SPECIAL BROKERAGE RELATIONSHIPS

SPECIAL BROKERAGE RELATIONSHIPS

From time to time a broker may have occasion to make a sale of property included in the estate of a decedent.
Less frequently a broker may represent a Board of Education or the State of California. Finally, a broker may
be innocently embroiled in a lawsuit by merely holding assets claimed by two or more contesting parties. The
following comments throw some light on these special situations.

1. Probate Sales and Commissions

The representative of the estate of a decedent may initiate a probate sale by seeking offers to purchase directly
or through one or more brokers. (Probate Code § 10150.) The executor or administrator may sell the real
property of an estate where it is found to be in the best interests of the estate. Whether the sale is public or
private, it must be advertised by publication or posting of notice. (Probate Code §§ 10300 et seq.) Acceptance
of an offer by the estate representative is subject to probate court confirmation. The representative of the estate
of the decedent with court permission may grant an exclusive right to sell the property for a period of not to
exceed 90 days. (Probate Code § 10150.)

The broker's compensation and the court confirmation procedure is set forth in Probate Code § 10160 et seq.
Initial information concerning the property, the broker's compensation, and the court confirmation procedure, if
any, can be furnished by the attorney for the estate. If a bank or trust company has been appointed
representative, interested persons may apply directly to the trust office of the institution for information. If a
public administrator is the estate representative, inquiry may be made at that office. The broker should ask
about the Independent Administration of Estates and whether the administrator is entitled to sell the property
without the court's confirmation, but with notice to all beneficiaries. (Probate Code § 10400 et seq.).

An offer to purchase must be for a price which is not less than 90% of the property's appraised value (appraisal
date within one year of sale) and it must conform to statutory requirements, the rules of the local superior court
governing probate sales and the terms stated in the public notice of sale. The court will make efforts to assure
the executor or administrator of the estate has exposed the property to the market. (Probate Code § 10160 et
seq.).

The person making the offer returned to court for confirmation, and the broker representing that person, should
attend the confirmation hearing whether or not that person plans to participate in higher bidding for the
property. All prospective bidders and brokers should be familiar with local rules of court governing advance
bidding, deposits required and similar matters. Ordinarily after court confirmation of a sale, normal escrow
procedures are used to consummate the transaction on the terms and conditions approved by the court.

The payment of commissions to brokers participating in probate sales is generally within the discretion of the
probate court subject to certain standards prescribed by statute. For example, § 10162 of the Probate Code
provides that the compensation of the agent producing a successful bidder shall not exceed one-half of the
difference between the amount of the bid in the original return and the amount of the successful bid provided
that the limitation shall not apply to any compensation of the agent holding a contract with the estate
representative pursuant to § 10150 of the Probate Code.

It is obviously important that the broker who procures the offer which is accepted by the estate representative
and returned to the court for confirmation have a written contract with the representative. In the case of an over
bid in open court at the confirmation hearing, it is a matter of importance to the broker that the court be
informed that a licensed broker has produced the bid in question. If a purchaser not represented by an agent has
his overbid confirmed, the listing broker may receive a full commission on the original bid only. (Probate Code
§ 10162.5).

The court in its order confirming the sale will set forth the amount of commission to be paid and the division of
the commission if more than one broker is to be compensated. (Probate Code § 10160 et seq.)> Needless to
say, where an agent is also the purchaser, the court will carefully examine "the substantiality" of the agent's acts
in putting together "the best deal," for the estate, especially where the agent expects a commission. Estate of
Levinthal v. Silberts, 105 Cal. App. 3d 691 (1980).

2. Board of Education Sales Commissions

The Education Code provides that the governing body of any school district may pay a commission to a
licensed real estate broker who procures a buyer for real property sold by the board. The sealed bid for the
property must be accompanied by the name of the broker to whom the commission is to be paid and by a
statement of the rate or amount of the commission.

In the event of a sale on a higher oral bid to a purchaser procured by a qualified licensed real estate broker,
other than the broker who submitted the highest written proposal, the board will allow a commission on the full
amount for which the sale is confirmed.

Note: One-half of the commission on the amount of the highest written proposal will be paid to the broker who
submitted it, and the balance of the commission on the purchase price to the broker who procured the purchaser
to whom the sale was confirmed.

3. State of California Sales Commissions

From time to time, the State of California has real property for disposal. When bids received for this property,
after advertising, do not equal its appraised value, the Department of Finance may authorize employment of a
licensed real estate broker to effect the sale on a commission basis. This procedure does not apply to surplus
real property of the State Division of Highways.

4. Dismissal of Broker-Stakeholder from Suit

The real estate broker as escrow holder has often been named as a defendant in a law suit to recover money
which the broker is holding as a trustee in a transaction. All too often the licensee must retain counsel and pay
the expense of defending in such a suit.

Under the Code of Civil Procedure, where the only relief sought against one of several defendants is payment of
a stated amount of money, such defendant may upon affidavit that he or she is a mere stakeholder with no
interest in the amount and that parties to the action have made conflicting demands upon the defendant, and
upon notice to the other parties, apply to the court for an order discharging said broker from liability and
dismissing defendant-broker from the action. This is known as an interpleader action. The defendant must
however deposit the amount in dispute with the clerk of the court. The court may then dismiss this suit as to
defendant-broker.

The broker need not wait to become a defendant in a lawsuit. If there is a fund disputed by two or more
persons, the holder of the fund may file an interpleader action. The holder would deposit the fund with the
clerk. The pleading would allege that the holder has no interest in the fund, and it would require the other
parties to litigate their claims. The holder of the fund may be awarded attorney fees and costs. The complaint
in interpleader can be used when there is a dispute between buyer and seller concerning a deposit in a failed
transaction.