I know it's a problem. Like that that's to me mathematical proof, and I can't I can't use it in court to get them in indicted or convicted, but you and I know that if an agent sells 10 properties and five of them are double end, something's probably wrong.

11:41 Right. Right. Just not the way it normally works, yeah. One of the things that came up recently for me was there's a company that really markets and specializes in rehab for probate. And, you know, I was presented with this at a public forum and said, "Well, don't you think it's a great idea?" And I said, "Well, actually no." I said, "First And I'd love to get your feedback on the legal part. On the business side, most people aren't going to be successful as flippers on their first property. So, if you take a property at 600,000, you invest 100,000 to get 700,000 or more, that's hard to do. It's a I know guys who do that for a living. They're tough guys. But there's another part to this, which is when you add probate now, you have the issue of perhaps changing the tax basis cuz the depending on how long the rehab takes, you might go more than a year and have to renew your bonds because now your bond gets renewed every year. and then if you have multiple heirs and you lose money, you're getting some lawsuit on it seems to me like you just open yourself up to a can of worms legally perhaps. What do you think as an attorney or what do you advise clients who come to you and say, "You know, I'm going to flip this property and make a couple hundred thousand dollars?"

12:51 Yeah, I would be very leery about that because as you point out, it's easier said than done and perhaps in an unusual situation where the rehabber or the flipper is extremely experienced, you know them or know of them and they're, you know, credit worthy and responsible and experienced with it, you know, maybe you make an exception, but otherwise it's you know, it's better to keep it simple, I think in probate is is the bottom line is that even if you leave a few dollars on the table having more certainty and you know, being conventional and doing things in a normal way is usually going to work out better for the beneficiaries. It's also going to be a lot easier to explain to the court when you have to explain particularly if something goes wrong.

13:52 Yeah, imagine if some mechanics lien and they say, "What were you doing?" Not pretty. And your heirs are like some 80-year-old grandma. "Well, I saw him the property make some money."

14:03 [laughter] Right. I would never There's sometimes you go to court you I say to myself, "I don't want to be that guy." That's a tough one. Exactly. So another topic here that you brought up on our pre-call and I love this topic cuz it does come up regularly is potential claims asserted by a domestic partner. And I see this I'm sure it's more common now just because our society has changed where it used to always be you know, more people were married than now by percentage. And then we have a whole another dynamic but the talk about that you know, a man lives with a woman for 20, 30, 40 years, pays all the bills, she maybe doesn't work or nominal job at best, passes away, he doesn't have a will, maybe he has a ex-wife and some kids, or maybe he has his wife on the title property forgot to take her off. What rights does a domestic partner have in a probate case if any?

14:55 Yeah, it's very interesting. So, the there's a whole line of cases known as the Marvin cases a Marvin case or Marvin claim. Lee Marvin who was an actor famous actor you know, many years ago. the first real known case in California came about with Lee Marvin it was a long time domestic partnership like you even said, Bill, involving a woman companion with whom he was not married. He had made promises allegedly made promises over to take care of her financially. She gave up certain things relying on those. And it's essentially really boils down to kind of a breach of contract. So, we made this deal. We weren't married, but we made this deal and the person who relied on the deal, often times the woman, but not always, you know, gave up sacrificed certain things in reliance on the deal. You promised that you would always take care of me or that I would get half of your estate or whatever. And of course, it's more common in the context of a divorce or not a divorce, but a termination of the relationship, the Marvin claim could be raised. But in the context of probate, I've handled a number of cases and I have a couple one that that I settled and not too long ago. I have another one that that I've just filed in connection with a probate where a decedent dies. Often they die intestate.

16:38 So, that is without a will. Okay, fine. They die intestate and therefore the closest of kin, those beneficiaries in the laws of intestacy, the closest of kin are entitled to the estate. One case that I handled and settled hasn't actually been completed, but it's been settled. My client was a woman who had lived for [snorts] about 30 years with her domestic partner. He had no previous spouse. He had no children, no grandchildren, so no living descendants or issue. and he was an only child, so there were no he had no brothers or sisters. And the closest of kin were cousins and first and second cousins, many of whom he had not met. And my client he had not even talked about them. He didn't either know them or maybe he had known of them but lost track of them 30 years ago. So, these distant relatives of the decedent were going were in place to take his estate because he died without a will. And there was piece of real estate and some other assets. And it was clear all evidence pointed to the fact that one they had sort of made this deal that they were going to take care of each other forever.

18:06 And at the end of the day at the end of one's life the survivor was going to get everything of the decedent. And yet the law says that the domestic partner gets zero. so you file a Marvin claim and based on sort of this breach of contract theory. And they're difficult cases. They mostly will require evidence and proof on a clear and convincing evidence basis. This is a high standard of proof. So, they're difficult cases. But they're equitably they feel right and most of people involved say, "Yeah, that's the right result." And the fortunately the vast majority of cases like all civil like the vast majority of all civil cases settle. They don't they're not going to go to trial anyway. And so if you can forge a settlement that often is feasible then everybody wins. The people who are the closest of kin for whom a lot of them it's just a windfall. They didn't even know the person, right? Or they have any relationship with the person the decedent.

19:25 They win because they get something significant and the domestic partner gets something significant and those kinds of settlements are common and very worthwhile.

19:38 So it sounds like then just it's interesting to hear you say this cuz I've I've heard numerous times that there's no place for that in probate court. I think what you're saying is correct. It's in family court or civil court. Breach of contract or family whatever. And then there's a claim that the against the estate and then that through the probate paying off all the debts they get paid through they get paid through that manner. I mean they're not really inheriting the money. They're really at that point like a creditor.

