Selling of Interest in a house - Posted by Jeanette Johnson

Real Estate Investing Real Estate Law
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Posted by John Merchant on June 11, 2007 at 07:34:12:

No, you misunderstood.

The whole estate, often, is cash-poor but asset rich and the big need is to convert some or all of those assets into cash so as to pay final debts of deceased and costs of estate administration.

The lawyer isn’t going to be able to put his fee out in front and get paid ahead of everybody else, but ANY cash coming in helps pay all those bills including the atty’s fees.

In an Intestate Administration (no last Will found or filed for probate)the probate court decides what to sell and for how much, then the distribution of the liquid cash, payment of bills, etc.

But with no cash, nothing can happen and nobody’s going to get paid so things have to be sold, cash raised to pay bills.

In a hefty percentage of all Intestate Administrations there’s little cash, so if you don’t hear from the lawyer pretty quick, send a letter to the Probate Court (the probate judge) and he/she’s going to be interested in hearing what you have to say as it’s the judge’s job to find the cash to pay the bills if possible…that Judge will then tell the lawyer what he/she WILL do, and you will then probably be hearing from the lawyer.

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Selling of Interest in a house - Posted by Jeanette Johnson

Posted by Jeanette Johnson on January 25, 2006 at 21:45:10:

If a home is owned by two homeowners who are both on a deed, can one homeowner sell his interest or share of the home to another party? If not, what can the initial homeowner do if this is done?

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Re: Selling of Interest in a house - Posted by Brian (UT)

Posted by Brian (UT) on January 26, 2006 at 09:26:22:

Jeanette

Yes, an owner can sell their partial interest in a property to someone else. The problem is getting what it is actually worth in relation to the fair market value of the property. Partial ownerships are usually sold at very deep discounts.

Brian

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Undivided interest not readily saleable - Posted by John Merchant

Posted by John Merchant on January 26, 2006 at 12:12:48:

Through a real fluke, I got a 1/2 undivided interest in a property.

My co-owner, a real operator, in the pejorative sense, after she gave me a deed for my half interest, which I purchased from her for what I thought was great bargain, attempted to morgage my half along with her half, together with a number of other slumlord properties she owned.

Really weird, but I’d forgotten to record my deed for some months, but one day found it in my file and realized I’d better record, which I did.

The very NEXT DAY, partner Betty was going to finalize her new loan, and only with the last minute title co. sweep was my deed found.

Her new loan proceeded, although encumbering her 1/2 interest only in our joint property.

She later lost all her property, including this 1/2 interest, in D/T foreclosure.

O----- Bank (those southern “gentlemen”) ended up with the REO and I’ll tell you, were extremely difficult and obnoxious to deal with.

We finally got together, barely, on price and terms to sell the entirely to a new buyer.

I learned in the interim that my 1/2 interest was virtually unsaleable…heck, I wouldn’t have paid more than peanuts for anybody else’s half, so totally understandable.

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Re: Undivided interest not readily saleable - Posted by Brian (UT)

Posted by Brian (UT) on January 27, 2006 at 06:54:05:

John

Your right, that’s why I only bought partial ownerships on good properties for peanuts. I then offered my share to the other owner for a more then fair price and if they didn’t buy I started a partion suit. Only had to actually go to court once, most of the time the other owner knew a good deal, or didn’t like where things were going when served with the suit.

Brian

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Hey, smart investor here! - Posted by John Merchant

Posted by John Merchant on January 27, 2006 at 09:52:09:

Great plan & I applaud your using it to buy otherwise un-saleable undivided interests.

A Partition Action is one of the simplest to file and try, so it is interesting that it’s so threatening to other owners…but I’ve found the same thing and it’s one more reason that BUYING undivided interests is a great plan.

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Re: Hey, smart investor here! - Posted by Natalie-VA

Posted by Natalie-VA on January 27, 2006 at 10:13:24:

John and Brian,

Buying partial interests is definitely intriguing to me. Are these deals that you just stumble into, or are there some angles to finding them that you might share? Anything I can look for in the land records, etc?

–Natalie

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child support - Posted by Anne_ND

Posted by Anne_ND on January 30, 2006 at 12:08:50:

Dead Beat Parents who leave a marriage or relationship and subsequently get sued for child support (often takes a few years) may end up having their portion of real property sold at foreclosure to pay back child support. Few people want to bid on these so you can get them cheap when you find them.

Anne

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Re: Hey, smart investor here! - Posted by Brian (UT)

Posted by Brian (UT) on January 29, 2006 at 12:02:34:

Natalie

In my case I became aware of partial interests when a investor client of mine confessed to where he got many of the properties he was selling. This was in california and at that time the divorce law in california didn’t have a automatic stay like it does today.

He would follow the divorces and find an angry husband and buy his share for peanuts telling the husband that he was going to move into the house and make her life miserable, amd that is what he did. He then made the offer to buy her out or she could buy him out.

The partials I personally bought were ones I stumbled into while conducting business but remembering that there could be money there because of my investor client I took a shot and it worked. I never formally chased these leads because it didn’t seem like the volume was there to justify it.

I think the message here is don’t automatically walk away if you find one.

