It’s known as Probate for a Good Reason

REALTOR® Outlook

By Kay Wilson-Bolton

July 21, 2010

Once in a while, a property comes on the market and must be sold under the authority of one to conduct a probate sale.

The terms of a probate sale are a little different and often irritate people who are not accustomed to it.

Simply stated, estate administration provides for the orderly distribution of real and personal property owned by someone who dies, known as decedent.

Any property which the decedent owned or in which the decedent had an interest at the time of death is collected into the estate and distributed to those entitled to it after all debts and expenses have been paid.

The process of administering a decedent‘s estate is referred to as “probate,” and is generally supervised by the probate court.

A personal representative is the person or entity charged with the responsibility of administering a decedent’s estate. A personal representative is either an executor/executrix who is named in a will; or an administrator/administratrix who is appointed by the court when there is no will, when the will does not name an executor or when the named executor is unable or unwilling to serve.

It’s often not an easy job and can require some painstaking work to do it well.

The personal representative is charged with the fiduciary responsibility of gathering the assets and paying the debts of the decedent so that the beneficiaries or heirs of the decedent receive the maximum inheritance.

The personal representative usually will hire an estate attorney to handle the legal aspects of the probate. Most business dealings are through the estate attorney or the Public Administrator.

Estate property may be sold by the personal representative when the sale is necessary to pay debts, devises (gifts to persons named in the will), a family allowance, expenses of estate administration, or taxes.

The sale is to the advantage of the estate and in the best interests of the interested persons. The property must be sold according to the terms of the will; or authority is given in the will to sell the property.

A decedent’s will may designate the manner in which estate real property is to be sold or identify the particular property to be sold. Absent a court order based upon the best interests of the interested parties to the contrary, the personal representative shall comply with the decedent’s instructions.

Estate real property may be sold by private sale, public auction, or a different method specified in the will of the decedent

A private sale is one in which bids or offers are independently solicited, while a sale by public auction invites concurrent competitive bidding.

The personal representative may legally market and sell real property without the services of a broker, as if he/she were the owner of the property. He/she may list it with a real estate broker.

The process of listing, marketing and selling probate real property has some exceptions. The sale is generally subject to confirmation by the court.

There are restrictions on the sales price of a private sale of estate real property. The sale is subject to court confirmation at least 90 percent of its appraised value set within one year prior to the sale.

Many courts require a 10 % deposit at the confirmation hearing in the form of cash or a certified check.  Generally, offers with contingencies are not approved by the court.

A Notice of Sale must be published prior to the sale of estate real property, and it provides the public with required information concerning the sale and will typically be handled by the attorney for the estate.

A Notice of Sale of real property must be published at least three times over a period of not less than 10 days before the sale, with the third publication at least five days after the first.

All publications must be in a newspaper published at least weekly in the county in which all or some of the property is situated.

The personal representative is required to report the sale and petition the court for confirmation of the sale within 30 days of accepting an offer.

All estate real property sales must be confirmed by the court except for sales of property under the IAEA.

At the confirmation hearing, the original sale may be subject to being overbid by another purchaser.

The initial overbid must exceed the original bid according to the following formula: the amount of the original bid, plus at least 10 percent of the first $10,000 of the original bid; plus at least 5 percent of the amount of the original bid in excess of $10,000.00.

Fortunately the California Association of Realtors has provided great forms for REALTORS® and the public who want to participate in the purchase of a probate home.

Beneficiaries would find more chaos than cash if the rules for probate sales were not in place.

Kay Wilson-Bolton has been a real estate broker since for more than 3 decades. She serves the public in a variety of venues from shortsale consultation to mediation to critical incident stress management.  She can be reached at 805.340.5025 or www.realestatemagic.com

 

What Really Caused the Meltdown of in the Years 2005-2009? What lessons will we learn?

Realtor Outlook

June 2010

 

Some of those arrested under one company name moved to another and practiced their deceptive craft under another label. Two of the women arrested opened their own company, and I remember thinking that no one was supervising them.

When will greed become unattractive?

Everyone involved played a part; the home seller who sold at top dollar, Realtors who helped sellers price their home to get top dollar–including me; the Realtors who represented buyers and worked with unscrupulous lenders and their team of appraisers, processors and underwriters who made sure the mission succeeded. Everyone involved benefitted.

Sadly, everyone demanded that the lending community find a way for buyers to purchase homes at escalating prices. Human nature created this problem. The system allowed it.

These apples don’t fall far from any tree.

Kay Wilson-Bolton has been in full-time real estate since 1976.

E-Signing Is Now the Efficient Way to Sign Some Documents

REALTOR® OUTLOOK

Kay Wilson-Bolton

June 15, 2010

 One of the latest and greatest efficiency factors in California real estate is the use of electronic signatures.

It is made possible by California’s Uniform Electronic Transactions Act (“UETA”) (Civil Code Sections 1633.1 et seq.) and the federal Electronic Signatures in Global and National Commerce Act (“E-Sign”) (15 USC Sections 7001 et seq.).

The primary stumbling block to electronic transactions has been security and authentication issues, but they have been resolved.

In reality, the document appears before you on your computer screen. You are asked to select a font type you like and a marker begins to tell you where to click your mouse. When you do, your name is imprinted where the sender previously indicated.

This feature is so sound that no signature, contract, or record relating to an approved document or transaction can be denied legal validity or enforceability solely because it is an electronic format,

There is no question that E-Signing is helpful and efficient and very “green”. As an early user of this technology myself, willing clients and I have saved dozens of reams of paper. However, there are clearly some documents that are not suited for E-signing. This is proven by personal experience and by law.

E-Signing legally excludes wills, codicils, or testamentary trusts, adoptions, divorce or other family law matters, and many legal notices.

Some of the documents which are excluded in real estate transactions are

seller financing disclosures, home equity sales contracts, provision of conditional sales contact/note and security agreement to mobilehome/manufactured home owner,

Notices under Mobilehome Residency Law,

condominium defect disclosures, handling of security deposits, inspection notices rental application screening fees, three-day and eviction notices.

Some clients may think initially that electronic signing is efficient, but some of us will always be more comfortable with paper and pen when executing a document.

E-Signing is totally voluntary but has specific requirements for obtaining consent to receive disclosures required by law to be given in writing.

As in all transactions, there is room and opportunity for fraud. Don’t take chances with your money and your peace of mind. If you are good at reading documents on line, E-signing is a good tool.

If you are more comfortable with pen and paper, let it be your business decision and stick with it. While it is the “green way” to go, there are times when it is not helpful in understanding what you are signing.

When in doubt, contact a knowledgeable and capable real estate attorney for advice.

Kay Wilson-Bolton is a real estate broker and has been serving West Ventura County since 1976 with offices in Ventura and Santa Paula. She can be reached at 805.340.5025. http://www.realestatemagic.com

 

 

 

Probate Information – Don’t Be Shy

REALTOR® Outlook

By Kay Wilson-Bolton

The world of probate is different, but for a good reason. Here are some often asked questions — and the answers.

