It Will be a Happy Year, Just Not a New Year

I'm looking at today's report of November home sales, a 12-year low, and can't help but think that 2008, compared to 2007, will be a happy year. Notice I didn't say Happy NEW Year. Because I don't see anything good happening while 2008 would be considered new. In fact, it may be Happy Old Year if anything. Perhaps we start seeing inventory move better in the third quarter and by this time next year, it will be a Happy New Year 2009? Hang in there folks. Optimism lives!!!

A Tenant's Due Diligence in Today's Market

The latest twist in the housing market downturn, at least in my mind, revolves around landlord/tenant relations. It's common practice for the landlord to do a credit check on a prospective tenant. With many tenants being evicted as a matter of process, following a bank's foreclosure, a common occurence nowadays, it's a matter of time before some tenants begin asking for a landlord's credit report as a condition of putting his or her living situation in the landlord's hands, so to speak. I was watching Fox 40 news last night, and a story about tenants' and their dilemna was presented. A quote from a tenant really caught my attention; she said something to the effect that, is this what it has come to, us tenants have to get the landlord's credit report?

I don't really believe it will come to us, but the irony is not lost. Even tenants can't be too careful anymore.

The Fluffy Mortgage Bailout

Fluff. That's all it really is. I'm not talking, of course, about the federal bailout agreement. You know, the one that applies to the drop-in-the-bucket of distressed homeowners out there. I didn't expect much from it, so I guess I'm not surprised that it turned out to be politics as usual. The best spin I have for this development is that it will have some kind of psychological effect on the market. I think the smart money will be on a continued slump until some real adjustment is allowed to take place, most likely without any real help from the feds.

Housing Discrimination and Sex Offenders: A Conflict Remains Unsolved

In February of this year, California Assemblyman Greg Aghazarian (R) introduced a bill which addressed the conflict in the law as it relates to sex offenders and housing discrimination. AB 1197, as written, would recite the legislature's intent that the Unruh Act, and housing discrimination protection, would be reflective of the laws protecting children from sex offenders (such as Megan's Law).

The bill died in committee but I hope that Assemblyman Aghazarian brings it back again. If he does, the safety of our children dictates that his fellow legislators support the law.

The protection of children is most important. But the law as it stands puts landlords in a bind. If the Dept. of Justice (D.O.J.)identifies a sex offender, shouldn't a property owner be permitted to recognize this in deciding who rents his or her property and lives next to other tenants? The ACLU and some special interest groups have opposed this bill, of course. Even the disability advocates oppose the bill because some sex offenders are disabled. But where do the rights of property owners come in? And, where does the safety of California's children come in?

I'll keep you posted if I hear more. Until then, you can call Assemblyman Aghazarian or your legislator and get this issue resolved before the problem is magnified....

One Thing Doesn't Change: Construction Defect Lawsuits

Stop the presses! Buyers are suing homebuilders! The latest in a line of reasons why builders earn every dime they make is evident in an MSN article about disgruntled homebuyers.

The article makes it sound as if the rush to courtroomsm has something to do with the credit/mortgage crisis. It doesn't. Nothing has changed in one respect: unhappy homebuyers are still using the courts to get their builder to pay up. Sometimes the builder deserves this. Often, they don't, nor do the agents, title companies, and everyone else drawn into the mess. Nevertheless, there will always be lawsuits directed at construction defects, credit crisis or not.

Happy Thanksgiving!

Happy Thanksgiving to everyone. This is one of the few days of the year where you can sit back and reflect on the market and where it's going to go. Watch some football, eat some turkey and pumpkin pie, and let your thoughts clear up a little. There are some great transactions lying ahead; we need to make sure we can spot them clearly.

Home Equity Law to Watch Out For

Wrote about the Mortgage Foreclosure Consultants Act earlier. A similar law is also in effect in California which regulates the transfer of real estate by "equity purchasers". This is distinguished by law from loan transactions. Main issue is whether the seller was unfairly coerced into transferring his/her property to a lender. Key point is that a five-day cancellation period is in effect, and not much can happen during that period. There's also an attorneys fees provision if a suit is brought, as well as a provision for possible criminal penalties. Every person who helps distressed homeowners should know this act. It doesn't say you can't help someone out, or do it for a profit. You just have to do it in a manner which the law allows.

