Estate Planning & Why You need an Attorney

Presenter: Bill Askin speaking on the masters of homeownership show

Bill Askin:

First of all, another just piece of information or advice for people, the attorney review contingency, that attorney review process, again, only applies to contracts that are drafted by realtors. If you have a couple of neighbors or a couple people that know each other, and they do their own contract, and they sign it, that’s legally binding upon executing the contract.

Most likely he’s not. But in general, some of the other reasons you need an attorney is to do the proper legal research. Number one may seem obvious. You got a contract with Lisa, and Lisa is selling her property to you? How do you know Lisa owns that property? She said she did, and I signed the contract, and I gave her some money, and she gave me a deed. What if it turns out she didn’t own that property? You’re stuck without having a lawyer do the necessary research and confirm who owns the property.

Second, what if you buy that property from Lisa, she gives you the deed, you give her the money. You close. A couple of weeks later, a bill from a mortgage company shows up in the mail. Maybe it’s not addressed to you, as the new property owner, it’s addressed to somebody else, but do you think that bill for that mortgage still has to be paid? It sure does. That mortgage is still on the property that you just bought, and it has not been discharged.

Marleny Cruz:

Now that’s your responsibility?

Jeffrey Hoebee:

That’s the ultimate [inaudible 00:12:40]

Bill Askin:

Jeffrey Hoebee:

Not yet, because it’s not a contract, right?

Bill Askin:

Jeff mentioned in the super hot real estate market we have right now, and in a super hot market or in a super not so hot market, it’s always important to have an attorney. But in a super hot market, more unique issues come up. One of which is multiple offers. We have so many, many transactions these days that come to us after somebody accepts an offer or gets an offer accepted, but they were in multiple offers on the property.

Generally, we hear from the realtors, this was a multiple offer situation, we got this deal done. Now, we want to get out of attorney review as quickly as possible. That leads to the second point. Well, let me finish the first point. When you’re in a market like this, it’s more important than ever to have an attorney, a real estate attorney on your side to help you navigate through the multiple offers in a particular property, in a particular situation. Because the most money is not always the best offer. I guarantee you that, the most… Jeff, right?

Jeffrey Hoebee:

I would have got a tattoo that would say that because it’s absolutely the absolute truth. The most money, those are usually the ones that crumble the fastest.

Marleny Cruz:

Wow. I’m seeing you clap over there. You were very excited about that point.

Jeffrey Hoebee:

No, it was the greatest thing I’ve ever heard. Go on.

Bill Askin:

The most money can and sometimes does come from the most unqualified buyer.

Marleny Cruz:

That’s why they’re giving the most money, right? That’s why-

Bill Askin:

To make it look better, right. Or the most money may come from a buyer who has to sell a house before they can afford to buy your house. Do you want to risk taking your house off the market, because somebody offered you a lot of money. But that person may not be totally qualified, and may need to sell their house before they can buy yours. Or, and not to knock Jeff out of the equation here, but the most qualified buyer would be somebody with a significant down payment, with nothing to sell. They can buy your house with, they don’t have a house to sell or their house is already sold or it’s under contract or they can buy your house as a second home.

Jeffrey Hoebee:

He did. When I was told the address, not to dwell on this, when I was told the address, the street and I was like, just so you know, I might have a problem, might. But I’ve been surprised before by appraisals where I go, I don’t understand how that ever came to be. But that’s paramount to why you need that layer of protection, that armor to protect you as a seller, and the same thing as… Because there are things where you’re dealing with the buyer, where they’re hiding, because most people you would probably say that are buyers go through a house and you go, “Do you like the house?” “It’s beautiful, everything is perfect.”

Then you get the home inspection report and it takes you 20 minutes to read it. You’re going oh, boy-

Marleny Cruz:

Not so perfect.

Jeffrey Hoebee:

Yeah. You’re dancing between the two lines, hopefully I’m not going to say something wrong, just correct me, dancing between two lines, that it’s really hard to get a house. But it’s also really hard to allow someone to make a horrible decision. Because in my world, if the appraiser said the septic’s shot. I could see the mud pit in the backyard, or whatever, you have to buy that with a construction loan. But I’m sure you have these conversations every day, right? With-

Bill Askin:

I do. Yeah. I can talk about inspections for hours and inspection contingencies and tell you about some stories. I’ll do that, I’ll do one, not hours, but I’ll give you a few minutes on inspections. Before I jump to that, though, I don’t want to leave off on a bad note with VA and USDA, I don’t mean to be critical of them at all. They’re both very, very good loan programs.

That applies to all real estate transactions, caveat emptor. In English, the translation, buyer beware. Buyer beware.

Jeffrey Hoebee:

Correct.

Bill Askin:

It is the onus upon the buyer to do an inspection, to confirm and find out for themselves what as is means with respect to that property, because they’re going to get it as is on the day of closing. After closing, can a buyer go after a seller for a condition on a property that wasn’t disclosed or they didn’t find in their inspections? Yeah, you can try. It’s tough cases, unless you can prove actual fraud. Failure to disclose or fraudulent non-disclosure, it’s almost impossible to win those cases.

Very important legal phrase, caveat emptor, buyer beware, you buy the property as is. In most real estate contracts, both residential and commercial, there’s a due diligence contingency, a due diligence period, an inspections during which the buyer can hire a private inspector, an environmental company an engineer to do their own work to find out what as is, is.

Marleny Cruz:

How much time do you have?