  1. Listing Contracts

Q 7. May the personal representative enter into a contract with a licensed real estate broker to sell estate real property?

A Yes. The personal representative may enter in to an exclusive right to sell contract with a broker for an original period of not more than 90 days plus one or more extensions each limited to the same periods (Cal. Prob. Code § 10150(c)).  This real estate broker may cooperate with other brokers and may advertise the property on the MLS (Cal. Prob. Code § 10150(a)).   Prior court approval must be obtained for each extension unless the personal representative is acting under IAEA. However, even here, if the personal representative has obtained only “limited” power rather than “full” power to administer the estate, court supervision of the sale of real property is required (Cal. Prob. Code § 10501(b)).

 

Q 8.  May a listing broker obtain an extension of the listing contract if the estate real property does not sell within the original listing ninety day period?

A Yes. However, any extension of the listing given requires prior court approval unless the personal representative is acting under IAEA. Each extension shall not exceed 90 days (Cal. Prob. Code § 10150(a)).  Under IAEA authority,the personal representative may give discretionary 90 day extensions to the original period as long as the total time is less than 270 days. Once 270 days are exceeded, the IAEA personal representative must give a Notice of Proposed Action of such further extension (Cal. Prob. Code § 10538(c)).  (See Section VII below for more information about the IAEA.)

 

Q 9. Is there a required form that must be used for listing estate real property?

A No. For sales under the IAEA any exclusive authorization and right to sell form is acceptable such as California Association of REALTORS® (C.A.R.) standard form listing contracts: RLA, RLAA and RLAN.

However, in the event court confirmation is required, C.A.R. Standard Form PL is appropriate, but it may also be used for probate sales under the IAEA.

 

III.  Agency, TDS and Other Disclosure Laws

Q 10. Is compliance with the agency disclosure laws required in the sale of estate real property?

A Yes.  If the estate real property consists of one to four residential units (including mobilehomes) and is to be the subject of a sale, exchange, land contract, or lease exceeding one year, compliance with the agency disclosure laws is required.  (Cal. Civ. Code § 2079.13(j).)

Q 11. Must the personal representative transferring estate real property complete a Real Estate Transfer Disclosure Statement (TDS) or provide other disclosures?

A Sellers of estate real property (and mobilehomes) are exempt from the requirement of providing prospective buyers with a transfer disclosure statement (Cal. Civ. Code § 1102.2(b)). This does not, however, relieve the seller from disclosing any known material facts regarding the value or desirability of the property.

Furthermore,probate sales must still comply with other disclosure laws.  For a complete list of required disclosures for probate residential one-to-four sales transactions, please refer to the following online chart:  Sales Disclosure Chart for REALTORS®.

 

Q 12. Is a licensee required to conduct a visual inspection of residential estate real property that is offered for transfer?

A Yes. A licensee involved in the transfer of residential one-to-four unit estate real property interests (including mobilehomes) is required to conduct a reasonably competent and diligent visual inspection of all accessible areas of the property and to disclose to prospective buyers all facts materially affecting the value or desirability of the property that the inspection reveals (Cal. Civ. Code § 2079(a)). Although not required by the statute, the disclosure should be made in writing.

 

 

  1. Real Estate Commissions

Q 13. How is the listing broker‘s commission established?

A The listing agreement usually specifies the amount of commission as a percentage of the sales price. The court will determine, in its discretion, what is a reasonable commission (Cal. Prob. Code §§ 10150((b), 10161(a)).  However, the court may not approve an amount in excess of the maximum percentage established by local court rules. This amount can be determined by contacting the clerk of the probate court of the county in which the estate is being administered.

Local court rules do vary.  For example:  Los Angeles County Superior Court Rule 10.93 limits commission to 5% except in the case of vacant land; Orange County Superior Court Rule 606.06 limits commission to 6% unless justified byexceptional circumstances.
If a sale is confirmed by the court and subsequently closes, the listing broker has earned the commission specified in the listing contract, not to exceed the maximum percentage allowed by local court rules.  The commission, also, may not exceed the amount provided for in the listing contract (Cal. Prob. Code § 10161(c)).

For Example :   If the maximum under local rules is five percent and the broker‘s listing contract specifies four percent,the broker is limited to a four percent commission. Conversely, if the commission in the listing contract is six percent and the maximum under local rules is five percent, the listing broker‘s fee is limited to five percent.

 

Q 14. When does an estate become liable for a commission to the listing broker?

A The estate becomes liable for the listing broker‘s commission only after all three of the following have occurred:

  • An actual sale is made;
  • The sale is confirmed by the court unless the sale is conducted under IAEA; and
  • The “sale is consummated.”

(Cal. Prob. Code § 10160.)

Hence, brokers are never entitled to a commission in a probate sale until the estate receives the purchase price, the deed is transferred to the buyer and a mortgage or deed of trust is taken for payments due in the future (Cal. Prob. Code § 10160 (Law Revision Comm’n Comment)).

 

Q 15. Can different brokers involved in the sale of estate real property determine how the commission will be divided between them?

A Yes. The court must honor an agreement between brokers concerning the division of a commission (Cal. Prob. Code § 10168).  However, the court has discretion to limit the total amount of commission paid by the estate.

 

Q 16. Does such a commission split agreement between brokers have to be in writing?

A No. Oral agreements between brokers concerning commission splits can be enforceable. However, mere verbal terms are often disputed and difficult to prove.  A separate, written commission agreement between the brokers is highly recommended to avoid any misunderstanding.

 

Q 17. Is an offer of compensation in the Multiple Listing Service (MLS) an enforceable “agreement” between brokers to split commissions?

A Yes.  An offer of compensation in a MLS normally creates an enforceable commission agreement between brokers, but only if the cooperating broker is a member of the same MLS (or an MLS with reciprocal privileges) and accepted the offer of compensationrelying on the MLS listing. The listing broker may specify in the MLS that the offer of compensation goes only to the successful cooperating office.According to the California Model MLS Rules:

For estate sale or probate listings, the compensation offered through the service under these rules and this section shall be considered an agreement as referred to in California Probate Code Section 10165 and will therefore supersede any commission splits provided by statute when there is no agreement. This section contemplates that estate sale, probate and bankruptcy judges have broad discretion and therefore are not intended as a guarantee of a specific result as to commissions in every probate or bankruptcy sale.

The listing office may also specify the amount of compensation going to the first cooperating office (unconfirmed cooperating broker compensation-“ucb”) if the accepted offer is overbid at the court confirmation hearing.  (Cal. Model MLS Rule § 7.15.1.).

 

Q 18. Can the court, at the confirmation hearing, alter a commission agreement between cooperating brokers?

A If cooperating brokers have entered into a commission agreement, the law mandates that the court honor it (Cal. Prob. Code § 10168). If all brokers agree in court to the terms of a prior oral or written agreement to split a commission, there should be no reason for the court to alter it. An exception however could arise if commission agreement between the brokers exceeds local court rules limiting the commission amount as paid by the estate.

