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Asset Erosion Due to Probate

6/3/2012

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PictureEast Bay Probate Sales
A probate sale erodes the family assets in two ways:
  1. Less buyers. Buyers usually don't understand the probate process so they get scared. They are afraid of losing their earnest money deposit if they back out. A buyer usually has to put 10% earnest money up front. (Some people are afraid to go to court.)
  2. Legal fees. The lawyer handling the estate has to be paid. The courts have to be paid. The probate appraiser has to be paid too.
These two losses can potentially cost the estate 20% of the the asset.

Something else:
  1. Loss of time. A probate sale takes longer to sell than a regular sale, specially if the offer is financed as the buyer has to remove all contingencies before the seller can request a court date.
  2. Break Up Loss. Sometimes the best thing to do is to keep the assets whole as they are worth more together than separately.
For these reasons, I'm suggesting to homeowners to prepare a will and a living trust if possible.


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No Probate Sales Over Bidders

11/5/2011

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Superior Court County of Alameda, Berkeley
There were no probate sales over bidders at two court confirmations Thursday, 11/3/11 at the Berkeley Superior Court of Alameda, 2120 Martin Luther King Jr. Way. One thing I tell buyers is that someone can show up at the court and over bid, one of the problems with probate court confirmation sales. But nobody showed up.

I had a small property, listed at $75,000. The Attorney was Richard Karlsson, Interim County Counsel. One of his assistants took care of the matter. It was confirmed by the the Hon. William McKinstry at $68,500, within the 90% minimum requirement.

The overbid formula was a) Original bid $68,500 + b) 10% first $10,000 of original bid $1,000 + c) 5% of (original bid - $10,000) $2,925,00 = a+b+c= $72,425.

The good news for me was that I also had the buyer. Both seller and buyer were happy with the sale.

Both sales were confirmed without muss or fuss. Neither the representatives for the seller nor the buyers showed up. I was there just in case something came up. The attorney got up and announced the sale of real property and asked if anyone wanted to bid. Silent reply. CONFIRMED.

The responsibility to make sure deal closed transferred to the buyer.

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The Stats Tell The Story

7/14/2011

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A buyer I’m working with was asking me if the market was still declining or not. Here’s my take: sellers can’t help themselves and prefer to start high; the house is not in a good area; the house needs a lot of work; and the house is dirty. Guess what happens. The market rejects it, month after month, and the seller is then forced to lower the price. The market then interprets that as: prices are going down.

If sellers would place a realistic price on the house, it would sell and the market would interpret that as: price stabilization. What are the odds of sellers doing that? None. Sellers, whether they be regular homeowners, agencies, organizations, or realtors, do what is humanly natural: they want to start high. (Greed, righteousness, fear, and distrust all put together pop into their minds.) And there is nothing that can convince them to do otherwise. When you sell your house I bet you, you will want to start high, right? A few sellers are realistic and they sell their houses right away AT fair market value.

All of that to get to this--is it a good time to buy? Yes. Look at the stats provided by Fannie Mae:

  1. 69% of renters say owning a home makes more sense than renting
  2. 61% of renters think home ownership is a safe investment
  3. 72% of renters feel home ownership is good for the economy
  4. 38% of renters indicate they are likely to buy a house in the next three years
  5. 16% of current homeowners are likely to buy a house in the next three years

Despite all the foreclosure problems we’ve been having, we’re seeing good sales activity because of low prices and interest rates. In many metro areas, it’s cheaper to own than to rent.

Whether you’re buying to live or invest, it’s a good time to buy.


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No Home Equity Loans for Many Homeowners

7/6/2011

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PictureHome Equity Loan Denied
In the paper today tales of home equity loans…Do you want a home equity line of credit (HELOC)? Odds are the bank is going to reject you. Banks have tightened on home equity loans seeing that many homeowners either have negative equity or not enough equity.

Yes. All those short sales and foreclosures are dragging values down. Your home equity is now worth half of what it once was, right? Sigh. (Some houses have dropped much more!!)

If you live in Nevada, Arizona, Florida, Michigan or California, there’s a one in three chance (1/3) that you’re underwater. Look around you. Every third person you see, their house is underwater or close. And those who are not homeowners, chances are one in three (1/3), they have too much debt. How about this? The house is under water and you owe a bunch. That’s the double whammy. Therefore, 33% to 66% of people in those states don’t qualify for a home equity loan.

What does it takes to get a home equity loan? You have to have equity. How much? A loan agent from a major bank said they want to see 20% equity remaining. If your house is worth $500,000, your borrowing ceiling is $400,000. You owe $250,000 let’s say, then the bank is willing to lend you up to $150,000. (Of course, your credit, FICO score, has to be very good, and they’ll check your employment, earnings, etc.)