The Mortgage Foreclosure Consultants Act

I spoke at a real estate seminar yesterday. Intelligent group of people asked some great questions. Two of the main issues we discussed were short sales and foreclosures. Much of the discussion centered around two California acts which regulate the practice of assisting distressed owners. One of the acts is known as the Mortgage Foreclosure Consultants Act. I've linked to the language of that act for anyone who wants to read it. A couple of things of note: the act requires a three-day cancellation period; and the act restricts the lender's ability to take an "interest" in the title of the property. The act does have some teeth, meaning it has some penalty provisions for violating the act. See 2945.4 for a list of violations. It should be taken seriously by professionals who make a living helping homeowners.

Some Foreclosures Hit a Federal Snag

The N.Y.Times published this article about a federal court ruling which limits the ability of some "investors" to foreclose on properties. If a mortgage is in foreclosure, and that mortgage has been pooled with other mortgages and sold to a bank, the bank likely cannot prove ownership at the time of foreclosure, which is a requirement of enforcing a mortgage. Usually this is a non-issue to the homeowner since the homeowner doesn't have the resources to defend, and pick apart, the lender's case. But in Ohio, the court took a stand against this established practice, and from the comments I read in the article, was quite ticked at the arrogance of the banks.

You Can't "Short" the I.R.S.

A lender may have an incentive to approve a short-sale of unproductive (and expensive to maintain and sell) property, especially in today's market. Our good friend, the IRS, does not have such incentive. It's important that sellers of property take that into account when they decide to do a short sale. There are some huge benefits to the short sale, i.e. avoiding larger credit problems, but there is also the disadvantage of having to justify the numbers to the I.R.S. For the seller, find out if it is a recourse loan or a non-recourse loan. I.R.S. Publication 544 talks about the differences in potential gain where the loan is recourse. In that case, the fair market value of the property plays a significant role in determining gain, or loss.

The Missing Notary Stamp

I've seen many real estate fraud cases which include a notary who either was negligent or just plain fraudulent. This case in L.A. involving a short sale fraud is the first time I have heard of fraud committed by way of a stolen notary stamp. I agree with the agents who wrote this story, how in the world a scammer thinks he or she can make money by recording fraudulent deeds in a foreclosure context, is beyond me. The only way someone could steal a stamp, record a deed (or a deed of trust, depending on their motive) and make money off fully-leveraged property, would be to also scam the lenders who have valid deeds of trust. Nevertheless, I believe as long as the title company properly searches title records, as most do, there won't be much damage. The new buyer will need to go to a court to have the fake deed reversed.

Notices, Notices, Notices!

Notices are everywhere. I'm talking about Notices of Trustee Sale. Have you looked at your local paper's legals? Sometimes I wonder if there is enough ink to publish all of these trustee sale notices. It's true that more and more lenders have become resigned, or should I say, open, to the option of a short sale. My guess is that either there are more defaults than even I imagined before, or many of these homeowners are not being aggressive enough with their lender to workout a solution. This wiki that I've linked to above describes a style of approach that many homeowners should consider when faced with a tough payment situation.

Another Lender Writes This One Off

* Taking the art of blogging seriously, I attended a blog trade show this weekend in Las Vegas. Called Blogworld, this show had a few seminars and some interesting exhibitors. Look for a much-improved blogsite in the next couple of weeks!

* The news today was that Bank of America is taking a $3 billion hit on its books due to bad debt. They're doing what most lenders are doing, large or small. My thought is this needs to be done so that the books can get cleaned up. They are calling their losses "manageable". That simply means that this won't take them down. But we assumed that.

A Visit to the County Recorder's Office

I must admit I've made a few trips to the county Recorder's office where I was just lost trying to figure out how to research property information. Every single time, I asked for help, and every single time my questions were answered. Not only that, unless the staff is extremely busy, they will help you learn how to work the machines like a pro.

The Recorder's office is easy to use, and a quick way to get copies of certified deeds or other recorded information. Looking at getting preliminary information about some property you're interested in buying? Ten minutes in front of a computer, and you'll probably find out more than you want to know. (That can be a good thing!).

