[WSBAPT] Valuation of Real Property Owned by an Estate

Wed Nov 4 13:22:40 PST 2020

Inge:

No I don’t think that you are missing anything. I understand what you are saying. If the only way to distribute the estate is to sell the property and the granddaughter can’t “cash out” the other beneficiaries’ shares, then that is how it will work out. I just like to point out that existing loans don’t have to be “assumed” by the person who inherits or that they have to apply for a new loan or refinance. They can continue to pay on the loan that is in place.

How to divide an estate when the home is the majority asset, to be shared by many beneficiaries is separate from that question. I have an estate where the other beneficiaries are willing to be paid by the occupying beneficiary over time and we are doing a Real Estate Contract with a Fulfillment Deed in Escrow so the occupant will be paying the “old” mortgage and the additional second mortgage to the other beneficiaries. When their shares are paid off (we are using a shorter term on the contract), the Fulfillment Deed gets filed. Meanwhile the original mortgage remains in place.

Just

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Inge Fordham
Sent: Wednesday, November 4, 2020 12:55 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Valuation of Real Property Owned by an Estate

Jane,

The townhome is the primary asset of the estate.  There is substantial equity.  I don’t see any way to allow the granddaughter to assume the loan and remain in the townhome as it would deprive the other beneficiaries of their share of the estate.  Am I missing something painfully obvious?

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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
www.fordhamlegal.com<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.fordhamlegal.com&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=qUUzW3Bi8LfpMaqgrZjSEKJSA4pC4ZxCn-6mGuwyFbA&s=Ny9STs2TI0YVYyI5gnBKvLn2sVxOOFI1t2LId7fv2Rc&e=>

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From: <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> on behalf of Jane Bitz <jbitz at whc-attorneys.com<mailto:jbitz at whc-attorneys.com>>
Reply-To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Date: Wednesday, November 4, 2020 at 12:09 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Valuation of Real Property Owned by an Estate

Inge:

I think you are incorrect about the decedent’s loan “not remaining in place.” I replied yesterday to a different part of this thread with the following:

If the granddaughter is a beneficiary of the Estate and if the condo could be a non-prorata distribution of her share of the estate (assuming the values work out when the appraisal is done and the PR knows the “net” value), then she does not have to qualify for a refinance for the property to be distributed to her.

Garn -St. Germain is a Federal Act that protects family members of the deceased, as long as they keep the mortgage current after the death of the original person who incurred the mortgage obligation.
Garn – St. Germain Act 1982
12 U.S. Code § 1701j–3 - Preemption of due-on-sale prohibitions
(a) Definitions
For the purpose of this section—
(1) the term “due-on-sale clause” means a contract provision which authorizes a lender, at its option, to declare due and payable sums secured by the lender’s security instrument if all or any part of the property, or an interest therein, securing the real property loan is sold or transferred without the lender’s prior written consent;
(2) the term “lender” means a person or government agency making a real property loan or any assignee or transferee, in whole or in part, of such a person or agency;
(3) the term “real property loan” means a loan, mortgage, advance, or credit sale secured by a lien on real property, the stock allocated to a dwelling unit in a cooperative housing corporation, or a residential manufactured home, whether real or personal property; and
(4) the term “residential manufactured home” means a manufactured home as defined in section 5402<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.law.cornell.edu_uscode_html_uscode42_usc-5Fsec-5F42-5F00005402-2D-2D-2D-2D000-2D.html&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=qUUzW3Bi8LfpMaqgrZjSEKJSA4pC4ZxCn-6mGuwyFbA&s=0gbYR7SJy3zxrThvsnDugNvCj5DOuaEwgbiUAtGKoT4&e=> (6)<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.law.cornell.edu_uscode_html_uscode42_usc-5Fsec-5F42-5F00005402-2D-2D-2D-2D000-2D.html-236&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=qUUzW3Bi8LfpMaqgrZjSEKJSA4pC4ZxCn-6mGuwyFbA&s=gmhlb5ffFsLsbV-SiMFzh4OiIt5XjPxjSN_XdrLEYXg&e=> of title 42<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.law.cornell.edu_uscode_html_uscode42_usc-5Fsup-5F01-5F42.html&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=qUUzW3Bi8LfpMaqgrZjSEKJSA4pC4ZxCn-6mGuwyFbA&s=jDrj_a6PY2NbIE1CI0voo-__7UjzMq6IAgo-SzHWWBc&e=> which is used as a residence; and
(5) the term “State” means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, American Samoa, and the Trust Territory of the Pacific Islands.
. . . .

