HOMESTEAD, PROBATE, FOREIGN INVESTORS, and FOR SALE BY OWNER

2. Chapter Outline Homestead Probate: Objectives and process Probate: Procedures Working with Foreign Investors Working with the For Sale By Owner (FSBO) Transactions

3. Explain the requirements for a valid homestead. Differentiate between the various steps involved in a probate. Distinguish between the process and the procedures required by the probate court. Explain the differences for an escrow involving a foreign investor. Outline the key points when working a For Sale By Owner (FSBO) transaction. Chapter 13

4. Homestead 1. Federal Homestead Act of 1862 acquiring title to property declaration of homestead filed with county recorder 2. California Homestead Law protection a Homeowner�s equity Dwelling House Exemption important on a judgment lien sale and on a refinance loan

5. Homestead A trust deed holder has priority over the homestead. The lender may require that the homestead be removed from title prior to the recordation of the new lien.

6. Abandonment of Homestead Used to terminate a recorded homestead Homestead automatically terminated by: Sale of the property Filing a new homestead on another property Not terminated when a spouse dies

7. Probate: Objectives and process The majority of probate escrows involve: v���� Professional conservator v���� Probate attorney v���� Real estate licensee with attorney

8. Probate Every court-ordered transfer requires an escrow, such as a probate sale. Probate is when a person dies and the estate of the deceased must be disbursed. The bills of the deceased must be paid Government taxes made current and Ownership to real and personal property transferred.

9. Probate includes the following items: ؠ Proving to the court that the will is valid ؠ Identifying and making an inventory of the property ؠ Having all property appraised ؠ Paying all debts, bills, obligations and taxes ؠ Obtaining court approval to distribute items as direct in the will A will becomes a matter of public record and must be submitted to a court for approval for handling the matters of the deceased.

10. How to settle an estate Search for decedent�s information Obtain legal documents: Will Certified copy of Death Certificate Establish executor, heirs, beneficiaries Obtain asset valuation as of date of death Determine how title is held File federal estate tax return Transfer property Court approval

11. Property exempt from probate in California includes: � v���� Property held as a joint tenant v� Property held in a living trust v���� Property left to a surviving spouse v���� Property passed where the total estate is under $600,000 per person

12. Documents created outside of escrow to establish a contractual relationship between the parties or their representatives: q������ Agency Relations Disclosure q������ Agent�s Inspection Disclosure (California Civil Code �2079 and �1102) q������ Probate Listing Agreement (Exclusive authorization and right to sell probate) q������ Probate purchase agreement and receipt for deposit q������ Probate advisory q ���Buyer�s inspection advisory q � Seller�s advisory

13. Probate: Procedures �������� Collect debts owed to the deceased person �������� Clear title to real or personal property that are held in the name of the deceased �������� Pass clear title to assets to heirs �������� Settle a dispute between people who each claim entitlement to the deceased persons assets �������� Resolve all disputes as to whether the deceased person�s will is valid

14. The purpose for probate: � v���� Establish the validity of a will or no testamentary deposition of property v���� Establish the proper identity of heirs, devisees and beneficiaries v���� Protect the right of creditors v���� Provide for the payment of all applicable taxes v���� Preserve the assets during the legal a process v���� Distribute property legally to the appropriate parties

15. Who handles the estate? The deceased cannot handle their own affairs The executor the deceased named the person to handle the estate The administrator the person the court would name if the estate had no will

16. What the title company will require Notice of proposed action Order authorizing independent administration of the estate Letters testamentary Copy of the will Letter from attorney stating that the value of the estate does not exceed $675,000 and therefore exempt from federal or state estate tax

17. Probate: Close of Escrow close of escrow is subject to the receipt of a certified copy of the court order confirming the sale certified copy must be forwarded to the title insurance company recorded at the county recorder�s office

18. Probate Transaction Forms: Petition for Probate (Probate Code �� 8802, 10450) Notice of Petition to Administer Estate (Probate Code � 8100) Notice of Hearing (Probate Code �� 1211, 1215, 1216, 1230) Order for Probate (Probate Code �� 8006, 8400) Duties and Liabilities of Personal Representative (Probate Code � 8404) Letters (Probate Code �� 1001, 8403, 8405, 8544, 8545 & Code of Civil Procedures � 2015.6) Creditor�s Claim (Probate Code �� 9000 et seq., 9153) Notice of Administration to Creditors (Probate Code �� 9050, 9052) Allowance or Rejection of Creditor�s Claim (Probate Code � 9000 et seq., 9250-9256, 9353)

19. Probate Transaction Forms: Inventory and Appraisal (Probate Code �� 1620-1616, 8800-8980) Inventory and Appraisal Attachment (Probate Code �� 301, 2610- 2613, 8800-8920, 10309) Notice of Proposed Action: Objection�Consent (Probate Code � 10580) Waiver of Notice of Proposed Action (Probate Code �� 10583, 10584) Citation (Probate) and Proof of Service (Probate Code �� 1240, 1241, 1242) Spousal Property Petition (Probate Code � 13650) Notice of Hearing (Probate Code �� 1211, 1215, 1216, 1230) Spousal Property Order (Probate Code � 13656) Report of Sale and Petition for Order Confirming Sale of Real Property (Probate Court �� 2540, 10308)

