Creative Real Estate

A 2005, 2006 Prudential Top Producer

Probate Sales :: Mixed Use :: Short Sales :: 1031 Exchanges :: TICs

Probate Sales

Probate sales (of both real and personal property) occur when an Estate is being administered because there is a person who is (1) incapable of managing either his or her own personal needs for food, clothing and medical care; or his or her own financial affairs (A "Conservatorship"); (2) a child under the age of 18 (A "Guardianship:); or a deceased person (A "Trustee Sale" or "Probate Sale"). The majority of these sales are referred to as “Probate” and are generally supervised by the probate court within the jurisdiction of the county where the real estate is located.

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The Two Types of Probate Sales

1. Sales requiring Court Confirmation – Certain types of sales require appraisal and approval by the probate court. The goal of the court proceeding is to protect the interests of all beneficiaries. These sales take longer than standard sales due to the additional court process. The representative of the estate, with court permission, may grant an exclusive right to sell the property for a period not to exceed 90 days. Acceptance of an offer by the estate representative is subject to probate court confirmation.

An offer to purchase must be for a price which is not less than 90 percent of the property's appraised value. When an offer is accepted, subject to court confirmation, the representative will petition the court to confirm the sale. After the court has set the matter for hearing, any interested person may bid at the time of the hearing.

To open the bidding, there must be an increase over the original bid of at least five percent of the original bid plus $500. Once the bidding has been opened, the court in its discretion may permit the bidding to continue on smaller bid increments until it declares a bid to be the highest and best obtainable. The sale then will be confirmed by the court to the bidder. Ordinarily, after court confirmation of a sale, normal escrow procedures are used to consummate the transaction on the terms and conditions approved by the court.

2. Sales without Court Confirmation – If the personal representative has been granted full administrative powers under the Independent Administration of Estates Act (IAEA), court confirmation may not be required. These sales are closer to the timing of a regular real estate transaction. However, the executor-administrator is exempt from disclosure, unlike an ordinary sale. All heirs must be notified in writing of the sale, and have 15 days to object to the sale. If this occurs, the sale would most likely need to go to court for confirmation.

Probates sales, both independent administration and court confirmed, are another avenue in which to purchase and sell property. I have conducted probate sales for both buyers and sellers and I can help guide you through this process.

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Mixed Use

Property deemed "Mixed Use" generally includes both residential and retail/commercial units. These properties often require commercial financing and may have special insurance requirements, down payments requirements, listing agreements, estoppel certificate requires, buying agreements, et cetera. Because commercial lending is required, the pool of lenders is smaller and requires special knowledge of the commercial lending process. I have sold mixed use properties and can aid you in the buying and selling of such properties, including but not limited to aiding you with lender, contractor, and insurance referrals.

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Short Sales

A short sale occurs when a property is either (A) in foreclosure or (B) nearing foreclosure, with little or no equity. This means that the seller owes an amount that is close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a “short pay” or “short sale.” From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process including: attorney fee's, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. A short sale may in some instances benefit a seller as they are able to avoid foreclosure. Also, if the loan being foreclosed upon is an owner occupier loan, there may be no deficiency charged to the seller.

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1031 Exchanges

Section 1031 of the Internal Revenue Code of 1986, as amended, offers real estate investors one of the last great investment opportunities to build wealth and save taxes. By completing an exchange, the investor (Exchanger) can dispose of their investment property, use all of the equity to acquire replacement investment property, defer the capital gain tax that would ordinarily be paid, and leverage all of their equity into the replacement property. Two requirements must be met to defer the capital gain tax: (a) the Exchanger must acquire like-kind replacement property and (b) the Exchanger cannot receive cash or other benefits (unless the Exchanger pays capital gain taxes on this money). The tax code states: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment purposes if such property is exchanged solely for property of a like-kind which is to be held for either productive use in trade or business or for investment purposes." Investors can accomplish virtually any investment objective with exchanges including greater leverage, diversification, freedom from joint ownership, improved cash flow, geographic relocation and/or property consolidation.

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TICs

Tenancy in Common or "TIC" is a form of ownership where two or more people share ownership of a property, but not necessarily equally. Even though the owners of a tenancy in common property can have unequal shares of the property, they all have the right to use the entire property. Unlike joint tenancy, tenancy in common doesn't have right of survivorship. So, if one of the co-owners dies, his/her interest passes to an heir(s), not the surviving co-owners. TICs can be a valuable tool in helping people purchase property as co-owners where one party may not be able to purchase on their own. Investors may also 1031 exchange into a TIC.

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