Q 19. Is there a comprehensive summary of rules concerning how much commission a broker earns on the sale of estate real property?

A Yes. The  C.A.R. legal article titled California Probate Code Commission Schedule is a chart that specifies the amount of commission a broker is entitled to whether the property is exclusively or not exclusively listed, and when confirmed to the original bidder, or confirmed to an overbidder.The chart also specifies a broker’s amount of commission in the event of a successful bid or overbid as obtained by the estate‘s personal representative.

 

Q 20. Can a real estate licensee receive a commission when buying estate real property as a principal?

A The Probate Code specifically provides that the estate is not liable for any commission where the listing broker or agent is directly or indirectly the purchaser of the estate property. In addition, the estate is not liable for commission when the selling broker or agent has “any interest in the purchaser” (e.g., financial interest in the purchaser) or is the purchaser.  (Cal. Prob. Code § 10160.5).  (See Estate of Toy v. Coldwell Banker (1977).)

Q 21. What is the broker‘s recourse when the court fails to award the broker a commission at the confirmation hearing?

A If the broker’s commission is not ordered on the court record at the confirmation hearing, the broker may request it in writing and the court may modify the order to award a commission. If a licensee is present in court at the time of the hearing and fails to ask for a commission, or is not present in court and could have been, the court may choose not to modify the order.  (Cal. Prob. Code §§10313(b); 10310(c).)

 

Q 22. What happens if the broker‘s commission is confirmed by the court but remains unpaid?

A If the estate fails to pay the broker a commission awarded by the court after the escrow has closed, the broker becomes a creditor of the estate. The broker may then institute proceedings to require payment. The court may at any time order an accounting by the personal representative of estate monies received and expended, including data on claims filed or presented to the estate.

It should be noted, however, that the commission is not earned until the sale is fully consummated. Thus, if the buyer defaults, no commission is payable and the broker is not entitled to file a claim against the estate.

Q 23. What happens if there is a dispute between brokers over the agreement to split commission?

A Generally the probate court will not interpret an agreement between cooperating brokers regarding the split of commission.  If upon request the court does not specifically split the commission, the cooperating brokers should resolve their dispute through the Board/Association arbitration system like any other commission dispute.

 

  1. Submission of Offers

Q 24. How should an offer be submittedon estate real property?

A Offers or bids on estate real property must be in writing.  (See, for example, C.A.R. Standard Form PPA, Probate Purchase Agreement and Joint Escrow Instructions.)Many other purchase contracts are not specificallytailored to probate sales, but may be used. However, the contrct should indicate that:

  • The title to be conveyed is whatever the estate holds;
  • The sale is subject to court confirmation;
  • If applicable, the property is sold “as is”;and
  • The total commission will be in an amount set by the court and will be paid only from the sale proceeds, whatever sum may be allowed by the court.

 

Q 25. To whom should an offer be submitted?

A The offer received by the listing licensees should be submitted to the personal representative or anyone else listed in the Notice of Sale as the appropriate recipient. Many times the personal representative will designate the estate attorney as recipient of offers for initial review.  (Cal. Prob. Code § 10307.)

 

Q 26. Who has the power to accept an offer concerning estate real property?

A The personal representative of the estate has the power to accept an offer. However, any acceptance is subject to court confirmation, unless the sale is made under the Independent Administration of Estates Act by a personal representation having full authority to administer the sale.

 

Q 27. When may offers be submitted on the sale of probate estate real property?

A Offers may be submitted at anytime.  An offer received by the listing broker at any time before a sale closes must be presented to the personal representative, unless the personal representative has expressly instructed the broker not to present it, or unless the offer is patently frivolous.  Whether the offer is patently frivolous depends on the facts and circumstances at the time of the offer.  The licensee’s safest course of action is to submit all offers of this type to the personal representative for his/her own determination.

 

Q 28. Will credit offers (subject to a loan) or other contingent offers on estate real property be confirmed by the court?

A  Acceptance of a contingent offer is quite rare in probate sales.  Acceptance of a credit offer is subject to court approval (Cal. Prob. Code § 10315).  In addition, the court may also permit seller financing (by the estate) (Cal. Prob. Code § 10315).  An offer with any contingency may be accepted by the personal representative, subject to court confirmation, which will usually require a demonstration of evidence that the property cannot be sold without the contingency.  The personal representative may also consider accepting an offer with a contingency provided the prospective purchaser removes the contingency before the offer is submitted to court.  Under IAEA full authority, no rules specifically prohibit a contingent sales contract.

 

Q 29.  Is there a minimum price for which estate real property must be sold?

A Generally, yes.  Without full authority under IAEA, the minimum offer price for a private sale of real property must be at least 90 percent of the appraised value of the property (Cal. Prob. Code § 10309(a)(3)).  The appraisal must have been made within one year prior to the date of the confirmation hearing (Cal. Prob. Code § 10309(a)(2)).

Q 30.  Is there a minimumd eposit required on the sale of estate real property?
A Generally, yes.  Except under IAEA full authority, all terms of a sale including the minimum required deposit are subject to court approval and local rules of court which vary from county to county.  Many courts require a 10 percent deposit at the confirmation hearing in the form of cash, cashier’s check, or a certified check.

Q 31How soon must the accepted offer be returned to the court for confirmation?

A The personal representative is required to file a report of the sale and petition the court for confirmation of sale within 30 days after acceptance of the offer unless acting under IAEA full authority (Cal. Prob. Code § 10308).  If the representative refuses or fails to do so within the 30 day period, the buyer may proceed to file the report and petition the court for confirmation of the sale.  The buyer, of course, should consult a personal attorney if the buyer feels it is necessary to petition the court.  (Cal. Prob. Code § 10308).

 

  1. Overbids

Q 32.  Is an original bid subject to an overbid at the confirmation hearing?

A Yes unless the sale is under full authority of IAEA.  Another prospective purchaser may attend the confirmation hearing and submit to the court a higher written offer, called an “overbid,” to purchase the real property (Cal. Prob. Code § 10311).

 

Q 33.   Is there a minimum amount required for an overbid?

A Yes.  The initial overbid must exceed the original bid according to the following formula:

  • The amount of the original bid, plus
  • At least 10 percent of the first $10,000.00 of the original bid; plus
  • At least 5 percent of the amount of the original bid in excess of $10,000.00.

If the original bid returned to the court for confirmation is for $100,000.00, then the initial overbid must be for at least $105,500.00 (10 percent of the first $10,000.00 = $1,000.00; plus five percent of the remaining balance of that bid of $90,000 = $4,500.00; $1,000.00 + $4,500.00 = $5,500.00 which must be added to the original bid of $100,000.  The resulting minimum overbid requires is $105,500.  ($100,000 + $5,500).

