Sharing Your Home Sales Price - Do or Don't?

Texas homebuyers quickly find their new mailboxes filled with solicitations and requests after their purchase. They are also overrun with appeals and demands for information regarding the purchase of their property.

In addition to the sham mortgage insurance offers and tax filing service scams are enticements to disclose the sales price of their property. Most of these communications look very official and it can be hard to decipher what is legitimate and what is not. Almost none of it is.

Texas is a non-disclosure state

In Texas, a buyer or seller is not required to disclose the sales price of a property to anyone or any entity whatsoever. Real estate sale prices are not public record.

In most states, you can look up any address through the county property tax appraiser to see the most recent sales price. The public has access to sales prices in 38 states. In some states, the public disclosure of real estate sale prices may be printed in local media or appear on the publicly recorded deed. In other ‘disclosure’ states, only governmental entities have access to the sales price.

Our state considers a property sale to be a private transaction and you have a right to keep the details away from curious folks as well as government agencies.

With whom should you share your sales price?

There is no law that says the state, county, city or appraisal districts can require you to provide your sales price. Nosy neighbors and relatives may also ask or speculate about what you paid for a property. It is nobody’s business.

You do not need to disclose the purchase price to the County Tax Office, your HOA, an appraiser, prying neighbors or anyone else. Your tax accountant is the only person with whom you should share the purchase price of a property.

Why does the County want to know?

Many Texas appraisal districts want full disclosure of real estate sales prices to help establish the taxable value. Texas has no state income tax. Our high property taxes help make up for that. Texas property taxes are assessed and paid by counties, cities, schools, appraisal districts, etc. The total property taxes average about 3% of the assessed value of the property each year. If your tax assessor has your actual sales price, they will usually base your taxes on that price.

Zestimates & Other guessers

Web sites like Zillow attempt to place a “home value” on a property based on different formulas. The estimated sales price and value posted on most web sites are inaccurate. These automated valuation models include limited information gathered from publicly recorded mortgage liens, tax assessments and geographic maps.

Their estimates do not include actual sales prices or take into account data such as negotiated concessions, repairs, closing costs, etc. that one of the parties may have paid. They do not take into account lot sizes, condition of the property, etc. Only licensed Realtors and Appraisers have access to all of this information.

Who really knows the sales price?

The buyer, seller, agents, title company and mortgage lender all know the sales price of a property. If a property is for sale in the Multiple Listing Service (MLS), then the listing broker must report the sale and sales price to the MLS. The MLS collects and maintains this proprietary information.

Property owner information, not sales price, is public information. Marketing and sales companies scour county records every day and collect information on deed transfers and filing of mortgage liens. That is where they find the addresses of new homeowners to solicit. A lot of the junk mail will also come from folks who find you when you turn on your utilities. That is also public information unless you request that that the utility provider make it private.

How to reduce requests

What should you do when faced with an official request asking for the details of the sale? Ignore it. There is enough information out there about all of us already. In my opinion, no one should offer up this additional financial and personal information voluntarily.

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When someone can’t make it to the title company on closing day to sign the necessary papers, a popular solution is to use a mobile notary. Mobile Notary services have been around a long time and are more sought-after than ever now. 

Notary services are crucial in real estate transactions. Several documents are required to be notarized in order for a property to change hands. Validating signatures and identities of signers keeps the process authentic and reduces the chance of fraud. 

Unlike signing in a traditional title office setting, a mobile notary travels to the client’s location to meet them in person.

Benefits

Mobile notaries offer a convenient service.

“I can travel to your home, office, or any location you need. Those could include a business, hospital, hotel, coffee shop, or parking lot,” says Henry Eford, a Certified Loan Signing Agent. “I go to a lot of locations that your title company may not be able or willing to accommodate.”