Bill Askin:

… What is it? I’m buying the property as is, let’s find out what as is is. Then when you find out, depending upon the language in the contract, you will have certain rights. Then the next thing is a lot of buyers think they’re going to do an inspection find out what as is means, they’re going to get an inspection report from the home inspector, which in most cases these days is a minimum of 25 pages long. Can be 60, 80 pages long.

What I dislike seeing, in fact, I put in my attorney review addendums to the contract is, that buyer cannot come to my seller and just deliver the inspection report and say, here, fix it. If you have a general home inspection that we sometimes see in real estate transaction that says buyer could do an inspection, and then if they’re not happy, they can ask the seller to fix stuff. That’s a very general, loose knit, awkward inspection contingency.

Then the buyer thinks that they’re going to give the inspection report to the seller and say here, fix it.

Marleny Cruz:

Yeah, then be prepared, right?

Bill Askin:

We don’t like that, especially in a market like this. It starts with education. Educating the buyer that every home in America, including new construction, needs maintenance. Every home in America has little tweaks and issues and maintenance needs and things like that. So, the education to the buyer has to start with a buyer that, hey, you’re buying a lifelong project.

That’s interesting to know that, that could happen.

Bill Askin:

I have gotten approval for a client in the past to build an automobile service station, in what is technically a residential zone. You might think that sounds odd, and it does sound odd. But it’s really not because the residential zone extended out onto a state highway, and up and down the state highway, there are commercial businesses, and it’s only behind the highway that it’s all residential. Technically, it’s a residential zone. But in reality, or practicality, it has all the appearance of commercial zoning and commercial properties, and it’s surrounded by commercial properties.

We handle a lot of property tax assessment appeals. Just again, real quick education, technically, you can’t appeal your property taxes. The tax rate itself is something that’s established as part of the municipal budgeting process every year, and at the end of that process, which typically wraps up in the late spring, every year, a new tax rate is established by that municipality. That tax rate, then it gets applied to the assessment, the assessed value of every real property or piece of real estate in that municipality, and the taxes themselves on the property are a result of those two things. It’s a result of the tax assessment, multiplied by the tax rate. There’s your taxes.

Please let’s talk about that. Yeah.

Jeffrey Hoebee:

Everything was done super wrong, and they have to sell it to pay the… I’m doing a horrible job. You go ahead and explain, if someone comes to you for estate planning. Estate, is that the right term in your office?

Bill Askin:

It is, but it’s a very, very general term, estate planning. It can involve and in fact does involve a lot of different issues, a lot of different documents, a lot of different advice depending upon that person or that family’s particular situation. There is no one shoe fits all in every situation of estate planning. Very quickly, number one, it’s my advice to everybody out there that you should have an estate plan. Because everybody that I’ve met, or I’ve known in my life wants to be involved in or in charge of knowing who’s going to be in charge of their assets, when they pass away someday. Because if you don’t make that decision, and you don’t have a will, a last will and testament, and you don’t appoint somebody to be your “executor”, guess who does it, guess who appoints somebody to be in charge of your estate? The surrogates court.

If that person could be contacted, they could step in, and they could assist. But what we usually recommend and do for most of our clients is to have a backup. I nominate and appoint, in my case, my spouse as my fiduciary under a power of attorney. But if my spouse predeceases, or is otherwise unavailable, or refuses to serve, I appoint my oldest child, or my brother or sister as a second choice. You can have a second, a third, a fourth backup, as many as you want.

Marleny Cruz:

Got it. Good to know.

Jeffrey Hoebee:

I’m sure as a part of this whole conversation, if we’re going to go with Marleny’s story about that boyfriend she had five years ago, which I’d like to hear about, but I’m sure you have meetings or updates, like having what changed, and new accounts you have and that kind of stuff.

Bill Askin:

It was a short sale, that was a wreck. But he’s handy dude, and he got it for next to nothing, because yours truly helped them get the house for real cheap. Then he wanted to do a loan to take out money to pay himself back and all this other stuff. For whatever reason, he didn’t come back to me and wait to hear what happened to him.

It sounds, first of all, he carried all the risk. He put the down payment, he invested the money, the time, the effort into doing the renovations to the home. He put in the sweat equity and sounds like the money too. She was on the loan, almost like a guarantor. Because without her on the loan, she wouldn’t have been able to get the loan.

Her role was to help him get the loan. He didn’t qualify on his own. When they did the refinance, the new mortgage company required that, if she’s on the loan, we want her on the deed too. Jeff wasn’t there to give good advice, which she would have given, I wasn’t there, I would doubt any attorney was there to give this investor good advice. She ends up on the deed, I don’t even know if he knew that she was on the deed or not. But if he knew or not, it should have been known, and there should have been some sort of an agreement between the two of them as to what would happen if she passed away.

What that agreement was or how it looked or whatever, it could have many different forms, it could be handled in her estate plan or her will, or it could be handled in a second mortgage on the property between the two of them, or it could have been handled in, when you own a property with somebody it doesn’t automatically have to be 50-50. You could own a property with somebody else where you own 95%, and the other person owns 5%.

There are a lot of different ways to tackle that issue. But unless you realize then it is an issue and talk to a professional, you’re leaving yourself open, like happened to Jeff’s friend here to substantial risk. Then what happens on the other side, she passes away, and then all of a sudden her estate, again, I don’t know if she named beneficiaries or kids but they find out oh, I got a windfall. I got half of the house worth $600,000. You think they’re going to go away and just let Jeff’s friend keep the house? Of course not. They’re going to go talk to a lawyer who’s going to give them their legal rights, and why would they give those legal rights up? It wasn’t done right from square one. Shame on whoever was involved because that sounds like it was a mess.

Jeffrey Hoebee:

Jeffrey Hoebee:

Bye.

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