The minimum amount of increase required after the first overbid will be set by the court at the time of the confirmation hearing.  The court will accept bids in much the same manner as an auction until the highest bid available has been made at the confirmation hearing.

If one prospective buyer bids a lesser cash amount and another prospective buyer bids a higher credit amount, the court cannot consider the higher offer unless the personal representative informs the court in person (or by counsel prior to confirmation of the sale) that the higher offer is acceptable (Cal. Prob. Code § 10311(d)).

 

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  1. Probate Proceedings In General

Q 1.  Can you give me a general description of how a sale of real property in probate works?

A Estate administration providesfor the orderly distribution of real and personal property owned by a decedent. More specifically, any property which the decedent owned or in which the decedent had an interest at the time of death is collected into the estate and distributed to those entitled to it after all debts and expenses have been paid. The process of administering a decedent‘s estate is referred to as “probate,” and is generally supervised by the probate court.A personal representative is the person or entity charged with the responsibility of administering a decedent’s estate (Cal. Prob. Code § 58(a)). A personal representative is either:

  • An executor (executrix) who is named in a will; or
  • An administrator (administratrix) who is appointed by the court when there is no will, when the will does not name an executor or when the named executor is unable or unwilling to serve.

The personal representative is charged with the fiduciary responsibility of gathering the assets and paying the debts of the decedent insuch a way that the beneficiaries or heirs of the decedent receive the maximum inheritance. The personal representative usually will hire an estate attorney to handle the legal aspects of the probate. Most business dealings are through the estate attorney.

 

Q 2.  When may the personal representative sell estate property?

A Estate property may be sold by the personal representative when:

  • The sale is necessary to pay debts, devises (gifts to persons named in the will), a family allowance, expenses of estate administration, or taxes;
  • The sale is to the advantage of the estate and in the best interests of the interested persons;
  • The property must be sold according to the terms of the will; or
  • Authority is given in the will to sell the property.

(Cal. Prob. Code § 10000.)A decedent’s will may designate the manner in which estate real property is to be sold or identify the particular property to be sold. Absent a court order based upon the best interests of the interested parties to the contrary, the personal representative shall comply with the decedent’s instructions. If the will is silent on these matters or there is no will, the personal representative may select the method of sale and the particular property to be sold.Estate real property may be sold by private sale, public auction, or a different method specified in the will of the decedent (Cal. Prob. Code §§ 10000.3, 10303). A private sale is one in which bids or offers are independently solicited, while a sale by public auction invites concurrent competitive bidding.

 

Q 3.  Must the personal representative list the estate real property with a real estate broker?

A The personal representative may legally market and sell real property without the services of abroker, as if he/she were the owner of the property. The personal representative is considered the “seller” in the transaction.  However, the personal representative may list the property with a real estate broker.  The process of listing, marketing and selling probate real property is much the same as any sales transaction with some exceptions discussed below.  Unless the personal representative has full authority under the IAEA, a sale is generally subject to confirmation by the court.

 

Q 4.  Are there any restrictions on the sales price of estate real property?

A Yes.  The sales price of a private sale of estate real property subject to court confirmation must be at least 90 percent of its appraised value set within one yearprior to the sale (Cal. Prob. Code § 10309).  All terms of a sale, including the minimum required deposit, are generally subject to court approval and local rules of court which vary from county to county. Many courts require a 10 percent deposit atthe confirmation hearing in the form of cash or a certified check.  Generally, offers with contingencies of any sort (e.g., financing, sale of home) are not approved by the court.  Sales of real property sold under the IAEA do not have the samerestrictions and may contain all of the same contingencies and provisions as non-probate sales of real property (Cal. Prob. Code § 10503).

Q 5.  What is a “Notice of Sale” and is it required prior to selling estate real property?

A  A Notice ofSale must be published prior to the sale of estate real property unless the will directs the real property to be sold or gives authority to the personal respresentative to sell the real property. The Notice of Sale provides the public with required information concerning the sale and will typically be handled by the attorney for the estate.  The contents of the Notice of Sale can be found in Probate Code Section 10304.

A Notice of Sale of real property must be published at least three times over a period of not less than 10 days before the sale, with the third publication at least five days after the first (Cal. Prob. Code § 10300; Cal. Gov’t Code § 6063a).  All publications must be in a newspaper published at least weekly in the county in which all or some of the property is situated.

Certain sales are exempt from this requirement, most importantly, sales under the IAEA (Cal. Prob. Code § 10503—the property may be sold with or without notice).

 

Q 6.  What is meant by court confirmation of the sale of real property?

A  The personal representative is required to report the sale and petition the court for confirmation of the sale within 30 days of accepting an offer (Cal. Prob. Code § 10308). Should the personal representative fail to perform these acts in this time period, the purchaser may do so on his or her own behalf (Cal. Prob. Code § 10308(b)). All estate real property sales must be confirmed by the court except for sales of property under the IAEA.

At the confirmation hearing, the original sale may be subject to being overbid by another purchaser (Cal. Prob. Code § 10313). The court will confirm the sale to either the original bidder or to an overbidder and normally approve payment of the brokerage commissions. Titlewill pass to the successful buyer only after the terms of sale have been met, the court has confirmed the sale and the personal representative has executed a conveyance to that buyer (Cal. Prob. Code § 10314).

 

  1. Listing Contracts

Q 7. May the personal representative enter into a contract with a licensed real estate broker to sell estate real property?

A Yes. The personal representative may enter in to an exclusive right to sell contract with a broker for an original period of not more than 90 days plus one or more extensions each limited to the same periods (Cal. Prob. Code § 10150(c)).  This real estate broker may cooperate with other brokers and may advertise the property on the MLS (Cal. Prob. Code § 10150(a)).   Prior court approval must be obtained for each extension unless the personal representative is acting under IAEA. However, even here, if the personal representative has obtained only “limited” power rather than “full” power to administer the estate, court supervision of the sale of real property is required (Cal. Prob. Code § 10501(b)).

Q 8.  May a listing broker obtain an extension of the listing contract if the estate real property does not sell within the original listing ninety day period?

 

A Yes. However, any extension of the listing given requires prior court approval unless the personal representative is acting under IAEA. Each extension shall not exceed 90 days (Cal. Prob. Code § 10150(a)).  Under IAEA authority,the personal representative may give discretionary 90 day extensions to the original period as long as the total time is less than 270 days. Once 270 days are exceeded, the IAEA personal representative must give a Notice of Proposed Action of such further extension (Cal. Prob. Code § 10538(c)).  (See Section VII below for more information about the IAEA.)

 

Q 9. Is there a required form that must be used for listing estate real property?

A No. For sales under the IAEA any exclusive authorization and right to sell form is acceptable such as California Association of REALTORS® (C.A.R.) standard form listing contracts: RLA, RLAA and RLAN.

However, in the event court confirmation is required, C.A.R. Standard Form PL is appropriate, but it may also be used for probate sales under the IAEA.

III.  Agency, TDS and Other Disclosure Laws

Q 10. Is compliance with the agency disclosure laws required in the sale of estate real property?