Many people end up signing up with these companies that offer to provide certified deeds for a big fee, when they really don't have to. I wouldn't call this a scam in the true sense of the word, but an unnecessary service that is thrown at consumers en masse, hoping that a few consumers will unnecessarily give in.

The Value of Your Home, in Perspective

I enjoy listening to a great radio show in the mornings on ESPN Radio. The host is Colin Cowherd (did I spell that right?). In addition to his great style of getting his point across, he also throws out a lot of great thoughts to ponder. Many have little to do with sports in fact.

Today, he mentioned a great quote: Buy for memories, lease for fun. He was talking about spending your disposable income. Better to spend it on something that you'll remember when you're 80, such as a trip to Tahoe (his example) than on a jet ski or some material possession. I fully agree with that premise. Maybe that's why I don't have that 22' boat I've been eyeing!

When it comes to real estate, there is some truth there, too. Find a home that you build great memories with, and put your disposable income in that direction. There's nothing wrong with filling the garage with a new Harley, which I'm sure is a great escape toy. But once you find a place you can enjoy coming home to or spending your free time on the weekends at, the fluctuating value of that property just doesn't matter too much.

The Husick Couple Selling Strategy

I've seen some great real estate sales techniques, but this one ranks up there with the best. A couple in Pennsylvania has offered to sell their house with a special covenant: the money will be returned to them when the couple dies. What's more, there's another option for the buyer--take care of the couple and you get a bonus. A home in Arizona.


For us probate minds, one must wonder: what if the buyer elects to rescind for some reason, the sellers fight this election, and the sellers both die before the court rules on the rescission?

A Transfer Disclosure Statement Example

I wrote about the TDS, or transfer disclosure statement, yesterday, and I'd like to provide an example, just one example of many in my mind, of why it's important to follow-through on these.

I was involved in a case a few years ago where the seller didn't properly list the items in the kitchen which weren't properly. In the lawsuit against the seller, the buyers added this failure to disclose to their laundry list of fraud causes of action.

The case primarily centered on fraud in non-disclosure of inadequate support for the house (an older house) and pest problems. When that part of the case essentially fell apart a few months later, the buyers were faced with whether to proceed or not. Lots of money in attorneys fees were at stake. Their case didn't support this risk. BUT, they also had this failure to disclose in the kitchen, which, if they took to trial and won, they may get their attorneys fees, or some of them, back. They could take a chance on the big one, and if they lose, they can still fall back on the small ones. The buyers ended up settling with my clients (the sellers) on the eve of trial, for very little money. But it was touch and go for awhile there, and their attorney kept harping on these small items.

If I remember correctly, the dishwasher didn't work properly, the stove didn't work properly, and there were some exposed wires in the kitchen. Items that sometimes are overlooked in the TDS process.

Transfer Disclosure Statements: Document Your Efforts

Your client's house is in escrow and the clock is ticking on the close. The TDS i still in need of attention. The seller is not cooperating, for one reason or another.

How do you represent a seller that won't focus on the TDS? Make documented efforts to schedule a thorough walk-through. Make sure your client knows that you've placed a great importance on disclosure. Make sure your client knows that you want to disclose anything and everything that might be an issue to a reasonable seller.

Remember, if there is a problem with non-disclosure, the agent/broker is usually brought into the dispute. That's where a solid collection of notices and memos may protect a Realtor who has done his or her job.

Should the Housing Industry Solve the Housing Mess?

I respect Jim Jubak and enjoy reading his columns. I also respect any writer who, with reason, thinks outside the box. Jubak's latest column echoes what many experts and leaders in the real estate and finance industry have been saying: let's have the lenders, brokers, and builders fix the housing mess. To me, that makes little sense. First, the fact that an industry finds a way for a consumer to buy a product easier than he or she would otherwise, is not new, and goes on everyday. Look at car dealers!

Second, the regulatory oversight of builders and of lenders makes it realistically impossible to craft and implement a solution that benefits troubled consumers, and thereby fixes this "mess". This reasoning actually flies in the face of what many others believe, that we simply need more regulation and less discretion for the lenders, brokers, and builders.