Nevertheless, it’s hard to know what banks want…THEY don’t know what they want. It’s so risky these days. Bank’s say when nobody knows what’s happening with housing prices and people just walking away from their houses. How do they risk price these loans?

As a home equity line holder, my wife and I watch our bill closely and treat it carefully. We’re concerned that if we’re ever late they may increase the interest rate, cut us back or tell us we have to pay it off. Luckily we have equity, but we just don’t want to hassle with the lender.

Finally, if you want a loan, you need lots of equity, good credit, a job, low debt, and a good reason…like fixing the house, college education. Vacations won’t cut it.


Sale Confirmations Are Boring Sometimes

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Probate Sale - What's the main difference from other sales?

5/22/2011

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A buyer asked me what was the main difference about a probate sale (with court confirmation) than other sales.

These are the main differences
  1. 10% down (unless otherwise stated)
  2. Offer must be 90% of the appraised value
  3. No contingencies. As-Is.
  4. No backing out.
  5. More complicated. More players, that is, lawyers and a court.
  6. Can be out bid in court

For these reasons I don't recommend probate sales with court confirmation to first time home buyers. There's a chance that the bank denies the loan late in the deal and their earnest money deposit may be lost, or someone out bids them in court.

I explained that this sale is better for savvy buyers with cash.

I did a Sunday Open House at 2501 E 28th St. in Oakland, CA 94601. It was a nice house. A 970 sq. ft., starter home, which would be perfect for a couple and child. It was a 3 bed, 1 bath, with a fireplace, front yard, and detached garage. See attached photo. Listed at $199,500.

There are deals in probate sales. Want to invest in this type of property? Let me know. Have a house to sell? I can help too.

This is your new blog post. Click here and start typing, or drag in elements from the top bar.
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May Probate Status Report for the East Bay CA

5/3/2011

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This month, in looking at the probates sales in the entire east bay, there were 47 active residential sales (detached homes, condos, etc.). For residential income, there were four (4) active properties on the market (duplex, triplex, etc.). These probates sales include court confirmation and no-court confirmation types.

An example of a probate residential income sale for investors: 685 33rd St. Oakland, CA for $199,000. This is classic 1910 Victorian fourplex. The property has two units downstairs and two units upstairs. All units are one bedroom, one bath. There is a 5th bonus, unfinished unit in the back. Total living space 2,205 sq. ft., and 3,600 sq. ft. Note: renovations and additions may be unwarranted. Fourplex will be delivered vacant. As-Is. Pest report available. No death on the property. Fourplex has tremendous potential and can generate positive cash flow.

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Do Probate Sales Need 10% Continued

3/6/2011

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If the probate sale is with court confirmation it may or may not need the 10% deposit with the offer. Again, ask the listing agent. If it's not court confirmation (independent administrator) then it's a regular sale, no 10% deposit needed.

Had to clear that up.
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Do Probate Sales Need 10% down?

3/6/2011

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We are looking at a couple properties listed as probate sales. We were told by our real estate agent that we should come up with 10% to purchase a probate. I pressed for what this meant but the agent was not clear. Question: "Do I NEED to come down with 10%?"

Answer: Yes and No. Yes, some institutions and situations do require a 10% deposit with the offer. On the other hand, there are some probate sales that don't, and will go with any amount as in a regular sale. I have been involved in both types. So how do you know if there is a 10% requirement? You ask the listing agent.

Hope this helps. Good luck.


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Sale Confirmations Are Boring Sometimes

2/28/2011

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Finally the court date came up. I had told the buying agent there had been no phone calls or emails regarding bidding. Everything was quiet and it should be a non-eventful, boring sale. But have your guys there just in case someone shows up unannounced. It happens. I reassured her that any new bidder had to bring cash and bid 5% more...not likely.

The judge asked if there was anyone interested in bidding on the house. Nobody. Sale approved. Next case. That took maybe three minutes. The buyers were surprised with the speed of things.

We waited almost three months for three minutes of the court's time.

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How Long Does It Take To Go To Court?

2/12/2011

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PictureProbate conservatorship
I've had this probate conservatorhip sale in Berkeley CA going for the past six months. Finally, there was an acceptable offer and then it was time to petition the court for a confirmation date.

The buying agent and well, me, wanted to know how long it would take to line up the judge. It took three weeks to hear the news, and the news was that it would be another two months to go to court. Ouch! That's a long time to wait.

If you get into a probate sale with court confirmation, be ready to wait for a while. But the good new is that when the offer is confirmed, the buyer can close right away, specially if it's an all-cash offer.

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    Ernest is an experienced agent with Better Homes & Gardens in Oakland CA. This is his specialized website for probates.

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