Preventing REO Closing Delays & Diversifying Your Business
An Introduction to Probate
Having vast knowledge of our industry is key for success. Join us for a webinar featuring the basics of probate and how you can incorporate these services into your business.
April 7th, 2020
1:00 PM EST, 12:00 PM CST, 10:00 AM PST
REOMAC Member: Free | Non-Member: $25
Items to be discussed include:
- Access to knowledgeable title agent/lawyer with probate experience helpful
- What is title insurance, what is probate and why do investors target “probate” homes?
- Probate includes residential and commercial properties
- Relatives and heirs often do not know where to turn for assistance in managing properties
- Savvy agent, with a few tools, can develop expertise in estate sales
In addition to Probate and Trusts, we will do a quick refresh on closing delays with REO properties – what the Servicer/Lender, Broker and Attorney/title can do to identify potential issues before they become problems.
- Code violations and code liens – resolutions and mitigation
- Selling properties with code liens/violations in place – best practice
- HOA issues – Safe Harbor Rules, identifying HOA violations
- IRS liens and CC judgments
- MI Insurance
- Junior and Secondary Liens
Michelle Garcia Gilbert, Esquire
Managing Partner, Gilbert Garcia Group, P.A.
Managing Partner, Sapphire Title & Escrow Company
Michelle Gilbert has been admitted to the following practices and courts: Florida Bar, 1986; Middle District of Florida; 1988, Northern District of Florida; 2005, Southern District of Florida, 2006; U.S. Supreme Court, 2000; U.S. Court of Appeals, Eleventh Circuit, 2003. She matriculated at the University of South Florida (B.A., 1982, cum laude), and the University of Notre Dame (J.D., 1985). She is a member of the following groups: Greater Tampa Association of Realtors; Bay Area Real Estate Council, Inc., Board of Directors; Hillsborough County Bar Association (Real Property, Probate and Trust Law; Solo and Small Firm; Diversity; and Military and Veteran Sections); Florida Bar (Real Property, Probate and Trust Law; Business; and Solo and Small Firm Sections); American Legal and Financial Network; Legal League 100 (Vice Chairperson, 2016-19; Advisory Council Member, 2014-19; Special Initiatives Working Group, 2017- present); REOMAC; Attorney Agent, Attorney’s Title Insurance Fund/ Old Republic; and Westcor Title agent.
She manages Gilbert Garcia Group’s foreclosure, real estate transactional and litigation, probate, estate planning, guardianship, business transactional and litigation, and corporate law practices, and oversees Sapphire Title & Escrow Company. Gilbert Garcia and Sapphire provide training and consulting to their clients, as well as sponsor monthly give back initiatives in their community.
Law Offices of Tyler Gold PA
Has a track record of success in the REO and title industry. Jill has been Office Manager and over seen day to day operations of Tyler A Gold PA for over 10 years. She has successfully resolved and mitigated code violations and code liens in dozens of municipalities through out the state of Florida. Jill is also responsible for the mitigation of association Estoppels for traditional closings and REO closings involving the application of the safe harbor statute. Jill and her office team also work with the IRS and DOJ in resolving federal tax liens and obtaining release from the right of redemption when applicable. Jill and her team have also successfully resolved subordinate liens through mutual indemnity and obtaining a release whenever possible. The office of Tyler A. Gold, has closed 1000’s of transactions in Florida for more than 25 years, and has a long history of satisfied repeat clients as well as long standing REO clients.
Nowadays it’s easy for home buyers to want to impulsively buy a house that they have fallen in love with because they are afraid that it will be snagged by another buyer with the same sentiments. With housing inventory in short supply, home buyers are quick on the trigger to purchase. A recent Redfin study also supports this with the fact that homes are on the market for less than 10 days before they are sold.
With the housing market being extremely competitive, it is in a home buyers best interest to really determine a home’s value. Using comparable sales, or comps as they are called in this industry, are recently sold homes that are comparable to a home you wish to purchase. This is a critical way to figuring out a home’s worth.
Here are ways of using comps to your advantage:
Why do investors target probate homes?
- Properties in probate are perfect for investors, because they’re possibly in need of serious updates and repairs, and the Personal Representative doesn’t have the time or money to spend making it ready to sell on the retail market, making it lucrative for real estate investors to buy these homes below the market value.