A refreshing approach: why not treat housing like other products and commodities, and accept that there will be highs and lows, and inventory swings in both directions? Do we really need to make an industry (in this case, housing) pay extra for making its product more accessible to the consumers?

Memories of a Malibu Fire

The Malibu fire brings back some memories. It was October 1985. I was a sophomore at Pepperdine, living right near the convergence of Malibu Canyon and the coast. I've never seen a fire tear through the landscape so quick. This brutal wilderness which sits behind the mountain range overlooking the beaches, has been the site of many fierce firestorms in the past, not just this one or the one I experienced. (BTW, the school was closed for four days!).

Who owns this land? I don't know. Most of it will never be developed so the owners aren't too worried. It's the homes, expensive homes, next to the wilderness, on top of the hills or looking over the water from the side of the hills, that are the real victims of these fires. All you can do as a homeowner in these areas is get lots of good insurance and keep lobbying for more controlled clearing of brush and trees in your area.

Another Disclosure Example

Does a seller of property have to list defects that are subjective in nature? Usually, they should, since the seller often must assume that the buyer is an arbitrary person. The subject of my last post, the haunted house, got me thinking. What if, for example, your neighbors around the corner have loud parties until late in the night? May not bug you. You've been there, done that. But if you think it is something that would decrease the value of your property in a material way, you may want to let the other side know. If they have reason to know of this already, perhaps they have heard about these neighbors or expect that type of behavior in this particular neighborhood, you probably do not have to disclose it. I've been involved in a matter with this "factor" before and in our case, I can recall that it was difficult to show that the loud noise affected the value. This is especially the case if the buyers start throwing their own late-nighters!

Boo! Your Listing is Haunted!

I expected the article to say that ghosts in the house would decrease the value of the house, possibly cause the broker to disclose this "defect". What I didn't expect was that, in some cases, haunted houses are a good thing? Good or bad, folks, this is something you need to disclose. Question is, when does this "factor", good or bad, cross the line from fairy tale to real. Happy Halloween!

Saving Your Home From Foreclosure

Contrary to what some homeowners think, most lenders do not mind if you can save your home from foreclosure. Why? Because usually that means that they're getting paid. But what can you do to save the property? There are many ways to do it, and some are actually legit. Not just some fly-by-night gimmick from some real estate scam artist.

If there is fraud in the making of your loan, depending on the type of fraud you may be able to convince a judge that the sale should be stopped. If the loan and its making was fair but you simply aren't able to come up with the funds on time, there are options. One is a right of redemption. This is a rather complicated legal right. But it essentially is a right the homeowner has to pay off the loan after the sale.

The period of time in which a homeowner has this right of redemption depends on whether the sale proceeds covered the loan amount. If it did, the period may be three months. If the sale proceeds were not sufficient to pay the loan, the period may be a year. Check with your attorney on this.

Right of redemption may allow a homeowner to find an investor (an honest investor!) to work with him or her to put the property back in his or her name.

More Fraud Examples

My last post linked to a guy who put deals together in Indiana when he did not have a license. The post mentioned having a license as one factor a buyer or investor looks for when considering a deal. Let me clarify one thing though. There are many people in California who managed to get a license, both a salesperson license and a broker license, and who are just as shady as the guy in Indiana. I've represented victims in some of these cases myself and can tell you that a valid license is a positive, but it is by no means a badge to rely upon. I'm hopeful that the DRE can strengthen its regs a little more so that many of these folks can be eliminated from the industry, not just the profession. But do this consumer check, too.

Licenses are there for a Reason

The slump in the real estate market has weeded out some of the fly-by-nighters, but courts all over the country are still cleaning up the messes left behind by the last flight of greedy dealers. It's happening in your town, too, I'm sure. You would probably have to go down to the courthouse to hear about much of it, but I promise you the shady deals are being exposed. Only problem it's usually the victims who expose them, at the expense of hiring a lawyer to remedy the fraud.

The best advice for anyone dealing with real estate, is the same as for anyone dealing with any other profession that the State of California had decided it's important to regulate. Check their license. Check the quality of their past work. And, don't do business with them if anything doesn't seem right. Just ask these folks in the Indiana deal linked above, or many other deals that went south because of a shady investor or dealer.

