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Land News and Notes - Leon R Miller Co

A Family Inheritance Nightmare

July 2nd, 2014 . by leonmiller

Several years, I sold a farm that three brothers and three sisters had originally inherited from their parents in 1968. In 1975, one of the sisters died.  She was a widow and her three children (we knew of only two at the time of the sale) inherited her 1/6 share ownership of the farm.  A second sister died in 1984.  At the time of her death, she was  married and had two children - a son and a mentally disabled daughter.  In 1990, her husband died leaving his entire estate (which he believed included his wife’s 1/6 interest in the farm) to the son who was caring for his sister.

We listed the property in June.  By early August, a contract had been signed and the closing was set for September 1st.  The Title Company requested a copy of all divorce decrees from the three sellers who had been divorced and remarried.  One of the decrees showed that an ex-wife had not signed the proper documents at the time of the divorce.   Legally, she had an interest in her husband’s inheritance.  After a few tense days for the ex-husband, she signed a quit claim deed that gave up any interest she might have claimed to the property.

Next, the Title Company determined that one of the dead sisters had three children and not two.  The third child, his wife and family were in the Federal Witness Protection Program. Two weeks later with the help of an anonymous source, I found him. He and his wife agreed they would sign the deed, but the time and place would be determined later and I was to be ready to meet on a very short notice. Then a major problem surfaced!

The Title Company discovered that the second sister died without a will. This meant that her husband inherited only one-half of his late wife’s interest in the farm and their two children had inherited the other half.  The intent of the parents had been for the son to receive 100% of the mother’s interest in the farm for taking care of his mentally disabled sister. Now the brother learned that legally he was entitled to only 50% of his mother’s interest in the farm.  Since he was not his sister’s legal guardian, the Court would have to appoint a guardian to represent her in the sale of her share of the farm.   Furthermore, the brother would have to go to Court against his sister’s guardian to establish who was to get the heir’s share of the farm.

An attorney was appointed to act as a guardian for the sister.  The Court ordered that the mother’s interest in the farm be appraised as of the date of her death in 1984.   Because I had been selling the land in the area since 1967, the Court accepted my appraisal of the property.  Then, nothing seemed to happen.  Sixty days had passed since the scheduled closing and no one seemed to know when the Court would make a final decision. 

The sellers were becoming concerned.  Suppose another heir died before the sale was closed?  Or, what if one of them became ill and could not act on their own behalf?   They wanted to close the sale as quickly as possible.  I offered a suggestion to the Title Company and they agreed.

The Title Company would close the sale.   All of the  owners would get their share and the Title Company would hold the disputed 1/12 share in an escrow account. Once the Court made a decision, the Title Company would pay the money to whom the Court designated. The sale closed in December - 90 days after the scheduled closing.

Three months later the Court ruled that 1/2 of the mother’s share of the farm (or 1/12 of the sale proceeds) would go to the brother as the parents had wished. But, by this time it didn’t matter to the brother. Here’s why: the 1/12 disputed share of the sale was $15,580. The Court costs and legal fees amounted to $14,250  

Leaving Land to Your Kids (and their spouses)

June 2nd, 2014 . by leonmiller

Let’s say you have three kids and are planning to give them the farm.  If all three are married, did you know you are really leaving the land to six people?  How?

The Missouri courts have made in clear that a spouse has “ownership” in real property inherited or gifted to their spouse.  Their name does not have to appear in the will or on the deed.  There are few exceptions and your lawyer can tell you about them.   Here are a few incidents where unreasonable spouses turned an inheritance into an unpleasant event.
 
In the mid 1900’s, I met with two sisters and who, with their brother had inherited 120 acres of Franklin County land.  On the day of the meeting, both husbands accompanied me and during the land inspection one bragged about his deer hunting experiences on the property.   Afterwards, the sisters and I sat down at the kitchen table while the two husbands stayed in the living room.

The sisters and I talked about the property and when I explained that the title company would require the spouses to sign the deed, a loud voice came from the living room, “I’m not signing a thing!”  It was the deer hunting spouse!  His wife appeared embarrassed but didn’t say a word.  I repeated my point and again I heard, “if I have to sign the deed, then it ain’t selling.” With that, I thanked them for their time and left.  During the following two weeks the other sister and her brother called me several times.   They desperately wanted to sell.  They had tried to reason with the brother-in-law and even offered to sell their share to him, but he said no.  Time past and a few years later his wife died.  Now he owned a full one-third interest in the property. Today, the remaining sister and her brother are joint owners with the brother-in-law in a much damaged relationship.   This was not the intent of their late parents.