- A Personal Representative cannot sell estate property without either an order permitting the sale or an order determining homestead status of real property.
• Real Estate Investors – probate leads represent the very best residential real estate-related lead source available today. Within 4-6 months of the probate filing, 40% of the properties found will be sold.
- Realtors will find that many of the residential properties in probate will be listed within the first year after the filing.
- Wide Range Of Properties – Commercial, Acreage, Duplexes, Condominiums, Apartment buildings, Strip malls, Office buildings, Ranchland, Farms. These are not rundown foreclosures, bankruptcies, or condemned properties that are complex deals and need costly repairs. These can be beautiful homes with no mortgage or debt attached, making them some of the cleanest and easiest of all real estate to buy low and sell high quickly.
What is probate?
Probate is the legal procedure in which the probate court assumes jurisdiction over the assets of someone who has died. The court supervises the payment of debts, taxes, and probate fees, then supervises the distribution of the remainder to the person(s) named in a will, or to the heirs if there is no will.
Florida probate law varies depending on the type of property. It is important to get guidance from an experienced Florida Real Estate Probate and Homestead Property Attorney.
A Florida probate can include:
- Proving to the Florida probate court that the deceased person’s will is valid.
- Identifying and preparing an inventory of the deceased person’s property.
- Determining the value of the deceased person’s property.
- Paying all debts and any taxes due.
- Distributing the remaining property as the will or the law directs.
- Attorney and court fees which are typically paid from estate assets.
PERSONAL REPRESENTATIVES are under no obligation to use the same law firm that wrote the will. Nearly all probate procedures in Florida involve paperwork drafted and filed by probate lawyers. Unlike some other states, Florida law generally does not allow “do-it-yourself” probate except in some cases involving very small bank accounts, refund checks, or similar assets.
Types of Probate Administration in Florida:
- Formal Probate Administration – The Normal Probate Process
This is Florida’s traditional form of probate administration. It requires APPROXIMATELY 12 months to complete. It is usually used for complicated issues such as challenges to the Will, disputes between beneficiaries or heirs, or supervision of the Personal Representative.
The following is an over-simplified description:
The process starts with a petition for administration and the appointment of one or more personal representatives (executors). After that, a Notice to Creditors is published in a local newspaper, and creditors generally have three months in which to file their claims.
Once the period of time for creditor claims has passed, the personal representative can pay the debts (in a certain order) and distribute the remaining estate. Once all debts are paid and the remainder of the estate has been distributed, a petition for discharge is filed, and the Florida estate is closed upon entry of an order of discharge.
While this may sound simple, probate is a fairly complex system of required and optional tasks by the personal representative, the attorney and sometimes a tax consultant (often a CPA). Of course, the simpler the assets and the deceased’s plan of distribution, the simpler the Florida probate will be.
- Summary Probate Process for Small Estates
The state also provides a “short form” of probate for certain smaller or older estates, which is quicker and cheaper than the “formal administration” used for most Florida probate administrations.
Summary probate administration is available for estates with “non-exempt” property of less than $75,000 and the decedent has no outstanding unpaid debts, or in cases where the decedent passed more than 2 years ago. The value of “homestead” real property is not counted in totaling the value of the estate, nor is any other proposed exempt property. Summary administration can also be used in any size estate if the deceased has been dead FOR more than two years. Summary administration does not work in certain cases, such as those with minor or missing heirs, or where the assets or debts of the deceased are unknown.
FLORIDA HOMESTEAD PROPERTY PROBATE RULES
If the deceased’s real estate is considered their “homestead,” the state of Florida applies certain unique rules to the transfer of the property. The homestead property exemption was created to protect families from being displaced from their home; however, there are many special rules to this probate property law.
PRESENTED BY MICHELLE GARCIA GILBERT, ESQ.