Lis Pendens: To Expunge or Not to Expunge

The lis pendens is in some respects, a provisional remedy, that is, a remedy used by a party in litigation prior to a trial or resolution of the whole case. Some courts consider it in another respect, a notice. I won't say "just a notice", because it's effect is greater than just notifying a would-be buyer or transferee that the property is the subject of litigation. In most cases, it simply brings to a halt any effort made by a seller/defendant to transfer or sell the property, since no transferee would voluntarily assume a problem like this.

Does that mean it's a weapon? No, just a tool. And a tool only to be used when there is a sincere concern that possession or title to the property could be lost forever. And a sincere belief (because in most cases this will have to be proven to a judge in a motion to expunge the lis pendens) that the plaintiff will prevail at trial on their action, and the action involves title to or possession of the property.

It's the latter point, the action must involve title to or possession of real property, that is the subject of most disputes in court over whether a lis pendens was properly filed. Sure, the case itself must have merits, but it must specifically address title or possession.

For example, a suit over money owed from A to B should not involve a lis pendens over A's property unless the money involved a sale from B to A of real estate and A can show that he/she was defrauded out of his/her property, or something of that nature. Court's understandably so, are reluctant to uphold a lis pendens unless there is a real property claim and the claim has merits.

So if you're property is tied up by a lis pendens, or you're looking at filing and recording a lis pendens in conjunction with a complaint, look carefully at when and why this is allowed.

A Delicious Break from Court

I'm having lunch in downtown San Jose before a court hearing yesterday (at a wonderful cafe named Cafe Rosalena) and I leave with a loaf of cinnamon bread from the bakery next door. Turns out that I took home a very popular, amazing cinnamon bread. Since I don't live in San Jose, or anywhere in the bay area for that matter, I would be out of luck if I wanted more of this delicious bread, at least until my next trip to the west. But I'm in luck, and so is anyone else who discovers this bread. Not only is it available at many local stores that have discovered it, but you can order it online. It's called Greenlee's Bakery. It's on The Alameda, about 1/2 mile west of HP Pavilion.

What's this have to do with real estate? Well, my hearing was on a motion to expunge a lis pendens. That'll have to do for now. More on the realities of filing a lis pendens, and having a lis pendens removed, in later posts.

Becoming A Good Faith Purchaser

California law goes out of its way at times to protect a good faith buyer of real estate. I'm not referring to someone who buys property really intending to pay a fair price, but someone who is buying the property without knowledge that someone else has an interest in the property. The buyer who does his or her homework, and is reasonably comfortable with the status of the property after a fair amount of research, will be considered a good faith purchaser. This means that he or she has good title regardless of someone else's claim to the property. Of course, the buyer has to pay a fair price for the property, too.

Oh, yes, there is one small exception to the protection afforded good faith purchasers. Isn't that the way it is with the law??!!

I'll get to that in a later post.

A.B.C. Approval of a Business Sale in California

The purchase and sale of a business is already complicated enough without the need to transfer a liquor license. When the sale involves a restauant or some type of nightclub, the broker and the escrow company need to make sure their procedure is airtight, and that they strictly follow this procedure.

In California, this includes the publication of a bulk sale notice and the requirements to have the transfer approved by the Department of Alcoholic Beverage Control, or A.B.C. The delay in getting A.B.C. approval can occur if there is some concern with the buyer's character, or if the seller has taxes that are not paid, or if the local agency has an issue with the transfer. I've seen many sellers and buyers try to circumvent the A.B.C. process so that they can get the escrow done. This is the last thing that should occur, even for a day. Brokers, escrow agents, stick to your timelines!

Disclosure of Bad Neighbors

A seller's duty to disclose, or for that matter, a broker's duty to disclose, continues to grow into a world of unknowns. Does it also include a duty to notify that a neighbor is unpleasant? What if the neighbor routinely cleans his firearms in the front yard? As a broker, you don't want to kill the deal, especially in today's market where the deals are less frequent, but how far does this go? The legal answer to this lies somewhere in the notion that if the "defect" materially affects the value of the property, it should be disclosed. That's a good reason why brokers earn their paycheck. They are left to answer this one every time they show a property. Here's a link to a video involving a "defect"! http://blog.sellsiusrealestate.com/unzillowable/rotten-neighbors-and-the-duty-to-disclose-2/2007/10/08/

Mold in my Theater: A Failure to Disclose of the Governor's Kind

California's governor and first lady have their own real estate disclosure case to deal with. Seems they sold a home in Pacific Palisades a couple of years ago, and the buyers, a personal injury attorney and a pro golfer, complained of a failure to disclose, including the common defect, mold in the movie theater. I'm sure all real estate agents are trained to watch for this one!