20. Probate Transaction Forms: Report of Sale and Petition for Order Confirming Sale of Real Property (Probate Court �� 2540, 10308) Order Confirming Sale of Real Property (Probate Code �� 2543, 10313) Affidavit RE Real Property of Small Value (Probate Code � 13200) Petition to Determine Succession to Real Property (Probate Code � 13151) Order Determining Succession to Real Property (Probate Code � 13154) Affidavit of Surviving Spouse Succeeding to Title to Community Property (Probate Code � 13540) County Assessor�s Office, Preliminary Change of Ownership Report (PCOR) (California Revenue and Taxation Code 480.3) Executor�s Deed Order of Final Distribution

21. Working with Foreign Investors Foreigner a nonresident alien a nonresident alien fiduciary individual business firm California has a higher percentage of foreign investment in US real estate than in foreign investment in the U.S. overall California has 20% of the total US foreign real estate investment

22. Escrow Officer Concern State and Federal income tax liability Foreign Investment Study Act of 1974 International Investment Survey Act of 1976 Agricultural Foreign Investment Disclosure Act of 1978 Foreign Investment In Real Property Tax Act of 1980. (FIRPTA) Foreign Investment Tax Reform Act of 1984 (CAL-FIRPTA) The Tax Reform Act of 1986

23. The escrow agent must request Power of Attorney Corporation corporate by-laws articles of incorporation government tax release Partnership proof of the type of partnership: General or Limited Proof that partnership taxes are paid. Secretary of State Release that no taxes are due Social Security Number

24. The escrow agent must obtain California Bank Account Down payment Points Disclosures

25. For Sale By Owner FSBO In 2004, One Million Americans will sell without an agent 20% of home sales annually Save an average of $9,000 in commission

26. Why FSBO? Savings Buyer�s agent commission Seller�s agent commission Control Show your house when you want Control every aspect of transaction Sell property quicker Lower listing price ****More feasible in sellers� market

27. Information Needed Terms of the sale Any seller-assisted financing Request for payment of services Tax statement Insurance Title Insurance Loan Documents

28. Escrow Do�s & Don�ts Serve as a liaison for the parties Prepare escrow instruction Request preliminary title search Comply with lender�s requirements Prepare of secure deeds, taxes Act as an adviser or negotiator Assist with the sale or Offer to Purchase Give or Offer Title research or advise loan advice tax advice Legal advice Principals should hire a real estate attorney Investment advice

29. Things Sellers SHOULD Know Legal rules for transferring property Who signs which papers and when they are due What to do when encumbrances arise Escrow instructions must be detailed

30. Who Does What in Escrow? Deposits with escrow holder: Executed and notarized deed to the buyer Insurance policies Tax receipts Home warranty contracts Equipment warranties Termite report and evidence work has been completed

31. Who Does What in Escrow? Deposits with escrow holder required funds Funds for home and title insurance Deed of trust or mortgage documents to secure loans for the property Approves inspection reports title commitments Arranges for borrowed funds to be delivered to escrow holder

32. Who Does What in Escrow? Deposits with escrow holder proceeds of the loan to the buyer Stipulate any conditions to escrow holder Prior to loan documents Prior to funding the loan Prior to recordation of documents

33. Who Does What in Escrow? Receives funds from buyer and lender Orders title insurance Prorates taxes, insurance, rent, homeowner�s association dues Distributes funds for title insurance escrow fees seller�s loan payoff recording fees

34. Who Does What in Escrow? Keeps all parties informed of process Prepares statements for buyer and seller outlining monies distributed and additional money needed to close Records deed and loan documents Delivers deed to buyer Delivers loan documents to lenders

35. What a Real Estate Broker Does Opens escrow by handing over deposit monies and instructions (seller typically handles this) Signed purchase agreement Provides escrow with information about the property (address) Send escrow instructions

36. Documents the Seller Signs Escrow instructions HUD 1 Settlement Statement Grant or warranty deed Bill of Sale

37. Documents the Buyer Signs Escrow instructions Original note and deed of trust or mortgage Insurance request forms Regulation "Z"(disclosure statement) HUD 1 Settlement Statement Lender's Escrow Instructions Bill of Sale Statement of Information

38. What is Needed to Open Escrow Purchase agreement including Purchase price Address, Legal description of property Tax identification: APN, AIN Signatures form both parties Seller�s name and address, vesting & liens Buyer�s name and address, vesting Statement of Identity (SI) title form

39. Which Services? Escrow company Title company Insurance company Pest control firm Lender

40. Who Pays for What? Escrow fee Title charges and recordation fees Home warranty Home inspection Pest control work Pest control report Lender fees

41. Parties to whom the preliminary title report will be sent (generally buyer, seller, lender) Executed purchase contract between the principals with all s signatures Termite report information (who will do the inspection) Amount of deposit to be held in escrow Insurance agent, coverage requirements and types Financing information Personal property involved in the sale Rents and security deposit transfer Projected closing date Contingencies and what constitutes removal What is Needed to Open Escrow

42. Tips for Smooth FSBO Escrow Bring valid ID when signing papers Escrow number Insurance Policies Termite report & Inspections

43. Issues that often arise: Home inspection reveals deficiencies ***Buyer asks for repair or replacement Low Appraisal *** Homes priced correctly, this is less likely 3. Buyer is rejected for their mortgage ***Less likely if buyer has pre-approval (with credit,ratio and source of funds review) early in the process

44. Issues arising and solutions 4. Termite inspection shows active infestation 5. Termite inspection shows prior insect damage 6. Survey shows encroachments 7. Title search reveals problems ***Your title or closing attorney or (agent) will direct solutions

45. �Think About It! What are the advantages and disadvantages in working with a For Sale By Owner (FSBO) Transaction ?

46. �Think About It! Advantages: Direct communications with the principals Less people to go through for answers Disadvantages: May not know the answer to needed data May not understand alternative options May lack experience in workings of escrow and title