GILBERT GARCIA GROUP, P.A. | SAPPHIRE TITLE & ESCROW COMPANY
Bitcoin, virtual currency, example of blockchain (or distributed ledger) technology
- Released at time of financial crisis, due to advances in software, communication and encryption
- Established set of rules that ensured integrity of data exchanged among computers globally, without use of government or other trusted third party
- Ledger recording transfer of bitcoins resides on virtual network which uses encryption and secure keys for transactions; each transfer is recorded in a block of information
- Each block has time stamp and link to prior block which creates permanent record that is almost impossible to alter
- Technology is being used for other distributed ledgers
Digitally record tangible and intangible assets in a system that is more trustworthy, transparent and verifiable than any other
- Private blockchains, not public like Bitcoin, participants verified against pre-approved list
- Collaboration among many participants required
- Common technical standards and processes required Participants must share information
- Resource intensive
- Legal concerns regarding intellectual property, data privacy, data security, anti-money laundering, settlement finality and securities requirements
REAL ESTATE TRANSACTIONS NOW
Old-fashioned industry with paper contracts, manual escrow deposits, hard files, and in-person closings
- U.S. net worth totals $89 trillion, household ownership of real estate is $27 trillion out of a total of $33 trillion of nonfinancial assets
- 2016- outstanding real estate debt was $11.5 trillion residential and $2.6 trillion nonresidential
- Industry has long history of state and local regulation, lobbying power of real estate agents, and interaction with laws, tax code and American culture of home ownership
- Establishing property rights involves navigating lawyers, insurance agents, realtors and title agents
- Current state of affairs: brokers and realtors facilitate transaction for a fee; parties can use an attorney in addition to an agent or in lieu of an agent, to prepare a contract; contract uncertainties exists with contingency for inspect ions, appraisals, state of title, and financing; title search is performed to determine state of title and requirements that must be met to convey marketable title; title insurance is provided as part of the transaction; 2016- 88% of all buyers financed homes; closing – most take 1-2 months to get to the table, and the closing itself can last hours
REAL ESTATE TRANSACTIONS IN THE FUTURE
Blockchain technology has the potential to address uncertainties in real estate transactions by providing more direct, precise and efficient process.
- Smart contracts: digitally signed agreement, stored on blockchain program would speed closings because payment would trigger automatic transfer of title; limited use for structuring of agreements, and handling of breaches and dispute resolution; also, without common technical standards and processes, suspect to hacking
- Land records: outdated system in which paper filings are maintained as a chain of title by local government office; manual process with high potential for error and fraud; risk mitigated by purchase of title insurance, though about 5% of premiums paid out in claims in 2016; In September, 2016, Cook County, Illinois launched a pilot program to current system with public blockchain technology; Cook county never completed a blockchain conveyance but reported alter the pilot ended, in May, 2017, “…that blockchain and distributed ledgers are natural fit for keeping land records and stream lining the dozens of intermediate steps needed just to get a deed into public record.”
- Transaction platforms: Encrypted, secure and distributed ledgers provide a way to execute transactions with little or no intervention by people. Instead of involving many employees, third-party agents and paper processes in a transaction flow that takes days, weeks or longer, huge volumes of transactions will be com pleted very quickly and transparently. Financial institutions, in particular, have been struggling with business process inefficiencies, but such inefficiencies exist in other industries, including real estate.
- States opting in: Blockchain recognized as a legitimate form of ownership.
WHAT IS HAPPENING NOW…
- Countries like Georgia and Ukraine have already implemented blockchain, as the start-up Propy executed the first real estate transaction through cryptocurrency, in which a San Francisco investor bought a house in Kiev for $60,000 in Ethereum tokens (another cryptocurrency)
- And more examples to be provided
With the existence of tens of thousands of farms in the state of Florida, as well as hundreds of thousands of privately-owned residential properties, land boundaries are a frequent point of contention between neighbors. The state of Florida has edicted several laws regarding the legality and construction of fences around properties.
There are two primary bodies of legislation regarding fencing: the encroachment or overlapping of the ownership of two adjoining landowners, and laws regarding the construction of fences on individual properties. An encroachment of land occurs when an individual occupies a part of land above or below the service that is not described in the land’s deed. Specifically, an encroachment occurs without the consent from the owner of the encroached land. Encroachment problems can get a bit trickier, though: two subtypes of encroachment are boundary by agreement and boundary by acquiescence.