You can read about it hear in the WSJ site: http://blogs.wsj.com/law/2006/09/29/pricey-real-estate-the-law/

The Going Concern of Brokering a Business Sale

The sale of a business is often handled by real estate brokers and agents. Many of the agreements are prepared on standard DRE (Dept. of Real Estate) forms. Even where the sale is handled through an escrow, the broker/agent needs to be extra careful.

Unlike some, or most land deals, the sale of a going concern is just that, a going concern. There are a number of issues that need to be addressed. I'll deal with many of these in future posts, but one is the disclosure of financial information. If the broker/agent acts in any regard in transferring the information from the seller to the buyer, that broker/agent may be considered to have represented that the financial information is valid and true. What happens when the buyer finds out otherwise, or believes otherwise, after paying lots of money for the business? The buyer goes after the seller, and the broker/agent. The broker/agent needs to make it crystal clear that it is not verifying any of the information. Better yet, the broker/agent should have no part in the physical transfer of this information.

More thoughts on broker/agent liability in business sales coming up.

Auctions in the New World of Home Sales

Going once, going twice, sold..... in a different way than you could have imagined.



Anderson Homes is just one of many builders who have utilized the auction procedure for selling homes. It's news today in the Modesto Bee, as some neighbors weren't thrilled about this. Here's the article: http://www.modbee.com/local/story/85257.html . What's most interesting to me is that, unlike with a traditional sale, buyers can buy more than one, and buyers can purchase for investment purposes. That is, buyers don't have to reside in the home.



This is interesting because the lender normally has something to say about purchasing for investment purposes, and lenders these days are trying to figure out the new world order for home loans. Do they care about these new policies of homebuilders? I'd be interested to hear about this from mortgage brokers and lenders.



This is also interesting because it really changes the dynamics of a neighborhood. It's true that right now many neighborhoods are ghost towns. When the market turns around, and it will, many of these neighborhoods will have a much different look and feel from what some developers envisioned when they designed them. All due to these changes in the market.

The Foreclosure State of Mind

Foreclosures are happening at an unbelievable pace. It seems like more and more clients and potential clients are looking at letting property go, whether the property consists of their home or some land which they acquired for development purposes. The interesting that I have noticed of late, the last few days or so, is that many landowners are actually resigned to this fact of life. Last year, or even this summer, a pending sale would bring with it more anxiety.

I think this is part of the natural order of things. It's a sign that we might be hitting bottom in this market when the attitude of owners and sellers changes from frustration to resignation. Let's hope that resignation turns to eternal hope soon.

Happiness and Lawyers Go Together

I love reading (or hearing) about people who practice law and then decide they're going to do something else they love. I love my practice and wouldn't give up the daily excitement that comes with real estate and probate. And helping people with their estate planning is something everyone should have the chance to experience. It's important to my clients, so it's important to me.

But if you get a chance to check out this person's blog, do so. This attorney apparently has taken up writing, and has a great concept: happiness. www.happiness-project.com/

Careful when transferring by Will to a Caregiver

A gift to a caregiver could run into trouble if the person is deemed a disqualified person under California Probate Code Section 21350. If the testator is a dependent adult and he or she gives the assets to a care custodian, then it is important that the attorney drafting the will or other instrument have an independent review of the proposed transfer. The purpose is to protect against elder abuse. This law applies to persons making donative transfers who are 64 or over. In a probate setting, this could become a contested gift depending on the size of the asset and how dependent the testator is, or better yet, how close the caregiver and the testator have become. BTW, there are exceptions. For example, if the asset is less than $3000, or there is a blood relation of a certain degree between the testator and the caregiver, the donative transfer does not fall under 21350.