 

A Yes.  If the estate real property consists of one to four residential units (including mobilehomes) and is to be the subject of a sale, exchange, land contract, or lease exceeding one year, compliance with the agency disclosure laws is required.  (Cal. Civ. Code § 2079.13(j).)

 

Q 11. Must the personal representative transferring estate real property complete a Real Estate Transfer Disclosure Statement (TDS) or provide other disclosures?

A Sellers of estate real property (and mobilehomes) are exempt from the requirement of providing prospective buyers with a transfer disclosure statement (Cal. Civ. Code § 1102.2(b)). This does not, however, relieve the seller from disclosing any known material facts regarding the value or desirability of the property.

Furthermore,probate sales must still comply with other disclosure laws.  For a complete list of required disclosures for probate residential one-to-four sales transactions, please refer to the following online chart:  Sales Disclosure Chart for REALTORS®.

 

Q 12. Is a licensee required to conduct a visual inspection of residential estate real property that is offered for transfer?

A Yes. A licensee involved in the transfer of residential one-to-four unit estate real property interests (including mobilehomes) is required to conduct a reasonably competent and diligent visual inspection of all accessible areas of the property and to disclose to prospective buyers all facts materially affecting the value or desirability of the property that the inspection reveals (Cal. Civ. Code § 2079(a)). Although not required by the statute, the disclosure should be made in writing.

 

  1. Real Estate Commissions

Q 13. How is the listing broker‘s commission established?

A The listing agreement usually specifies the amount of commission as a percentage of the sales price. The court will determine, in its discretion, what is a reasonable commission (Cal. Prob. Code §§ 10150((b), 10161(a)).  However, the court may not approve an amount in excess of the maximum percentage established by local court rules. This amount can be determined by contacting the clerk of the probate court of the county in which the estate is being administered.

Local court rules do vary.  For example:  Los Angeles County Superior Court Rule 10.93 limits commission to 5% except in the case of vacant land; Orange County Superior Court Rule 606.06 limits commission to 6% unless justified byexceptional circumstances.
If a sale is confirmed by the court and subsequently closes, the listing broker has earned the commission specified in the listing contract, not to exceed the maximum percentage allowed by local court rules.  The commission, also, may not exceed the amount provided for in the listing contract (Cal. Prob. Code § 10161(c)).

For Example :   If the maximum under local rules is five percent and the broker‘s listing contract specifies four percent,the broker is limited to a four percent commission. Conversely, if the commission in the listing contract is six percent and the maximum under local rules is five percent, the listing broker‘s fee is limited to five percent.

 

Q 14. When does an estate become liable for a commission to the listing broker?

A The estate becomes liable for the listing broker‘s commission only after all three of the following have occurred:

  • An actual sale is made;
  • The sale is confirmed by the court unless the sale is conducted under IAEA; and
  • The “sale is consummated.”

(Cal. Prob. Code § 10160.)

Hence, brokers are never entitled to a commission in a probate sale until the estate receives the purchase price, the deed is transferred to the buyer and a mortgage or deed of trust is taken for payments due in the future (Cal. Prob. Code § 10160 (Law Revision Comm’n Comment)).

Q 15. Can different brokers involved in the sale of estate real property determine how the commission will be divided between them?

A Yes. The court must honor an agreement between brokers concerning the division of a commission (Cal. Prob. Code § 10168).  However, the court has discretion to limit the total amount of commission paid by the estate.

Q 16. Does such a commission split agreement between brokers have to be in writing?

A No. Oral agreements between brokers concerning commission splits can be enforceable. However, mere verbal terms are often disputed and difficult to prove.  Aseparate, written commission agreement between the brokers is highly recommended to avoid any misunderstanding.

 

Q 17. Is an offer of compensation in the Multiple Listing Service (MLS) an enforceable “agreement” between brokers to split commissions?

A Yes.  An offer of compensation in a MLS normally creates an enforceable commission agreement between brokers, but only if the cooperating broker is a member of the same MLS (or an MLS with reciprocal privileges) and accepted the offer of compensationrelying on the MLS listing. The listing broker may specify in the MLS that the offer of compensation goes only to the successful cooperating office.According to the California Model MLS Rules:

For estate sale or probate listings, the compensation offered through the service under these rules and this section shall be considered an agreement as referred to in California Probate Code Section 10165 and will therefore supersede any commission splits provided by statute when there is no agreement. This section contemplates that estate sale, probate and bankruptcy judges have broad discretion and therefore are not intended as a guarantee of a specific result as to commissions in every probate or bankruptcy sale.

The listing office may also specify the amount of compensation going to the first cooperating office (unconfirmed cooperating broker compensation-“ucb”) if the accepted offer is overbid at the court confirmation hearing.  (Cal. Model MLS Rule § 7.15.1.).

 

Q 18. Can the court, at the confirmation hearing, alter a commission agreement between cooperating brokers?

A If cooperating brokers have entered into a commission agreement, the law mandates that the court honor it (Cal. Prob. Code § 10168). If all brokers agree in court to the terms of a prior oral or written agreement to split a commission, there should be no reason for the court to alter it. An exception however could arise if commission agreement between the brokers exceeds local court rules limiting the commission amount as paid by the estate.

 

Q 19. Is there a comprehensive summary of rules concerning how much commission a broker earns on the sale of estate real property?

A Yes. The  C.A.R. legal article titled California Probate Code Commission Schedule is a chart that specifies the amount of commission a broker is entitled to whether the property is exclusively or not exclusively listed, and when confirmed to the original bidder, or confirmed to an overbidder.The chart also specifies a broker’s amount of commission in the event of a successful bid or overbid as obtained by the estate‘s personal representative.

 

Q 20. Can a real estate licensee receive a commission when buying estate real property as a principal?

A The Probate Code specifically provides that the estate is not liable for any commission where the listing broker or agent is directly or indirectly the purchaser of the estate property. In addition, the estate is not liable for commission when the selling broker or agent has “any interest in the purchaser” (e.g., financial interest in the purchaser) or is the purchaser.  (Cal. Prob. Code § 10160.5).  (See Estate of Toy v. Coldwell Banker (1977).)

 

Q 21. What is the broker‘s recourse when the court fails to award the broker a commission at the confirmation hearing?

A If the broker’s commission is not ordered on the court record at the confirmation hearing, the broker may request it in writing and the court may modify the order to award a commission. If a licensee is present in court at the time of the hearing and fails to ask for a commission, or is not present in court and could have been, the court may choose not to modify the order.  (Cal. Prob. Code §§10313(b); 10310(c).)

 

Q 22. What happens if the broker‘s commission is confirmed by the court but remains unpaid?

A If the estate fails to pay the broker a commission awarded by the court after the escrow has closed, the broker becomes a creditor of the estate. The broker may then institute proceedings to require payment. The court may at any time order an accounting by the personal representative of estate monies received and expended, including data on claims filed or presented to the estate.