A boundary by agreement has three important aspects: uncertainty to the true boundary line, an agreement that a certain line will be treated by the parties as the actual boundary line, and occupation by the parties for a period of time adequate to show a recognition of the line as a permanent boundary. For example, if John erects a fence that encroaches on Jane’s farmland by twenty feet, but neither party is aware of the fact that this fence encroaches on Jane’s farmland, and the fence has been maintained by both parties for at least five years, a boundary by agreement has been entered. Thus, if Jane conducts a survey to reveal that the fence is encroaching on her land, she can no longer request to have the fence removed, because both parties have made a de facto boundary at the fence. A boundary by acquiescence requires a dispute from which it can be implied that both parties are in doubt of the true boundary line, and continued occupation in a line that is not the true boundary for more than seven years. In short, it means that any action brought to undo encroachment will likely be denied if it is after seven years of encroachment.
There are also several Florida regulations regarding the ownership and construction of fences on private, residential properties. Fences must be constructed to not impede the flow of water through any drainage way, and must have sound and sturdy construction. Front yard fences cannot be any taller than four feet, while backyard fences can be no taller than six feet. Hazardous materials that may harm people or animals are not allowed in fence construction.
Because of their “super” status, Homeowners Association liens are a particular form of confusion and frustration for Mortgage servicers and their attorneys. The content covers legal and process issues that affect a servicer’s ability to assert their position in a property and any other relevant subtopics.
Super-priority is more or less the circumvention of the traditional legal concept of “first in time, first in right,” meaning first to notice, file, or record is first in right, meaning that an association’s lien has higher priority over previously recorded liens. Currently, twenty-one states require the foreclosing lender to pay between six months and twelve months, or some variation of periodic assessments to the association at some point during the lender’s foreclosure process.[i] Depending on the state, the beneficiary of the super-priority liens are either condominiums or homeowners associations, or both. As of November 2017, four out of the top five states with the highest foreclosure rate have super-priority HOA statutes.[ii]
In Florida, associations must be named in the foreclosure process as a subordinate lienholder and interested party[iii] and the foreclosing lender cannot assign the bid to a third-party before the sale[iv] in order to qualify for the allowable statutory “safe harbor” provisions.[v] The 2008 Florida statutes were amended to allow an association’s lien to “relate back to the date on which the original declaration of the community was recorded”[vi] reserving a caveat for pre-2008 mortgages.[vii]
Nevada has recently disrupted the lending industry with a shocking decision in SFR Investments Pool 1 v. U.S. Bank.[viii] In this 2014 decision, the court clarified the differences between “true lien priority” and “payment priority” and held that associations hold a “true lien priority” which can unequivocally extinguish a first mortgage upon following the proper foreclosure procedures. [ix]
In Washington, a COA’s lien maintains a limited priority over a mortgage, subject to a relatively recent statute.[x] That limited priority mandates the lender to pay six months of assessments to the COA prior to the foreclosure sale date.[xi]
- While not a designated “super” priority state, Arkansas recognized that a first mortgage does not entirely extinguish an association’s interest in delinquent assessments.[xii]
- The District of Columbia[xiii] and Rhode Island[xiv] held that a first mortgage is subordinate to an association lien and the association could extinguish the first mortgagee’s interest.
- On the more extreme end of the “super” priority spectrum, Massachusetts allows for multiple successive liens (every six months), all of which can be contemporaneously enforced.[xv]
- Vermont extends its super priority status to assessments that have accrued during the first mortgagee’s foreclosure action plus the prior six months of assessments.[xvi]
In order to preserve the first mortgagee’s lien enforcement rights, some options include: (i) paying off the association’s lien, (ii) keeping the borrower’s account current with the association, (iii) redeeming the property in the association’s foreclosure, (iv) reviewing potential lien priority issues at the loan origination stage, (v) including language in mortgages requiring escrow of association assessments to ensure timely payment, (vi) timely participation in association lien enforcement actions, (vii) referring lien priority determination files to their foreclosing attorneys in each jurisdiction, (viii) requiring an assignment or proxy designation of borrower-owner association voting rights, (ix) requiring assessment invoices, billing statements, and periodic notices be sent to the lender to ensure timely payment or, at least, to allow the lender to monitor the status of an account, and (x) revising the terms of a mortgage to include non-payment of super-priority eligible associations’ assessments be considered a default under the terms of the mortgage.