The "New" Option Agreement

Sellers of raw land are still out there; there just aren't as many buyers right now. Enter the more buyer-friendly option agreement.

The option agreement, a popular mechanism for buyers and developers in the past, normally contains a feasibility (or due diligence) period during which a buyer can consider whether the land could be developed, and at what cost. Normally, the deposit a buyer puts up for the purchase, becomes non-refundable at the end of the feasibility period unless the buyer disapproves of the feasibility of the land for the proposed project.

In this slower and slower housing market, many buyers are being offered rather generous terms in their option agreements. One area where they have more flexibility is the period of feasibility and the amount of the deposit. Given the relative risk that many developers are taking nowadays when paying option money for land, the new option agreement is one way to keep the land transactions from stopping altogether, and a great way to allow builders to move ahead with building attractive projects in the future.

Why Does 6132 Exclude Real Property Devises

I wrote earlier about Probate Code Section 6132, which recently took effect. Section 6132 permits a will to refer to a writing, even a later writing, in the devise of personal property. The intent of this law is to make sure a testator's intent is followed when the will is written this way. So why just personal property, and not real property?



The transfer of real property, whether by devise, bequest, or other means, is subject to the statute of frauds and is also held to a higher level of scrutiny than other assets. For example, the document has to be in writing and has to be certain.



It can't be "I deed to Joe the back 40 acres, with the house and well on it." If it were that simple (or complicated, depending on how you look at it), there would be lots of 'splaining to do. So the California legislature, likewise, has not allowed a "later writing" exception to the drafting of wills to include real property. It would be much too confusing if the writing was not clear. For example, if the later writing turned out to be an option to purchase, which left many vague details as to payment terms, exercise of the option or whatever, there would be great uncertainty as to how the real estate was to be transferred, or even to whom. This example is just one of many that could complicate an estate administration. The legislature doesn't provide that a later writing is sufficient for the transfer of real estate, only for personal property.

Personal Property Can Be Devised by a later Writing

Probate Code Section 6132 took effect in January of 2007. This section allows a will to refer to a writing that is not yet in existence in the course of devising personal property from the testator to another. That's right. The writing doesn't even have to exist yet. I find that a little odd because if the writing never materializes or does so in an ambiguous manner, the entire devise will be in doubt. The purpose of 6132, however, is to allow the true intent of a testator to be recognized in some situations. Such as when the testator has not decided what to do with certain personal property, such as furniture, or jewelry, or collections.

But 6132 does not apply to all situations. Most importantly, Section 6132 does not apply to real property devises. I'll get into the reasons, valid reasons, next.

To Trust in Another: The Constructive Trust

The constructive trust. To most it's just another legal term that confuses the average person. Lawyer speak. But I think it's important for anyone in the real estate or title industry to understand. A constructive trust is essentially a term to refer to the manner in which one individual (the trustee) holds legal title for another individual (or individuals). This arrangement often comes up when one person takes legal title for another because, for example, the beneficiary could not qualify for a loan to buy the property. (There are many other reasons why one person would take title for another, such as in a partnership to develop or manage real property.) Even though the title holder, is well, on title, the beneficial owner is the true owner, and the title holder is merely a constructive trustee. If the "trustee" disagrees that there is such an arrangement, a complaint is often filed, and there are many factors that a court will look at in deciding whether there is a constructive trust. (The court will have to determine what the intent of the parties was at the time the title was put in the "trustee's" name.) One factor is who made the payments for the mortgage or perhaps property taxes. Another factor is why the title was placed in the defendant's name.

A similar type of trust is a resulting trust. I'll post about this one later. Both types of trusts are important to understand in today's real estate environment.

Another Mortgage Fraud Bust

Huge mortgage fraud indictments handed out today in Sacramento. I'm personally not familiar with this case or any of these named defendants, but the general nature of the actions these men took is quite common in today's real estate environment. What amazes me is how these people thought they would get away with it. Two words: paper trail.

I've always believed, and said, that real estate, unlike many other assets, makes people greedy. Greedy to the point that they often turn on family members and trusted friends all in the name of real estate. And they often ignore the obvious, that sooner or later their greed will catch up to them in the form of missed loan payments, forged deeds, and other fraudulent tactics.

