[WSBAPT] Selling Property from Estate using a Deed of Trust (foreclosure risks)

[Eric Nelsen]

I think it's a rare circumstance where a PR's fiduciary duties would allow a seller-financed sale of Estate property. Complications in determining the financing terms, and ensuring that the Estate gets full market value and doesn't agree to payment terms and interest that are too favorable to the Buyer. And why can't the Buyer just get a bank loan? If the Buyer is a good credit risk, Buyer should be able to get commercial financing. If Buyer isn't a good credit risk, then the PR has no business offering seller financing.

Also, the probate needs to close in a prompt fashion. Most likely that means the Promissory Note will have to be assigned/distributed to one or more heirs. If it's multiple heirs, that introduces problems. If the Note is distributed pro rata then all heirs would have to operate together to declare a default, payments would have to be gathered by an agent and split among the holders, etc.--lots of logistical complications.

On the other hand, if it's distributed non pro rata, to one heir out of several, how much is the Note worth for purposes of figuring out equal distribution of the whole estate? It represents a future income stream that may or may not actually occur, so its face value probably isn't its value for distribution purposes. The credit risk of the Buyer factors into the value of the Note, and introduces a potential point of dispute between the heirs.

One solution would be for the Estate to sell the Note on the open market in order to fix its value--but if that's going to happen, far better to just require the Buyer to go get financing and let the Estate get all cash at closing. There's no reason for the Estate to be nice to the Buyer by taking on the burden of flogging their Note.

So far, I have yet to encounter an Estate where selling on seller-financing met the PR's duties. It could happen I suppose, but I haven't seen it yet.

To answer your question--nonjudicial foreclosure of a DOT takes a minimum of 190 days and more often 8-12 months. Judicial foreclosure can take longer, and also usually includes a post-foreclosure redemption period of either 8 or 12 months before the buyer at auction can take possession.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

Please Note that We Have Moved. We have moved our Seattle office to Mount Baker Ridge (a small commercial community just above the I-90 tunnel). Our new address is 1417 31st Avenue South, Seattle WA 98144. All other contact information remains the same.

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of G. (Gus) Benjamin Lindsey III
Sent: Wednesday, May 03, 2017 2:23 PM
To: 'WSBA Probate & Trust Listserv'
Subject: [WSBAPT] Selling Property from Estate using a Deed of Trust (foreclosure risks)

Hello,

PC (personal representative) is considering an offer buy real property from an estate using a deed of trust. (Seller carrying the loan balance)

Seller/Personal Representative wants to know how "difficult/expensive" it is to regain possession of the property in the event of a default.

While I handle some property related matters, including ejectments, I am not familiar with the foreclosure process.

Anyone have insight on this from the perspective of an estate? My initial reaction is that this may not be the best approach for the estate but that may be based on some past horror stories! My typical probate client does not want this approach so this is  new one for me.


Sincerely,

G. (Gus) Benjamin Lindsey III
Attorney-at-Law
[cid:image001.png at 01D2C420.AE750D70]

The Law Office of G. Benjamin Lindsey III
2012 Grade Road, Suite 202
Lake Stevens, WA 98258

Phone:   (425) 263-9585

website: www.gbl3law.com<http://www.gbl3law.com/>

Employment/Labor Law     Construction Law     Civil Litigation     Estate Planning      Probate
Business Law

CONFIDENTIALITY NOTE: This e-mail message contains information belonging to The Law Office of G. Benjamin Lindsey III, which may be privileged, confidential and/or protected from disclosure.  The information is intended only for the use of the individual or entity named above.  If you think that you have received this message in error, please contact the sender.  If you are not the intended recipient, any dissemination, distribution or copying is strictly prohibited




-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20170503/24cd29ec/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.png
Type: image/png
Size: 10408 bytes
Desc: image001.png
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20170503/24cd29ec/image001.png>