It should be noted, however, that the commission is not earned until the sale is fully consummated. Thus, if the buyer defaults, no commission is payable and the broker is not entitled to file a claim against the estate.

 

Q 23. What happens if there is a dispute between brokers over the agreement to split commission?

A Generally the probate court will not interpret an agreement between cooperating brokers regarding the split of commission.  If upon request the court does not specifically split the commission, the cooperating brokers should resolve their dispute through the Board/Association arbitration system like any other commission dispute.

 

  1. Submission of Offers

Q 24. How should an offer be submittedon estate real property?

A Offers or bids on estate real property must be in writing.  (See, for example, C.A.R. Standard Form PPA, Probate Purchase Agreement and Joint Escrow Instructions.)Many other purchase contracts are not specificallytailored to probate sales, but may be used. However, the contrct should indicate that:

  • The title to be conveyed is whatever the estate holds;
  • The sale is subject to court confirmation;
  • If applicable, the property is sold “as is”;and
  • The total commission will be in an amount set by the court and will be paid only from the sale proceeds, whatever sum may be allowed by the court.

Q 25. To whom should an offer be submitted?

A The offer received by the listing licensees should be submitted to the personal representative or anyone else listed in the Notice of Sale as the appropriate recipient. Many times the personal representative will designate the estate attorney as recipient of offers for initial review.  (Cal. Prob. Code § 10307.)

Q 26. Who has the power to accept an offer concerning estate real property?

A The personal representative of the estate has the power to accept an offer. However, any acceptance is subject to court confirmation, unless the sale is made under the Independent Administration of Estates Act by a personal representation having full authority to administer the sale.

 

Q 27. When may offers be submitted on the sale of probate estate real property?

A Offers may be submitted at anytime.  An offer received by the listing broker at any time before a sale closes must be presented to the personal representative, unless the personal representative has expressly instructed the broker not to present it, or unless the offer is patently frivolous.  Whether the offer is patently frivolous depends on the facts and circumstances at the time of the offer.  The licensee’s safest course of action is to submit all offers of this type to the personal representative for his/her own determination.

 

Q 28. Will credit offers (subject to a loan) or other contingent offers on estate real property be confirmed by the court?

A  Acceptance of a contingent offer is quite rare in probate sales.  Acceptance of a credit offer is subject to court approval (Cal. Prob. Code § 10315).  In addition, the court may also permit seller financing (by the estate) (Cal. Prob. Code § 10315).  An offer with any contingency may be accepted by the personal representative, subject to court confirmation, which will usually require a demonstration of evidence that the property cannot be sold without the contingency.  The personal representative may also consider accepting an offer with a contingency provided the prospective purchaser removes the contingency before the offer is submitted to court.  Under IAEA full authority, no rules specifically prohibit a contingent sales contract.

 

Q 29.  Is there a minimum price for which estate real property must be sold?

A Generally, yes.  Without full authority under IAEA, the minimum offer price for a private sale of real property must be at least 90 percent of the appraised value of the property (Cal. Prob. Code § 10309(a)(3)).  The appraisal must have been made within one year prior to the date of the confirmation hearing (Cal. Prob. Code § 10309(a)(2)).

Q 30.  Is there a minimumd eposit required on the sale of estate real property?
A
 Generally, yes.  Except under IAEA full authority, all terms of a sale including the minimum required deposit are subject to court approval and local rules of court which vary from county to county.  Many courts require a 10 percent deposit at the confirmation hearing in the form of cash, cashier’s check, or a certified check.

Q 31How soon must the accepted offer be returned to the court for confirmation?

A The personal representative is required to file a report of the sale and petition the court for confirmation of sale within 30 days after acceptance of the offer unless acting under IAEA full authority (Cal. Prob. Code § 10308).  If the representative refuses or fails to do so within the 30 day period, the buyer may proceed to file the report and petition the court for confirmation of the sale.  The buyer, of course, should consult a personal attorney if the buyer feels it is necessary to petition the court.  (Cal. Prob. Code § 10308).

 

  1. Overbids

Q 32.  Is an original bid subject to an overbid at the confirmation hearing?

A Yes unless the sale is under full authority of IAEA.  Another prospective purchaser may attend the confirmation hearing and submit to the court a higher written offer, called an “overbid,” to purchase the real property (Cal. Prob. Code § 10311).

 

Q 33.   Is there a minimum amount required for an overbid?

A Yes.  The initial overbid must exceed the original bid according to the following formula:

  • The amount of the original bid, plus
  • At least 10 percent of the first $10,000.00 of the original bid; plus
  • At least 5 percent of the amount of the original bid in excess of $10,000.00.

If the original bid returned to the court for confirmation is for $100,000.00, then the initial overbid must be for at least $105,500.00 (10 percent of the first $10,000.00 = $1,000.00; plus five percent of the remaining balance of that bid of $90,000 = $4,500.00; $1,000.00 + $4,500.00 = $5,500.00 which must be added to the original bid of $100,000.  The resulting minimum overbid requires is $105,500.  ($100,000 + $5,500).

The minimum amount of increase required after the first overbid will be set by the court at the time of the confirmation hearing.  The court will accept bids in much the same manner as an auction until the highest bid available has been made at the confirmation hearing.

If one prospective buyer bids a lesser cash amount and another prospective buyer bids a higher credit amount, the court cannot consider the higher offer unless the personal representative informs the court in person (or by counsel prior to confirmation of the sale) that the higher offer is acceptable (Cal. Prob. Code § 10311(d)).

 

 

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com

 

 

 

 

 

 

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com

 

 

 

NEW LAWS IN EFFECT AS OF JANUARY 1, 2010

REALTOR® Outlook

By Kay Wilson-Bolton

January 15, 2010

Every industry is compelled to look itself in the eye and rely on our legislators to craft news laws that make sense while they protect the consumer. This year is no exception. Consider the following new laws.

Advertisng.  Solicitation materials that must contain the agnets license identification number issued by the Departmetn of Real Estate on business cards, stationery, web sites and other marketing or promotional materials designed to solicit the creation of a professional relationship between the licensee and a consumer, or intended to induce a consumer to contact the licensee about any licensed services. It must also be on any purchase contracts signed by the agents.

Not included are advertisements in electronic media, print advertising  or “For Sale” signs.

SB 234 This law requires appraisal management companies, as defined, to register with the Office of Real Estate Appraisers, and subjects them to the provisions of the Real Estate Appraisers’ Licensing and Certification Law

A regularly controversial aspect of real estate practice is the use of handymen to completle simple tasks in preparing or repairing property.

SB 370 states it is a misdemeanor for a person to engage in the business or act in the capacity of a contractor without having a license.  This new law increases the penalties for acting as a contractor without a license.

A person who used the services of an unlicensed contractor is a victim of crime and eligible for restitution for economic losses, regardless of whether that person had knowledge that the contractor was unlicensed.