These bonded professionals can be scheduled just about any hour of the day and many specialize in flexible, after-hours closings. The convenience and efficiency of signing documents at your preferred time and location can save the signer the hassles of traveling to a title office. A mobile notary can be there when and where you need them. The service can be provided in any state in the U.S.

Notary/Signing Agents

There is a difference between a mobile notary and a signing agent. The typical notary’s job is to witness the signature. They do not act as an escrow officer or attorney. They cannot explain the closing documents or details of a specific transaction. If a person wants some explanation of documents they are signing, they should request a signing agent.

“Loan signing agents are notaries trained in mortgage and title documents,” says Eford. “As a certified loan signing agent, I ensure that all needed signatures and initials are obtained and I travel to the signer’s location to do so. Often my services include additional duties like printing the loan document packages, and delivering the completed loan documents to the title company or lender.”

Signing agents are screened and certified to meet compliance requirements for a remote closing.

Time and Cost

A remote closing with a mobile notary must be scheduled and approved in advance by the title company. When closing documents are signed outside of the title company office, the originals must be returned to the title company for processing, funding, and finalizing the transaction. This often requires paperwork to be signed a day in advance.

In arranging and approving for someone to sign documents with a mobile notary, the title company may consider factors like security, turnaround time, efficiency, and accuracy.

Typical mobile notary/signing agent cost ranges from $85 to $400 depending on location, the experience of the notary, and additional services like printing, scanning, and delivering originals. Maximum notary fee charges are set by each state. In Texas, notaries may charge $6 for the first signature and $1 for each additional signature. They may also charge for copies, a separate travel fee, and mileage for traveling to the customer’s location.

International notaries are an entirely different challenge. These can be complicated and require a lot of time and coordination. Often the parties are better off delaying closing until the signer is back in the country.

While the fees for mobile notary services add to the transaction costs, they are often a good value when the signer considers the convenience, expenses of travel time, and deadlines.

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Expect Delays in 2022 Real Estate Closings

If you are buying, selling, or refinancing a property in the next few weeks or months, expect delays. In case you haven’t heard, there is a labor and staffing shortage in the U.S. The ripple effect is has hit the real estate industry in several ways. 

Who and what has caused delays?

There are many links in the chain of people involved in a transaction from start to finish. There are an equal number of reasons for delays. Closing delays are not usually intentional. While some delays can be avoided with enough advance planning, it is difficult right now to anticipate every potential setback.  We are in a unique real estate market and additional obstacles seem to pop up every week.

Just like restaurants, retail stores, fulfillment centers, etc., there are labor and supply problems in our industry. There is no shortage of real estate agents or title companies ready and willing to keep the wheels of the real estate industry turning. However, the increased demand for homes and loans in 2021 paired with capacity issues in many real estate-related businesses is a formula for snafus.

While most real estate closing are settled on time, the current backlog lies with:

Lenders: Almost a third of closing delays are due to financing issues, according to the 2021 National Association of Realtors report. Lenders are dealing with record volumes and staffing shortages.

Appraisers: The second most common reason for closing delays this year is appraisal issues. Demand for appraisals has been at all-time highs and there is a shortage of appraisers. Increased valuations have made this job more difficult. 

Surveyors: Another industry seeing high demand and a shortage of licensed professionals.

Inspectors: Ditto. Everyone is working to keep up with demand.

Underwriters: The huge number of transactions have lending and insurance underwriters overwhelmed.

Repairmen, movers, etc.: Again, labor and supply problems are plaguing multiple industries.

What can you do?

If you are buying, get pre-approved by a lender before signing a contract. Stick with that lender.

Make your contract dates realistic. You may need to plan for 45 or 60 days to close instead of the traditional 30 days we often see in Texas.

Book inspections and repair people as soon as possible. It is the responsibility of both buyers and sellers to obtain qualified professionals for these tasks.

Confirm that the appraisal is ordered at least three to four weeks prior to the closing date. Once completed, the appraisal must be reviewed by the lender and their underwriter.

