This is Rick Harmon and welcome to the Gordian Knot Show. This the beginning of season two and I’m going to change things up a little bit, alternating between solo and guest interviews. Also with the guest interviews what I intend to do is to find some great guests that you have recommended who serve the industry in the probate legal, and other legal communities in California.

So I want to give you a little bit of background about what’s come to my mind and developed over all these conundrums of well over 40 years in real estate in California, and really what it is is a format that I developed that I think has really served people and certainly served me well to simplify the way I look at a transaction opportunity. Specifically, what happens is a client is referred to us, either directly through the website, or somebody calls and it talks … They talk to one of my assistants and we get some basic information about the property.

Now this actually accomplishes a couple of things. One is that by gathering the information I have by the time I’m involved, at least I can see whether somebody is serious enough to provide information, and if they’re not, there’s really no reason to talk to them, because that basically means that they’re not motivated if they’re not going to give information.

So the ability to give somebody specific answers to general information, it can be accomplished through a website or through other material. But I found that the best effective way for me to do it, this is a format that I call Petito. You may say potato, I say Petito. Now what that stands for is property equity, title, interests, threats and opportunities.

As I go down through each one of these pieces I can look at this, it gives me a format so I kind of understand what is going on with a particular situation. Regardless of who calls me, whether it’s an attorney calls me who’s representing a client, whether it’s the client that calls me, whether it’s a third party in error or beneficiary, whether it’s a counter party with a claim secured, or unsecured lender. Regardless somebody’s calling, I kind of know where they fit in.

So I’m going to go through this real briefly with you. In the property section, the basics are what the property is, what the asset is. Now, one of the things that I like to remember too is that with the trust or estate as an example, there may be multiple assets, and this is sometimes something that we have to remind the client that when we’re coming into a matter, especially from the side or from the middle, we have no idea really how many assets are going on.

Most of our clients are really pretty modest to states that are under, well $1 million, but not always. Sometimes when I fund my other lender’s transactions as the bank, what happens is I don’t really know all the backstory. So I’ll use this format, be very, very useful. So I want to know about this property. Is it a single family residence, is it commercial, whatever, and I want to know what’s going on there. Is this property vacant? Is it occupied? Is there a situation going on that we need to know about, has it damaged, whatever, any of the thing that you would normally want to do as a real estate agent might ask, whether it be a probate or not.

I always want to know about the equity, that’s the E in Petito and the reason I want to know about the equity is because I’m an equity lender. If I’m going to do a situation and deal with it, there’s got to be enough equity for me to have some kind of a substance way to secure it as collateral, and the equity of the property is going to be … Somebody brings me a property and it’s been highly leveraged and all that, there’s not much of an opportunity as to the transactions that I do.

Most likely it’s going to be somebody who I refer to someone else, if there’s any opportunity at all. What I will do is I’ll look at this equity in the property, I’ll look at the existing lien, starting with the property taxes, if they’re current. Then I’ll start building up from there and then I’ll start looking at the first, second, third mortgages, any open liens I know about that are voluntary or involuntary liens that may be against the property. I’ll start adding those up, and kind of get a sense as to what the property situation is as it stands related to the equity.

In the title aspect, that’s the T in Petito. I’ll look at who currently is vested in the property. Now, the property taxes is what some people will look at on the county websites, and that’s basically just who is being taxed. It has nothing to do, necessarily, with who in fact is the owner of record.

So I want to know who the record owner is, you would also call legal investing. It doesn’t mean that it’s been insured, but with that title situation, I want to know if there’s one individual, and whether the individual who might be alive or not, whether it’s an entity. Is it a trust? Is it a corporate entity, like a corporation LLC? Are there other activities that I need to know what’s going on, has it been transferred frequently in the last few years, or this title has been relatively stable for a long period of time?

So with that basic information, I have the property, I have the equity, I have the title. That gives me some basics to work with. However, if the title is owned by a deceased individual, or if it’s fractionalized by way of a probate estate or a trust where I may not know, or for that matter, I guess, a corporate entity, I’m going to want to know the interests.

Now, sometimes when people call, most of the time, they know who the interests are, whether that’s going to be an heir or a beneficiary. Sometimes I don’t. Sometimes somebody brings me a situation and I have to determine that on my own, which can be very, very difficult. As a lender, I don’t really care that much who the various interests, fractional or otherwise, as long as I’m dealing with the person in charge.

This relates back to title. So somebody who has capacity, powers and authority, I could do a transaction that I want whether to encumber it or whatever, or someone else might be involved in selling it, but I don’t need to know about those interests unless there are some other counterclaims, or there’s a threat to the title which brings us to threats.

So we have property equity, title, interests, and threats. I want to know are there issues that are going on their counterclaims that are threatening title? Are there disputes that may blossom into litigation? Are there other counterclaims or threats to that title that might eliminate that?

Is there any kind of an interest at all that may become problematic? Is there, for example, a receiver involved, because the property is vacant. So in that threats I’ll also look at possession because even though it’s not one of the the acronym abbreviations, it is important to know. So basic threats that could include anything that might damage that property I want to know.

There may be squatters that may be vacant, there may be fire damage. There may be other activities that are nearby, maybe in Brownfield area. There could be a pending for closure. There could be any number of things, but I want to know about those threats, and especially how they may relate to time.

So that call comes down to the threat category. And O for opportunities. I’m going to look at opportunities in terms of how I might be able to help, or someone else may be able to help. Many times people call and I’m not the right person, or it’s not a good fit, or the client’s unwilling to cooperate, or they’re looking for something that’s just not available. They’re just not realistic.

Quite often I’ll refer clients or prospects, if you will, to other attorneys. Very frequently, other attorneys will call me looking for a solution, because I think I’m pretty well connected. I have a giant Rolodex. So what ends up happening in the opportunity section is that if I think there’s a better way to do something, I’ll send them off, or if I think it may be a good fit, I’ll take a look at it and say, “Hey, what can we do?” Including, perhaps, making a loan to the estate as a fiduciary mortgage.

So I hope that this format gives you something useful to work with. And I’m also hoping that when you are looking at the … Anything that you’re going to do in the future, if you don’t have some kind of an intake format, you may want to incorporate this Petito format. And if you ever need any assistance, feel free to contact me at the Close Probate website, and we’ll make sure that you get what you need. Hope you’re having a great week.

This episode is brought to you by, loans and solutions for cash poor California estates and trusts. You are listening to the Gordian Knot with Rick Harmon.

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