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Chapter Outline. HomesteadProbate: Objectives and processProbate: ProceduresWorking with Foreign InvestorsWorking with the For Sale By Owner (FSBO) Transactions. Explain the requirements for a valid homestead.Differentiate between the various steps involved in a probate.Distinguish between
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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: Ř Proving to the court that the will is valid
Ř Identifying and making an inventory of the property
Ř Having all property appraised
Ř Paying all debts, bills, obligations and taxes
Ř 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