Overall, lenders and associations must jointly navigate the same laws. While super priority may not be the fairest or the easiest resolution to the problems legislatures face in protecting all interests in real estate properties, it is certainly one solution. In order to properly and effectively navigate these complex laws, lenders should consult with their relevant jurisdiction’s attorney for a case-specific strategy on (i) how best to enforce the terms of the mortgage in case of a default and (ii) how best to preserve its lien in the case of an association foreclosure.
[i] Priority Lien for Collecting Delinquent Assessments. https://www.caionline.org/Advocacy/StateAdvocacy/PriorityIssues/PriorityLien/Pages/default.aspx (Alabama, Alaska, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Vermont, Washington, West Virginia)
[ii] U.S. Real Estate Trends & Market Info: Foreclosure Trends. http://www.realtytrac.com/statsandtrends/foreclosuretrends (Alabama 1/2286, Alaska 1/4259, Colorado 1/4170, Connecticut 1/1391, Delaware 1/875, District of Columbia 1/1876, Florida 1/2361, Hawaii 1/3626, Illinois 1/1196, Maryland 1/981, Massachusetts 1/1862, Minnesota 1/3772, Missouri 1/2226, Nevada 1/1407, New Hampshire 1/3894, New Jersey 1/734, Oregon 1/3135, Pennsylvania 1/1723, Puerto Rico (unknown), Rhode Island 1/2324, Vermont 1/7176, Washington 1/5206, West Virginia 1/9372)
[iii] Fla. Stat. 720.3085(2)(c)(2)
[iv] Bay Holdings, Inc. v. 2000 Island Boulevard Condominium Association, 895 So.2d 1197 (Fla. 3d Dist. App. 2005) (holding that a title holder by virtue of a Certificate of Title whom was an assignee of a foreclosure final judgment did not qualify as a first mortgagee, successor, or assignee under Fla. Stat. 718.116(1) and therefore did not qualify for the safe harbor protections.)
[v] Under this statute, the foreclosing lender only has to pay the super-priority portion of the HOA’s lien to a certain degree – the lessor of (i) the past twelve months of regular assessments or (ii) one percent of the original mortgage debt. This statute is still triggered if a Deed in Lieu of Foreclosure is utilized as an alternative to a traditional judicial foreclosure.
[vi] Fla. Stat. 720.3085(1) (2008-2017)
[viii] SFR Investments Pool 1 v. U.S. Bank, 334 P.3d 408 (Nev. 2014); Prior to this decision, Nevada’s prior version of the controlling statute was found to have violated the Fourteenth Amendment’s Due Process Clause. See Bourne Valley Court Trust v. Wells Fargo Bank, 832 F.3d 1154 (9th Cir. 2016)
[ix] NRS 116.3116(2); This was later adopted by the Uniform Common Interest Ownership Act (UCIOA) (2014) §3-116 cmt. 2
[x] The Washington Condominium Act of 1989 governs the rights of condominium associations, including the lien priority over lender’s mortgages. While it is effective only for condominiums created after July 1, 1990. A COA lien is considered superior to a mortgage, unless the mortgage is recorded before the declarations of the condominium or before the assessments become delinquent.
[xi] Only periodic assessments for the annual COA’s budget for common expenses are specifically granted the limited super priority over mortgages, while capital improvement assessments and attorney fees and costs from collection efforts are examples of the limitations to the COA lien’s super priority status. See Summerhill Village Homeowners Association v. Roughley, 289 P.3d 645 (Wash. Ct. App. 2012)
[xii] First State Bank v. Metro.District Condos Property Owner’s Association, Inc., 432 S.W. 3d 1 (Ark. 2014)
[xiii] Chase Plaza Condo. Ass’n, Inc. v. JP Morgan Chase Bank, N.A. 98 A.3d 166 (D.C. 2014)
[xiv] Twenty Eleven, LLC v. Botelho, 127 A.3d 897 (R.I. 2015)
[xv] Drummer Boy Homes Association, Inc. v. Britton, 47 N.E. 3d 400 (Mass. 2016)
[xvi] Bank of America, N.A. v. Morganbesser, 2013 WL 9792479 (Vt. 2013)
Written By: Jessica Skoglund Mazariego, Esq., Attorney Gilbert Garcia Group, P.A., a Florida Law Firm