SB 367 The California Unruh Civil Rights Act prohibits arbitrary discrimination in providing accommodations, advantages, faciities, privileges, or services by business establishments. This law states that any discount or benefit given to a consumer who has lost a job or has suffered reduced wages is not considered arbitrary discrimination

SB306 Previously the law required that, upon a breach of the obligation of a mortgage or transfer of an interest in property, the trustee, mortgagee, or beneficiary record a notice of default in the office of the county recorder where the mortgaged or trust property is situated and mail the notice of default to the mortgagor or trustor.

Furthermore, until January 1, 2013, the prior law prohibited a mortgagee, trustee, beneficiary, or authorized agent from filing a notice of default for an additional 30 days on loans made between January 1, 2003, to December 31, 2007, that secures residential real property.

This portion of the law is now limited to owner-occupied residential real property containing no more than 4 dwelling units.

Previously the law required a trustee or authorized agent, upon posting a notice of sale, to post and mail a specified notice addressed to residents of property subject to foreclosure upon posting a notice of sale. Existing law required a notice of sale to be recorded in the county in which the property, or some part of it, is situated at least 14 days prior to the date of sale.

The new law specifies how and when this notice is to be mailed. It also extends the time from 14 to 20 days prior to the date of sale.

The California Unruh Civil Rights Act prohibits arbitrary discrimination in providing accommodations, advantages, faciities, privileges, or services by business establishments.

AB 367 states that any discount or benefit given to a consumer who has lost a job or has suffered reduced wages is not considered arbitrary discrimination.

AB 1061 makes any provision of the governing documents of a common interest development void and unenforceable if it prohibits the use of low water-using plants as a group, or if it has the effect of prohibiting or restricting compliance with a local water-efficient landscape ordinance or water conservation measure. In other words, HOAs can no longer force homeowners to maintain lush green lawns if the homeowners prefer other low water-using plants.

AB 313 prohibits an HOA from making assessments on separate interests within the common interest development based on the taxable value of the separate interests according to the local assessor’s office, unless the association was already doing so on or before December 31, 2009, in accordance with its governing documents.  An association that is responsible for paying taxes on the separate interests within the common interest development is not subject to this prohibition.

AB 899 requires an HOA to include in the Assessment and Reserve Funding Disclosure Summary a specified statement regarding the interest rate earned on reserve funds and the assumed inflation rate applied to major component repair and replacement costs.  The HOA must also provide, at an owner’s request, a new Disclosure Document Index.  Furthermore, all the disclosure documents on this Index can be provided electronically (e-mail, fax, etc.).

AB 1046 changes the statutory homestead exemptions.  Previously the base exemption was $50,000 for a single person, $75,000 for a member of a family unit and there is at least one member of the family unit who owns no interest in the homestead or whose only interest is a community property interest in the homestead, $150,000 for a person who is (1) 65 years of age or older, (2) physically or mentally disabled and unable to work, or (3) 55 years of age or older and has a gross annual income of $15,000 or less (or $20,000 or less if married).

This law increases the homestead exemptions to $75,000, $100,000, and $175,000, respectively.

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is  www.realestatemagic.com

 

 

 

 

 

 

When someone you don’t know wants your money – think scam.

REALTOR® Outlook

By Kay Wilson-Bolton

August 10, 2010

There have been reports in the Santa Paula Times of good people, believing the best in others, handed over their money to strangers and lost it.

It has happened again at least twice recently in Santa Paula where someone has approached a homeowner about modifying their loan to a lower interest rate.  All of that sounds good to every homeowner, but one has to do more to protect themselves.

Whether facing foreclosure or not it is tempting to want to reduce a house payment, particularly during an economic downturn.

Any borrower may seek a loan modification to reduce the interest rate, the loan payment or the principal balance.

Homeowners are tempted to not make mortgage payments when their property investments have less value than when it was purchased, but a loan modification to a lower payment is enticing to everyone.

If anyone entices you to pay for services up front to modify your loan in any way, DON’T.

Unless certain requirements are met, advance fees cannot be collected.

California law defines an advance fee to include a fee claimed, demanded, charged, received, collected or contracted from a principal for negotiating real estate loans.          Before anyone can collect an advance fee, they must satisfy the following three requirements:

  1. The property is owner occupied with one-to-four dwelling units and has a recorded notice of default.
  2. The plan for modification must be submitted for review to the Department of Real Estate (DRE) and the broker has received a “no objection” letter from the DRE
  3. The broker must place any advance fee collected into the broker’s trust account as specified and can only be used for expenses or payment when the work is done.

If someone tells you they know someone who can help you modify your loan, or offers to do that for you, slow down and investigate. Talk to someone you trust first and get additional advice; or, call the District Attorney’s Office at  805-662-1750.

The best way to protect your money is to be informed.  The advance fee law came into being because people have been hurt by financial loss. Let’s not let it happen again in Santa Paula

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com

Is Home Ownership Passe?

REALTOR® Outlook

By Kay Wilson-Bolton

September 5, 2010

Recently a nationally read magazine suggested that home ownership might be passé.

That argument is easily countered by those retirees 55 years who entered retirement with a minimal mortgage on their home with burning it in the near future.

It can also be be countered by the millions of middle-Americans who bought wisely, refinanced only to obtain a better interest rate, enjoy the tax deductions and the appreciation that comes over time with real estate ownership.

Now that rent payments and mortgage payments have intersected, a homeowner will quickly notice at year end the wisdom of paying their own lender instead of someone else’s.

It would be hard to imagine an America with a landed gentry that owns all its single family homes.  Individual ownership spreads the wealth, stabilizes and balances governments while it creates jobs and spending power for the reliable but disappearing middle class.

There is no question that a decline in home prices precipitates a decline in wealth, but as long as it is across economic distinctions, all boats float high in the water.

Since home prices in California double every 20 years in California, it is a safe bet that over the long term, owing your own home is a hedge against the drop in income associated with retirement.

It can also guarantee that vacations and a few luxuries are still possible in retirement years, let alone sleep filled nights and stress-less days, role modeling good business decisions for kids, stabilizing families and neighborhoods

No should buy a home until they are “ready.”  Education in money management, understanding loans, responsible home purchasing and ownership, sensible spending habits and right thinking would decrease the risks of foreclosure. We are living through the disaster where people bought homes but just weren’t ready for the realities and the responsibilities.

The Department of Real Estate requires a license and education for someone to sell a home; maybe we should inspire a program where some buyers need the same to buy one.

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista. She brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com

 

 

 

EVEN FHA TIGHTENS UP

REALTOR® Outlook

By Kay Wilson-Bolton

March 23, 2010

It’s hard to believe that even FHA has had to tighten its requirements for borrowers. It has always been a homebuyer’s most trusted friend.

But, it’s about to get tougher to qualify for an FHA mortgage — a government insured, low-down payment home loan often considered the replacement loan for subprime mortgages.