Two sisters signed a contract to sell 80 acres in Montgomery County they had inherited from their mother.  A few days before closing, the title company notified me of a problem.  One of the sisters had divorced after she had inherited the property and the ex-husband had not deeded over his spousal interest in the land at time of the divorce.   Since the sister and her former husband were not on good terms, the attorney for the title company agreed to contact him. The next day a lawyer representing the ex-husband notified the title company that her client would not transfer his spousal interest to the land.   Finally after two years and several thousands of dollars of legal expenses, the ex-husband agreed to “give up” his spousal interest for a price.     In order to sell the land, the sister had to meet his demands.  At the time of the divorce, the sister believed that since the 80 acres had been inherited, her husband had no interest; therefore she had not told her lawyer about her ownership in the land.   Big mistake.

In the late 1980’s, I sold a Warren County farm that had been inherited by 10 children.  The contract was signed by the 10 children, but only 9 spouses.  That’s when I learned that one of the heirs was getting a divorce and his soon to be ex-wife had been advised by her attorney not to sign until she was guaranteed 50% of his inheritance. The husband argued that this was his inheritance and not hers.  The closing was delayed. After weeks of haggling and considerable pressure from his siblings, the husband agreed to her demands.  Then the day before closing, the wife’s attorney notified the title company that his client would not sign the deed until she had the check in her hand.  Typically, the title company would disburse the funds in 10 check, each made payable to the heir and their spouse.  This was not acceptable to the attorney.  So, the title company came up with the solution.
 
The proceeds would be paid out in twenty checks, rather than ten.  Each heir and their spouse would receive a check, but that check would be made payable to both parties. So, the heir and their spouse would have to endorse each check before either check could be cashed.  

At the closing, the husband and soon to be ex-wife sat across the table from each other with their attorneys along with 9 other couples.  The title company gave the deed to the husband, which he signed.  The deed was then handed to the ex-wife along with one of the two checks made payable to her and her husband.  She signed the deed and endorsed her check.  The husband endorsed his check.  Then each slowly slid their endorsed check across the table until their hands were on both checks.  Then they slowly pulled back the exchanged check and their attorneys verified that the other had actually endorsed the back.  As I look back, this was one of the strangest (and funniest) closings I had ever witness.  The checks were exchange much like a prisoner exchange.  This could not have been what the late parents would have wanted!

All of these problems could have been avoided.  If you are planning to will your real estate to the kids, consult with an attorney.

Listing with a Friend, Relative, or Neighbor is Risky

May 2nd, 2014 . by leonmiller

When business decisions are clouded by personal relationship, bad things can happen. Last week, I received an email from a landowner who wanted advice on how to sell his land. The land had been listed for two years and no offers had been received. He ended his email with “… the real estate agent is a good friend and I would never consider listing with anyone else.” Ironically, a few weeks earlier I had spoken to his broker.The broker said he didn’t know how to tell the seller that the land was over priced without jeopardizing their friendship. Their friendship was interfering with the broker’s need to be candid with his client.

A few months ago I got a call from a gentleman telling me of his dilemma. He and his wife’s brother bought 150 acres about ten years ago. Then five years later they decided to sell. His brother-in-law insisted that the land be listed with his wife, a St. Louis residential agent. This gentleman felt obligated and agreed; however, when the wife’s marketing efforts fell short, he suggested that the property be listed with a real estate agent who was more qualified. Unfortunately, his brother-in-law and his wife took the request “personal” rather than “business.” Since then, the families haven’t spoken and this has created tension among other family members. This problem was created because the arrangement was based entirely upon agent’s personal relationship rather than the agent’s qualification to sell land.

I recently met with a potential client who is the executor of an estate which included a125 acre farm. About two years ago, they decided to sell, so he listed it with his next door neighbor. After a few months of no activity, they asked the agent if they should lower the price. The agent’s response was, “You’ll have to tell me what you want because you might be angry if I suggest a price and since we are neighbors I don’t want that to happen.” When the listing agreement expired, the executor would not renew. The agent/neighbor was offended. Now a few of the other heirs are angry with the executor because he listed with the agent only because he was a neighbor. There is even a greater problem here. A good argument could be made to the court that the executor had failed to perform his fiduciary responsibilities.

 To avoid similar pitfalls here are questions to answer before listing with a friend, relative and/or neighbor:

    Does the person have the knowledge/experience to sell my property?