Scams, Scams, Scams

Looks like there is one investigation after another into fraudulently obtained loans. Elk Grove is seeing a big one now. Modesto has seen a few. The truth is, there are many more of these "scams" that haven't even come out yet. Our firm represents a few of the defrauded homeowners.

Many of these buyers were lured into rescue loans by artists, who tricked them into literally signing their homes over, or signing deeds of trusts, in order to avoid foreclosure. The homeowner thinks he or she is simply making lease payments for awhile, and the money would go toward the loan. Meanwhile, the rescue artists/loan officers tap out the equity in the homes and leave the homeowner (sometimes a renter) with a growing interest rate and mortgage burden.

Oh, the lease payments. Do you really think the "landlord" paid this money toward a mortgage?

More Family Solutions

I'll use the term family here to include "related-by-marriage", since this is often the case where two (or more) people have different ideas about what to do with property in their name. Usually, an in-law would like the property sold, while another person, with more of an emotional connection to the property, would like to keep it. One solution here would be an option agreement whereby one family member would have a certain amount of time to buy the land. If he or she fails to do so, then everyone could partition it. If there are two or more people with an interest in the land, the option could be given to one person first, or a bidding procedure could be implemented. Probate courts often see a similar type of bidding procedure.

Don't look at these ideas as the only solutions. There are many more. But as I posted earlier, at least the options are in the family's control before a probate is opened.

Family Dispute Solutions

As I spoke of yesterday, there are many solutions to a family squabble over who should, or will, hold title to real estate. In fact, each family has different characteristics which dictate what's best for everyone. If there is a concern about one family member not having good enough credit to buy property that he or she will be entitled to, and other family member's can and are willing to hold title in their name, some attorneys would recommend that the title can be held as a "constructive trustee", that is, someone who holds legal title for the benefit of another. Is this a good solution? Sometimes. Depends on the persons involved. Make sure it's in writing. Make sure there is language which covers contingencies. For example, what if the beneficial owner doesn't want the property later or gets in trouble and cannot take over the title. Who gets it then? And how? And is the beneficial compensated for his or her forebearance? There are many questions to answer, but if the language in a trust agreement is clear to everyone, and is complete, a potentially ugly arrangement can be addressed before it becomes a problem. More scenarios and solutions later.

Family disputes over the title to property often become an issue only when it has to,--when someone passes away and a title issue needs to be resolved. At this point the dispute can get ugly and expensive for everyone. But like most matters, the solution to the dispute usually can be reached if the problem is addressed BEFORE a court is involved.

For example, say a mother or father, or both, are on title with a child, but not all the children. The other kids are, well, o.k. with this, because they're supposed to receive money from the family business or from some other source.

Problem is, child #1 isn't sure that this arrangement is what everyone else thinks it is, and the written agreement (usually there isn't one) doesn't spell out the entire arrangement very well. If and when something happens to the parent(s), the children have to deal with this issue. An issue they knew about when their folks were around and they could have resolved this around the table.

I'll post more about the possible solutions later, but needless to say, it's much easier to pull the grant deed out and get the family together now. Even if different attorneys are needed to negotiate the whole thing.

The Market Today

In talking to many different professionals in the real estate business each day, I' m starting to guage which type of professional will begin to show optimism about the housing market first. Will it be mortgage brokers? Agents? Title companies? Attorneys? So far I have heard lots of skepticism from across the board. I'll be watching for trends.

The, uh, beauty of owning a business

It's interesting how owning a business can be an exciting thing. So can selling it. Ask any escrow or title company which handles business escrows, and they would tell you how the world of business buying and selling is growing at a strong pace, despite the slowdown in real estate in general. And those are only the businesses which actually see an escrow, or what we in California describe as a bulk sale.

Introduction

Hello, my name is Nick Yonano. I'm a partner at a firm in Turlock, California. Been practicing since 1991, with a short hiatus due to an injury from a car wreck (drunk driver hit me). My partner in the firm is Mike Warda. Mike specializes in land use, entitlements, and zoning. I do little of that. I spend much of my time in the world of real estate, mainly with legal issues involving title disputes. Many other problems people have as well when it comes to land. So I'm not only interested in what other professionals have to say, but would like to present my views as well.