Tuesday, August 13, 2013

Living The Big Sky Life: Famous Files

Although U.S. Highway 93 (a/k/a “Pray for me, I drive 93”) was considered during my residency to be the most direct route north into Whitefish from Kalispell, there were several other north/south options into town as well. Farm-To-Market Road was an old west-of-town option. Highway 2/LaSalle Road was an east-of-town option, and where Kalispell’s Glacier Park International Airport is located. And then there was Whitefish Stage Road which ran parallel between Highways 93 and 2.

It was west of Whitefish Stage Road just south of Highway 40 that you would’ve found Wagon Wheel Road – home to the house once owned by Emilio Estevez. When it came time to exchange his humble hideaway house in the Wagon Wheel neighborhood south of town for something more desirable like waterfront property on Whitefish Lake, he listed his property for sale with local agent, Ben Singer.

Ben Singer was, and I’m assuming still is, a longtime local real estate broker who – I was told - had Hollywood connections. He was known to handle his fair share of the valley’s higher profile celebrity transactions so I had little reason to question what I was told with regard to the family connections he had. The transactional truth in dealing with Ben was hard to deny however. He was obviously getting the business somehow and it wasn’t because of his business acumen or acute attention to detail. It seemed that’s what his wife, Candace, was for, and frankly, it was a good thing he had her.

I never knew Ben before the accident, and therefore have nothing to compare things to, but I was told that after he dangerously slammed into a tree while skiing and suffered a serious head injury, he was never quite the same. No surprise there. He was lucky to be alive they said. One had to admire his spirit and perseverance in spite of it all, and far be it from me to take that away from him.

The low key sale of Emilio’s low profile Wagon Wheel Road house sometime in 1993 was hardly noteworthy … until I got an urgent phone call one morning from Ben asking me to come to his office in person to do the closing that afternoon. Not a biggie unto itself, but it was something that simply never happened in Whitefish. My office was barely three blocks away from Ben’s office and was by far the most efficient closing option. But he insisted, so I complied without really understanding what all the fuss was about.

I showed up at Ben’s office as agreed, briefcase in hand, and was ushered into a poorly lit windowless conference room where Emilio and then wife, Paula Abdul, were seated around the closing table. Emilio was seated at the head of the table with his back to the door. Paula was seated near the middle of the table to the right of Emilio backed up against the wall, and Ben sat in a chair in the corner between Emilio and Paula, also backed up against the wall. I chose to sit at the table to the left of Emilio and across from Paula where I could see everyone in the room.

After the introductions were made, I pulled the closing paperwork out of my briefcase and began the signing. The house was bought by Emilio prior to his marriage to Paula so she was not an owner/seller of the Wagon Wheel house, and was in attendance as merely an observer. My dealings were solely with Emilio at this point.

His intentions were to sell the Wagon Wheel house utilizing a 1031 tax deferred exchange which required legal agreements/paperwork be prepared by the MOWB (and in my opinion, inept) Kalispell attorney Ben had referred him to, and the exchange accommodator chosen by said attorney whose sole function was to act as a neutral third party to the transaction for the purpose of holding the sales proceeds from this closing in a trust account only he controlled for later use in the exchange purchase of a new lakefront property yet to be named.

1031 exchanges are done all of the time in the investment real estate business. The tax code is complicated and the requirements for a successful tax deferred exchange are very specific so the details are extremely important. One of the most important requirements for a successful exchange stipulates that the seller should never have control over the funds received from the sale of the exchange property, or the “down leg.” Another requirement is that ownership to the newly purchased property, or the “up leg,” must match the vested ownership of the down leg property at the time of sale.

The exchange accommodator for Emilio’s transaction was a Kalispell accountant whom I’d never met (other than over the phone) but had transacted other uneventful 1031 closings with. I had no real reason for concern this day, but I would be lying if I didn’t say the entire 1031 accommodator thing has always disturbed me, for a variety of reasons - the primary being that the accommodator can theoretically be anybody. No insurance or bonding required, no protection for the seller and its funds being held in trust by some unknown the seller is supposed to trust - a person who could essentially abscond with enormous sums in cash proceeds if so inclined. And believe you me, it’s happened.

Let me add too that the IRS typically does not care if the seller’s down leg proceeds have been embezzled by an unscrupulous accommodator. It will require the seller to pay any capital gains tax owed on the proceeds realized from the sale of the down leg should the up leg purchase not be consummated as required by the tax code. No matter the reason.

As I began moving paperwork by Emilio for signature, we chatted casually about the house being sold and the ping pong table being left behind, but when we got to the exchange part of the closing, there was nothing casual about his examination of the attorney prepared paperwork. His sales proceeds were relatively substantial and quite unexpectedly, he focused his piercing blue eyes upon me and asked the million dollar question no seller had ever asked me before: “What’s to keep this accommodator from taking off with my money?”

I could see Ben’s face in the corner go apoplectic red as his eyes bulged in their sockets, but Emilio was oblivious to everything except my answer, which was, “Well, you’d better hope he has a wife and a family that he loves.” What else was there to say? He was a smart man or he wouldn’t have asked the question. His response (and I was the only one who saw it) saw his sharp blue eyes widen to double their size, and then he quietly turned to re-review the attorney's paperwork as he slowly exhaled. And that was it. He signed everything while we informally conversed about what he was looking to replace the Wagon Wheel house with.

The up leg purchase was going to involve Paula and that’s where her paranoia of paparazzi got involved. She was adamant that everything be top secret. She wanted absolutely no one to know anything about anything. Having been a part of the Flathead Valley for as long as he had, Emilio was far more laid back about the whole thing, but strived to pacify Paula all the same. The ownership vesting on the up leg did ultimately prove to be an issue, but the attorney believed he knew better so I shut my mouth and proceeded as instructed. 

Less than a month later, Penny Brooks , the listing agent on the Whitefish Lake house Emilio had identified as his up leg delivered the signed contract to my office so we could open escrow. It was indeed top secret and she wanted to make sure Joan and I understood the confidentiality clause in the contract. Yes, of course - every transaction that took place in our office was treated with the level of confidentiality now required by law simply because I believed that good business was nobody’s business.

It wasn’t long before word got out around town all the same. Penny came storming into our office one afternoon in a fit of rage accusing us of violating the contract’s confidentiality clause by divulging sensitive details about the super-secret sale on Whitefish Lake. I told her flat out that if word got out, it didn’t come from my office. Hell, Carla didn’t even know who Emilio Estevez or Paula Abdul were. Penny was unconvinced and left in a dramatic huff.

It wasn’t long after those false accusations that we learned the source of the leak was Penny’s very own seller who’d gotten drunk on the golf course and bragged over the course of an afternoon to anyone who would listen about who was buying his house. So much for confidences and small town secrets.

And now for my favorite part! On his new lakefront purchase contract, I noticed immediately that Emilio had set the earnest money deposit for the exact amount of the sales proceeds I’d deposited with his 1031 accommodator on the down leg sale barely a month earlier. All of that money he was justifiably concerned about was now going to be legitimately moved from the unknown to the known until close of escrow - from the accommodator’s trust account to Ben’s broker trust account where Emil clearly believed it more secure. 

I chuckled with smug delight for days, and have been air high-fiving Emil ever since. Nice job, Mr. Estevez. I suspect your brother would righteously call this "Winning!" 

Living The Big Sky LifeTM 
© by DK King

1 comment:

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Comments? Great! Please say it kindly. Gratitude, DK.