      Do I feel obligated to list because this person is a friend, relative and/or neighbor?
      Do I really want this friend, relative or neighbor to know my business?
      Will my information remain confidential with my friend, relative or neighbor?
      If this person was not a friend, relative and/or neighbor would I still list my land with them?
      What will be the consequences if I am dissatisfied and must terminate this person as my agent?

It’s not always easy to say “no” to a friend, neighbor or relative who wants to list your land. On the other hand, if the answers to any of the questions above make you uneasy, then the word “no” may be the best for all parities. (In the end, you might learn that they didn’t want the listing but only asked because they felt obligated to do so.)

Buyer Agency (The Myth)

March 2nd, 2014 . by leonmiller

   Under traditional real estate, when two brokers are involved in a transaction, the seller’s agent shares a portion of the real estate commission paid by the seller with the cooperating agent.  And of course, the higher the price paid by the buyer, the larger the commission to be split between the agents.  This fact alone is why the seller is due a fiduciary duty and the buyer is due something less.  A few years ago, efforts began to promote the “buyer agency” so the buyer would receive as equal representation as the seller.  State laws and regulations were passed and many real estate agents now claim to be representing buyers, but do they?

The Problem:  In the real world, any transaction where the real estate commission is paid by the seller, even the buyer’s agent wants to make sure that the seller likes the deal, if he is to get paid.  The buyer agent is mentally representing the seller.  The buyer wants his agent to negotiate the lowest price possible, but to do so means the agent will make less commission.  The buyer agent’s objectives and the buyer’s objectives are conflicted.

So what law, regulations or disclosure is going to persuade the buyer agent to negotiate for a lower purchase price that will result in a small commission check? Unfortunately, no rules can change human nature.

The Solution:  As long as the buyer agent’s income is from the seller and that income is based on a percentage of the purchase price, buyer can never be assured they have the representation that state laws and regulations were intended to give them; therefore, the method by which buyer agents are paid must be changed.  Buyer agents need to be paid by the buyer and that fee should be a flat fee rather than a commission or percentage of the sale.

Buyer agents cannot expect a buyer to pay unless they provide a complete service.  A complete service would include calling expired listings, contacting for sale by owner, and searching out new listings before they are placed on the multiple listing service.    When this occurs, the laws of the State and the laws of human nature will provide buyers with the same representation as presently received by sellers.

Lender Problems

February 2nd, 2014 . by leonmiller

 In 1988, THE SELLER who was single purchased a home with 10 acres in Lincoln County.  The next year, she added an adjoining 50 acres.  She married a year later.  The marriage had been on shaky grounds from the start but reached a breaking point in 1995, when her husband forged her name on credit cards and loan papers.  She divorced him soon afterwards.  In 2005, she refinanced the home and 10 acres with U.S. Bank. (So she thought)

When THE SELLER called me, she was unemployed.  The monthly payments had become difficult to make.  In addition, she had not been able to maintain the home and its value had declined.   She was ready to allow the bank to foreclose on the home and ten acres.   She thought that she would still have 50 acres free and clear.  The only problem with this plan was that she would not have a home or the ability to buy a home.  I suggested a better solution.  She would sell the land, keep the home with the ten acres, pay off the U.S. Bank loan, make needed repairs to her home, and set aside the  remainder of the proceeds for her retirement.  She agreed and we listed the 50 acres.

Within a few weeks, a buyer called.   THE BUYER had seen the property showcased on the www.leonmillerco.com website.  Within a few days THE BUYER  and THE SELLER signed a sale contract.   THE BUYER would have 30 days to obtain financing.   Then the property would be surveyed.  Seldom are sales simple and this one wasn’t either… for THE BUYER OR THE SELLER.

THE BUYER’S lender, Mortgage Solutions LLC, typically did not make land loans but agreed to make this one.  They needed an  appraisal.   Instead of contracting a local appraiser, the lender hired an appraisal consultant from California.  In turn, this  consultant was to hire an appraiser in the area of the property.   When THE BUYER & I asked for the name of the appraiser, Mortgage Solutions LLC stated that their policy did not allow any contact with an appraiser.   The California consultant assured Mortgage   Solutions LLC that the appraisal d be completed in 10 days.

Well, ten days later the appraisal was not completed.  For a week, Mortgage Solutions LLC would not return our telephone calls.  Finally, 10 days after the appraisal was supposed to be completed, Mortgage Solutions LLC called.  The news wasn’t good!
The lender said the appraiser hired by the California appraisal consultant had not done the work.  So the consultant had hired   another appraiser and the appraisal would be completed within a week.  This time, THE BUYER & I demanded and got the name of
the appraiser.   THE BUYER called the appraiser and was assured the appraisal would be done on Friday, three days before the end of the 30 day financing contingency.