20:07 Yes, in fact well, there's really two tracks here. One is a probate creditor's claim track. or approach and the other procedure is a civil lawsuit civil court lawsuit. Sometimes it's both. So you can file a claim in probate. If that claim is rejected which it probably will be then the creditor has 90 days to file suit. There's a something that you have to be very careful with and that is there's a code of civil procedure statute that says pretty much very rare exception. If you have a claim against an estate you better file it within 1 year of date of death. So even if you filed in probate if that 1 year expires and you haven't filed a civil claim you might be out based on the expiration of the statute of limitations, no matter how meritorious your claim is. So, you have to be careful with that. But, so, it could be one or the other. You could file a creditor's claim and get settled in probate, and there's never a civil suit. But, again, most of the time it's going to get rejected, in which case then you've got to file a civil suit within 90 days, and make sure that it's filed within 1 year of date of death.

21:32 In LA County, where so many probates don't even have letters issued within a year, right? You better You know, you have to think about those timetables. Absolutely.

21:41 The calendar runs pretty fast, and it can be very unforgiving. And so, but it's interesting you say this, cuz I've seen so many cases, some I thought were pretty legitimate, you know, a domestic partner, they obviously lived together like they were as husband and wife, you know, I mean, that's not how I would live my life, but that's how they live their life. It's clear they seem lived that way, told people of that way, treated them like their spouse, promised to take care of them, took care of them during their lifetime. But, it sounds like the answer then is not they're going to inherit, but they're they have a claim to a contract, or a claim to some sort of compensation, and then that's probably done as a creditor, not as a as a as a heir. Fascinating. I never thought of that. That's fascinating.

22:24 That's right. And there are also some adjunct claims that can be made. for example, caregiving. Supposing a person is a care has done caregiving at the end of life before the decedent passed away, there was, you know, 3 years, 4 years of 24/7, or, you know, you know, full-time type caregiving, and the caregiver was not paid. Had they gone out to the marketplace, they would have had to pay, you know, it's very expensive. What is it? agencies, you know, $30 to $45 an hour or more? and so that adds up an awful lot. and so yeah, furthermore, if they were if they were a caregiver in that role and they didn't get breaks, question, are there labor code violations because they didn't get breaks and they weren't, you know, there wasn't withholdings, they, you know, and so forth and so on. So, there are quantum meruit. In other words, just fairness, hey, as a matter of fairness, they provided these caregiving services and they should have gotten paid and they didn't get paid. And so, these types of claims, paying, reimbursing for expenses that that the care that the companion made during lifetime, you know, occupancy for the home and so forth and, you know, the there's a lot a lot of different components that can be part of this large companion claim.

24:06 Well, it you know, it strikes me in talking about both these topics that and I think this is true in my business, too, and I think more and more it's true about industries where when I started my career, it was more of the generic case and simple case. And as you get more experience, you spend more time on the edges where people need expertise. You know, legal advice is getting cheaper and cheaper, generic legal advice. Bad legal advice is free, by the way. but generic legal even decent legal advice is pretty inexpensive today. But experience and expertise on the edge cases is invaluable. and so I think as practitioner, you must kind of try to line yourself up on that spot rather than in the in the middle.

24:56 Yes, and an interesting note on fees, these kinds of cases it's not uncommon where a client really can't afford a companion surviving companion cannot afford doesn't have the resources to hire an attorney at you know Bay Area or LA or wherever you're wherever you are that the attorney your rates These cases can on an hourly basis easily end up incurring many tens of thousands if not into the hundreds of thousands of dollars and so when a client's facing that say hey sorry but I just don't have the resources and then it's a matter of certain attorneys it's easier for me with a small firm I can do what I want I'm not answering to you know to the senior partner and a lot of larger firms will not take cases on contingency. I do take certain select cases on contingency and that's sort of a partnership deal with the client basically look I know you don't have the resources I'm going to take on the risk as an attorney that you could get nothing and therefore I'm going to get nothing all right but if you if I am successful in helping you bring this claim and you there is a recovery then I will take a certain percentage of the cover recovery and lots of clients are absolutely delighted to do that sure I'll I'll give a percentage of this if I know my downside my actual dollar commitment is zero I'm I'm happy to give up some of the upside.

26:40 Fascinating. Well let's get to know and you know I know that like you say many attorneys shy away from doing contingency for various reasons and as an entrepreneur you can run the business the way you want I guess and for better for worse. Well, look, I really appreciate the time we've had today. As always, Robert Silverman is a fountain of information on probate issues. I think today what we learned is some of the edge cases that are really important because I think more and more, like I said, people go into chat GPT and get free bad legal advice or free average legal advice. But if you really want to talk to an expert, like anything else, you should talk to one. Robert Silverman, Silverman Jaffe, is the law firm and his contact information is down below. phone number [phone number shown on screen] or [email address shown on screen]. If you can't write that down because you're driving, reach out to me. I'd be more glad to be honored to make the connection. Robert, thank you again for your time today. I really appreciate it.

27:34 Bill, thanks for having me again. Always enjoy it. And for the rest of you, this is Probate Weekly. We get together every week, usually with a with a probate attorney. not all as experienced as Robert is. I hope you learned a lot today. I know I learned a couple tricks. hope you find this helpful. Like this if you like it. Send me a comment. Subscribe. You know the drill. Reach out to me if I can help in any way at Bill Gross Probate on social media. As always, make today your best day ever. Thanks so much.