FHA is adding more-stringent lending requirements and higher fees borrowers must pay to get the federally-insured loans with one goal and that is to prevent foreclosures in a fragile segment of the market.

Because FHA loans are low-down payment loans, they come with a requirement that the borrower buy mortgage insurance. Mortgages made for home purchases with smaller down payments have a higher risk for default and foreclosure.       When a borrower goes into foreclosure, the action triggers mortgage insurance benefits that pay the lender to cover the loss.

Before the housing market’s boom-bust cycle, FHA loans accounted for a fraction of all mortgages. Today they account for 30 to 50 percent of all purchase loans in some locations. More loans exposed to risk have drained FHA coffers and forced the federal agency to cut its losses.

Effective April 5, the FHA will raise mortgage insurance fees that borrowers must pay, cap the amount of cash that sellers can contribute for closing costs and require higher down payments for the borrowers with poor credit scores.

The new upfront mortgage premium will cost borrowers 2.25 percent of the loan amount, up from the current 1.75 percent — the second increase in the past two years. The good news is that the upfront premium can be rolled into the loan.

New borrowers must have a minimum FICO credit score of 580 to qualify for FHA’s 3.5 percent down payment loan, otherwise the borrower must put 10 percent down. Most lenders require a minimum credit score of about 620.

Sellers will only be able to contribute closing costs that amount to 3 percent of the sale price, half the current 6 percent. Experts say the higher maximum encouraged borrowers to mark up the price to compensate for their concession.

FHA’s low down payment loans are available for 15- and 30-year terms with fixed or adjustable rates, for those who qualify.

The required mortgage insurance, can’t be canceled during the first five years, but is automatically canceled after 15 years or if the loan-to-value ratio of the mortgage falls to 78 percent of the original debt. It is not automatic. It has to be requested and supported.

It is a heavy correction to the best  friend of American homebuyers.  There is no one to blame anymore. This is the new lending environment that will govern the industry until we all forget what caused it.

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com

 

 

 

Flood Insurance Reigns In Some Buyer

By Kay Wilson-Bolton

January 22, 2010

Flood Insurance “Rains In” Some Buyers

Just when we think the every day challenges of this market have been managed, a very onerous requirement has been imposed on recent homebuyers.

More problematic is the imposition of new flood insurance requirements on existing homeowners who never planned on adding $150 to their monthly house payment.

In case you haven’t heard, the Federal Emergency Management Agency (FEMA) has issued revised Flood Insurance Rate Maps for all of Ventura County that became effective on Wednesday, January 20, 2010.

These maps show areas that are considered to be in a floodplain, and therefore now require homeowners to obtain flood insurance. Flood zone disclosure is a statutory requirement in California real estate transactions.

The revised FEMA maps expand the 100-year flood zone, affecting properties mainly in the vicinity of Moorpark, Camarillo, Oxnard and Fillmore. Approximately 11,000 parcels that are not now entirely or partially within a 100-year flood zone were drawn into this high-risk zone when the revised maps became effective.

According to FEMA sources, the agency plans to follow this map release with Letters of Map Change that will modify the new flood zones in the cities of Oxnard and Fillmore and in neighboring unincorporated Ventura County.

On the new flood maps, areas behind a levee are now designated as “Zone X Protected by Levee”. Approximately 3,700 parcels in Ventura County are included within this new map zone, primarily in and around the cities of San Buenaventura, Simi Valley and Fillmore.

Although flood insurance was previously required in this new zone — this has changed. Some levees in Ventura County may not meet FEMA’s 100-year flood protection standards. Levee owners must demonstrate, within a specified time, that the levee provides protection from a 100-year flood. Otherwise, the levee-protected zone will be revised to the high-risk 100-year flood zone designation, which will trigger the flood insurance requirement.

Prospective home buyers must enlist everyone on their team to see if the property’s flood zone and insurance requirements apply. The cost is significant. In one case, a recent home purchaser just discovered that the cost of flooD insurance is going to cost $150 per month, a significant increase on any budget.

There are several trigger points on this new requirement. One is the Natural Hazards Disclosure which will note that the area is in a special flood hazard zone. Research it. Don’t just acknowledge it.

Buyers have rights to inspect the various aspects of the property prior to removing their contingency to purchase the property.  Insurance is one of them.

Quiz your insurance agent to be sure you have all the facts you need before completing your purchase. Ask the seller(s) for more information.

Ask your REALTOR® to help you find out what you need to know. Remember that buyers have a duty to investigate, not just rely on the word of others.

http://www.fanhd.com/Portals/0/fanhd/pdf/VenturaCo_FEMAmaps_Jan2010.pdf

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com

 

 

 

 

 

 

EVEN FHA HAS TIGHTENED THE RULES

By Kay Wilson-Bolton

March 23, 2010

It’s hard to believe that even FHA has had to tighten its requirements for borrowers. It has always been a homebuyer’s most trusted friend.

But, it’s about to get tougher to qualify for an FHA mortgage — a government insured, low-down payment home loan often considered the replacement loan for subprime mortgages.

FHA is adding more-stringent lending requirements and higher fees borrowers must pay to get the federally-insured loans with one goal and that is to prevent foreclosures in a fragile segment of the market.

Because FHA loans are low-down payment loans, they come with a requirement that the borrower buy mortgage insurance. Mortgages made for home purchases with smaller down payments have a higher risk for default and foreclosure.       When a borrower goes into foreclosure, the action triggers mortgage insurance benefits that pay the lender to cover the loss.

Before the housing market’s boom-bust cycle, FHA loans accounted for a fraction of all mortgages. Today they account for 30 to 50 percent of all purchase loans in some locations. More loans exposed to risk have drained FHA coffers and forced the federal agency to cut its losses.

Effective April 5, the FHA will raise mortgage insurance fees that borrowers must pay, cap the amount of cash that sellers can contribute for closing costs and require higher down payments for the borrowers with poor credit scores.

The new upfront mortgage premium will cost borrowers 2.25 percent of the loan amount, up from the current 1.75 percent — the second increase in the past two years. The good news is that the upfront premium can be rolled into the loan.

New borrowers must have a minimum FICO credit score of 580 to qualify for FHA’s 3.5 percent down payment loan, otherwise the borrower must put 10 percent down. Most lenders require a minimum credit score of about 620.

Sellers will only be able to contribute closing costs that amount to 3 percent of the sale price, half the current 6 percent. Experts say the higher maximum encouraged borrowers to mark up the price to compensate for their concession.

FHA’s low down payment loans are available for 15- and 30-year terms with fixed or adjustable rates, for those who qualify.

The required mortgage insurance, can’t be canceled during the first five years, but is automatically canceled after 15 years or if the loan-to-value ratio of the mortgage falls to 78 percent of the original debt. It is not automatic. It has to be requested and supported.

It is a heavy correction to the best  friend of American homebuyers.  There is no one to blame anymore. This is the new lending environment that will govern the industry until we all forget what caused it.

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista in Ventura and Santa Paula. She always brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.realestatemagic.com