On that Friday, Mortgage Solutions LLC called to tell THE BUYER that the property had appraised for the selling price; however, the appraisal had to be sent to and approved by the California consultant firm.  They assured him that the California consultant would respond by Monday, which was the final day THE BUYER had to obtain financing.  THE BUYER went home for the weekend, satisfied that all was going well until Sunday afternoon.

Sunday afternoon, THE BUYER decided to do a search on the internet for the California appraisal consulting firm.  What he found stunned him!  A notice on the website stated that the company had gone out of business the previous Friday.  THE BUYER called me.

Monday morning we called the appraiser.  By this time the appraiser also knew the California consulting company was no longer in business.  The only solution was to send the appraisal to the lender and hope they would accept it.  They did and by mid afternoon, Mortgage Solutions LLC approved the loan, just a few hours before the deadline.  While THE BUYER & I were dealing with lender issues, the title company was uncovering problems for THE SELLER.  And these problems also involved lenders.
THE SELLER had obtained a $45,000 loan from U.S Bank in 2005 that she understood was to finance the house and ten acres.   It is possible that the U.S. Bank loan officer (who typically makes home loans)did not understand land legal descriptions; thus he included all of her property instead of the 10 acres.  This mistake would have been terrible if THE SELLER had allowed U.S. Bank to foreclose.  Her entire 60 acres would have been auctioned on the court house steps.  This error would not have hindered this sale, but the second issue could have.

The title company found a second recorded deed of trust dated 1991 to the Bank of Old Monroe.  The unpaid balance was $6,600 plus  20 years of accrued interest. This could have totaled to more  $30,000. Since this deed of trust preceded U.S. Bank’s deed of trust, U.S. Bank’s note was not in a first position as they had intended. Instead, their loan was in a secondary position behind the Bank of Old Monroe.  More than likely, they would not have made the loan if they had known that fact.  Either the title company in 2005 had

found it and U.S. Bank officials didn’t read the title commitment.      In any event, THE SELLER had stated in her loan application that no other loans existed.  She had committed fraud if this were not true.  THE SELLER maintained that the loan at the Bank of Old Monroe was not valid.  Here’s why.

In 1995 she received a notice of foreclosure from the Bank of Old Monroe.   She was unaware that a loan was on her property.  When the banker showed her a 1991 note and deed of trust with the signature of she and her husband, she saw that her signature had been forged.   Her husband (who was now her ex) had forged her name on the loan papers.  The documents had been  notarized by the secretary of the husband’s attorney.  The bank brought suit against the husband and notary and THE SELLER agreed to testify for the bank.  Then a day before the court date, a bank officer called.  Her        testimony would not be necessary because the notary’s bonding company made a settlement and the loan had been satisfied.   Now it appeared the bank had failed to record a deed of release in 1995, THE SELLER was sure that once she got in touch with the Bank of Old Monroe, the matter would be solved, but it wasn’t that simple.

When THE SELLER called the bank, she learned all of the 1995 bank officers were gone.  Furthermore, since the matter was settled    outside of court, there were no court records to support her version.  And the bank had not sent any documentation to THE SELLER that showed the matter had been resolved.   A simple solution was beginning to become thorny.   Now, THE SELLER could only trust that a bank official would be willing to search for the documents to support her claim and hope the documents still existed.
At first the young man at Old Monroe Bank who received THE SELLER’S call was skeptical, but he agreed to search the old files.  The next day he called THE SELLER.  He had located the file with the documents that supported her claim and would record the deed of release at the Lincoln County Recorder of deeds immediately. The sale closed.

THE SELLER believed that people would do the right thing, but mistakes happen.  THE SELLER was lucky.  Lucky that U.S. Bank didn’t foreclose and lucky that a young man at the Bank of Old Monroe took her claim serious and acted immediately to correct the matter.   Perhaps a larger bank with a less knowledgeable employee would not been so cooperative.

Hindsight is always 20-20, but if THE SELLER had hired an attorney these issues would never have occurred.  An attorney would have found the legal description error in the U. S. Bank loan documents.  An attorney would have insisted that the Bank of Old Monroe file a deed of release at the time of their out of court settlement.

By the way THE BUYER learned a valuable lesson.  The next time he needs a land loan, he’ll call the local bank or a land lender.