(d) Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—

(1) the creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;
(2) the creation of a purchase money security interest for household appliances;
(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(4) the granting of a leasehold interest of three years or less not containing an option to purchase;
(5) a transfer to a relative resulting from the death of a borrower;
(6) a transfer where the spouse or children of the borrower become an owner of the property;
(7) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or
(9) any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.

Jane G. Bitz
Of Counsel
Wolff, Hislop & Crockett, PLLC
12209 E. Mission Ave, Suite 5
Spokane Valley, WA 99206-4824
(509) 927-9700 x126
FAX: (509) 777-1800

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Inge Fordham
Sent: Tuesday, November 3, 2020 3:26 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Valuation of Real Property Owned by an Estate

Thanks, Marcus.  The decedent’s loan will not remain in place under any circumstances.  Either the granddaughter assumes the loan (based on approval of the mortgage company, which will result in transferring the mortgage into her name) or she gets refinanced.  Assuming she cannot qualify for either, the estate will be forced to sell.

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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
www.fordhamlegal.com<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.fordhamlegal.com&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=Qv3UdBdiOHytU2IdyqIk7dr8Qwcv-9b6HsCBVjxW6fk&s=HgHl5kxiZAe7ccOD8EEuIcYG_O9bKyN0vh892k4ACZs&e=>

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From: <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> on behalf of Marcus Fry <mfry at lyon-law.com<mailto:mfry at lyon-law.com>>
Reply-To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Date: Tuesday, November 3, 2020 at 3:15 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Valuation of Real Property Owned by an Estate

Inge:
My 2 cents.

I would get a current market analysis (or broker’s opinion of value) for the realtor (some do it for free others charge $50-$150) and then have the PR communicate with the other heirs to see if there is any disagreement with regard to value.  Saves the cost of a formal appraisal if there is no dispute based upon the CMA/Broker’s Opinion.  I would use current value for the purposes of distribution rather than date of death value.  No different than $100000 sitting in the estate account at death, and then being worth $100,500 at time of distribution.

Note: Not a big fan of the PR leaving decedent’s loan in place for decedent’s granddaughter.  Make sure you send NTC to lender and make sure granddaughter provides proof of homeowner insurance to provide as much protection to PR as possible.  I would say get an indemnity, but given that granddaughter has poor credit, may not be worth anything.

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Inge Fordham
Sent: Tuesday, November 03, 2020 2:56 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Valuation of Real Property Owned by an Estate

That’s my thought as well.  Just wanted to see what other folks do under these circumstances.  For purposes of determining estate income tax, do we need an appraisal for the value at date of death and at also at date of disposition?  I’m not an accountant, but my understanding is that an increase in the value of the property in excess of $600 in a calendar year triggers estate income tax.

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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
www.fordhamlegal.com<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.fordhamlegal.com&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=Qv3UdBdiOHytU2IdyqIk7dr8Qwcv-9b6HsCBVjxW6fk&s=HgHl5kxiZAe7ccOD8EEuIcYG_O9bKyN0vh892k4ACZs&e=>

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From: <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> on behalf of Eric Nelsen <Eric at sayrelawoffices.com<mailto:Eric at sayrelawoffices.com>>
Reply-To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Date: Tuesday, November 3, 2020 at 2:42 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Valuation of Real Property Owned by an Estate

For purposes of valuing a distribution to the granddaughter, where other beneficiaries could be prejudiced if it's misvalued, I would get a certified appraisal. I never used assessed value for these situations.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Inge Fordham
Sent: Tuesday, November 3, 2020 2:16 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] Valuation of Real Property Owned by an Estate

Colleagues:

In past probate cases I have handled with real property owned by the estate, the PR or administrator has either sold real property or conveyed it to a sole beneficiary.  I now find myself dealing with a situation where the estate owns a townhome in which the granddaughter (one of several beneficiaries under the will) is living and would like to retain.  It is encumbered by a mortgage and unlikely the granddaughter can get approved to refinance or assume the mortgage.  How does the PR determine the net value of the townhome - it varies widely depending on whether the value is determined by the tax assessed value or appraised value.  I have seen attorneys use both.  Is there a bright line rule?

Thank you,

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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
www.fordhamlegal.com<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.fordhamlegal.com&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=QdyRUSI4IjN8jHONJV63CB7QV6AxGix1TpuYc8c6Rww&m=Qv3UdBdiOHytU2IdyqIk7dr8Qwcv-9b6HsCBVjxW6fk&s=HgHl5kxiZAe7ccOD8EEuIcYG_O9bKyN0vh892k4ACZs&e=>

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