Brian

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Finding the RE partial interest - Posted by John Merchant

Posted by John Merchant on January 27, 2006 at 12:11:25:

The case I related was one in which I entered as a lender, basically, intending to make a loan to a REI, but where I decided, and got agreement in writing for, that I’d get a deed for a partial interest to secure my loan…

I’ve done a number of RE loan deals where I, as lender, took a deed, or as borrower, gave the lender one, to secure the loan. I’ve used a lot of OPM this way, and by having the money guy hold the deed, he knows he’s protected.

I’ve been doing some thinking about how to find other “odd couple” partials.

I’m remembering a lot of these partials, owned by disparate and frequently antagonistic co-owners, when I was in active law practice…so it seems to me that lawyers, specially those with business and probate practices, would probably come across these frequently.

I was involved in a number of hostile and unfriendly heirship situations, when probating a will, or representing one of the heirs in trying to protect his/her interests in the probate estate.

And often there was an heir (or several) who was in the position of owning a minority interest in a property and who would have gladly sold it for just a pittance.

So following this line of reason, it seems to me that a small ad in one of the cheap, rag type courthouse newspapers or periodicals that lawyers read, might be the best avenue for finding the odd partial seller.

AlI larger counties and cities have such legal “rags” and their ad space is relatively cheap.

And maybe a little ad like this would pay off:

"Hey, counsel, do you represent an heir with a small, undivided interest in Realty? I BUY UNDIVIDED PROPERTY INTERESTS FOR CASH (xxx)xxx-xxxx "

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Re: Finding the RE partial interest - Posted by Bob Smith

Posted by Bob Smith on March 10, 2006 at 12:41:09:

What’s your exit? How are you bringing the other guy to the table, so he’ll buy you out or you’ll buy him out? This is especially problematic when the other party lives in the property, so they’re getting a real sweet deal: use and enjoyment while not paying its full cost. I’ve been talking to some guys who were telling me that, at least in CA, you should expect a partition to take 18-24 months and cost $25-50k in legal fees (not to mention the cost of your time).

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What to do with the partial interest - Posted by John Merchant

Posted by John Merchant on March 10, 2006 at 16:55:23:

Looks like a PA will be necessary to get your friend out and get you to a cash-out point.

However, it doesn’t necessarily have to be the present partner(s) who have to do this…and I’m confident your interest might be sold to an REI, maybe a lawyer REI, who’d then do the PA without any regrets.

I’ve seen and bought RE that was for sale at a bargain price primarily because of such a mess or bad tenant, etc…the Seller just didn’t want to deal with it and wanted rid of the problem.

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Re: What to do with the partial interest - Posted by Bob Smith

Posted by Bob Smith on March 11, 2006 at 23:45:36:

Selling to the lawyer sounds like it could work, at least until he sees your ad in the legal rag and puts out his own to cut out the middleman (you).

I like the idea of partial interests as a strategy, but a partial interest may not be much of a bargain if the costs I cited are at all realistic. After all, the point of the exercise is to make money, not make the seller’s problems your problems. Without at least the threat of a big stick how do you get the other tenants-in-common to the table?

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Option - Posted by John Merchant

Posted by John Merchant on March 12, 2006 at 10:38:51:

“Selling to the lawyer sounds like it could work, at least until he sees your ad in the legal rag and puts out his own to cut out the middleman (you).”

To protect your interests, of course you’d need to have a written option agreement with the seller, just as in any other RE deal.

Every RE agreement, to even be valid, must be in writing, and it would never be wise to embark on anything on a property without specific written rights.

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Re: Option - Posted by Bob Smith

Posted by Bob Smith on March 12, 2006 at 11:34:08:

I wasn’t thinking about the need for a written agreement. I was thinking about selling to a real estate lawyer as your usual exit strategy for a partial interest purchase. Then again, most lawyers are anti-entrepreneurs, so maybe they won’t bother to undercut you. It would be best, I think, to deal with the other co-owners, but what brings them to the table to make a deal with you?

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Lawyer needs cash for fee - Posted by John Merchant

Posted by John Merchant on February 28, 2007 at 19:51:13:

Lawyers are in my experience, normally not interested in any kind of fee but cash, as their landlords (& staff,families, etc.) need to eat too.

I’ve found lawyers, almost without exception, very interested in helping their clients sell their partial interests for cash NOW.

I’d bet that in at least 75% of all cases filed in your courthouse, civil and criminal, there’re some fees owed by the client that couldn’t be paid before the trial or hearing…so those lawyers want to be paid now.

So if you can show any laweyer how his client might sell any asset for cash now, you’re going to be popular guy.

And the lawyer as a possible competitor?

No way, as that’s not a lawyer’s nature, no matter how avaricious she might be…there might be $500k n other interests that she knows about, but all she cares about is the bucks she’s owed.

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Re: Lawyer needs cash for fee - Posted by M. Osterman

Posted by M. Osterman on June 11, 2007 at 07:22:31:

John,
I’ve been culling probate leads for sometime with no luck. I’m in California and think that my market has much to do with the lack of owners interest to sell at a discount since this market has been really smokin. Now it’s differnt and the phones ringing.

I’ve been trying to figure out a way to work with attorneys, I do market to them from time to time with little or no luck and I think this could be a great way to get in the door.

My question is this. How are you getting the attorney cash? If I’m buying the interst of an heir, when or how does the attorney get paid NOW?

Thanks and if you could elaborate it would be helpful.

Mike