Ensure that the existing survey is approved or a new one is ordered at least three weeks prior to closing. The title company, lender and underwriter must review and approve any survey for use.

Make sure the lender has everything they need quickly. Lenders often require additional documents throughout the loan process. The quicker they receive them, the quicker they are reviewed and approved.

Communicate often and promptly. Surprise delays or last minute rescheduling is frustrating for all parties.

Work with professionals who respond quickly and can help deal with problems.

Be prepared, patient, and kind with everyone trying to do their job during difficult times.

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Digging into your Home's Mineral Rights

When purchasing a Texas property, the mineral rights may or may not come with it. Uncovering and then cashing in on mineral rights are not as easy as Jeb Clampett shootin’ up some crude.

Do Mineral Rights Always Transfer?

Whether any mineral rights transfer with a property depends on what rights the current seller owns. Let’s dig a little deeper. In the beginning of time (or for the sake of this article, let’s say 300 years ago), a piece of land included all rights to the property along with the right to do what you wanted with it.

But in time, some property rights may have been given away, taken away, or sold. A property owner can transfer all or part of their property rights by deed, lease, easement, mortgage, or will. Someone who owned your piece of land 100 years ago could have done any of those with the mineral rights. You may own a huge piece of land and have no right to the minerals that lie beneath it.

TREC Residential Contract, Paragraph 2D

Using the standard TREC residential contract, the mineral rights owned by the seller transfer with the property per paragraph 2D. But only the mineral rights owned by the seller will transfer to the buyer. An owner can’t sell you rights that they don’t have. If the seller wants to retain any of the mineral rights, an addendum must be included.

The mineral rights addendum specifically states: “A full examination of the title to the Property completed by an attorney with expertise in this area is the only proper means for determining title to the Mineral Estate with certainty …”

Even though the surface rights may convey to the buyer, the subsurface mineral rights like gas, oil and other mineral rights that may not necessarily transfer. Surface rights that transfer can include natural resources such as plants, water and other resources. Details on ownership of those need expert legal advice as well.

How Do You Get The Mineral Rights?

If you really want to who owns the mineral rights for a property, hire an abstract company. Or you can try the do-it-yourself method by researching the property records at your county clerk’s office. It is often necessary to trace records back through several transactions to determine where they may have initially been sold and then whether those rights were then sold to someone else.

In Texas, mineral rights are transferred with a Mineral Deed.  Occasionally, mineral rights are not sold but are leased. A leasehold is a different scenario that needs a real estate attorney’s guidance.

Laws concerning mineral rights can be complicated. Just remember that property ownership is completely separate from mineral rights ownership. Sorry folks, but you have no rights to your land’s minerals if you don’t legally own the rights.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem

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HOA Violations - Who is responsible?

A recent home buyer posed a question about an HOA violation concerning their new home. It seems the fence installed by the previous homeowner a couple of years ago doesn’t conform to the HOA rules. Now the HOA is requiring the new owner to bring the fence into compliance with the HOA regulations. Who is responsible for correcting a violation of an HOA restriction?

What is fair? 

When a property is part of a mandatory homeowners association, a violation of the HOA rules, regulations, or restrictions does not usually hinder a sale. And the seller is not automatically obligated to resolve the violation.

After closing, the new buyer may get a letter from the HOA stating that they are out of compliance and must fix the issue. That kind of surprise shouldn’t happen, but certainly does sometimes.

Know your rights

When there is a mandatory owners association (HOA), the standard TREC contract has a provision for providing HOA documents and for the buyer to object to any issues. The buyer is entitled to receive copies of all documents that govern the maintenance or operation of a property including restrictions, bylaws, rules and regulations, and a resale certificate.

HOA documents are essentially restrictions to the owner’s use of their property. These can include a variety of matters: how many and what kind of pets are allowed, signs or flags being displayed, parking of vehicles, guests allowed, cable or internet services available, front door color, fence design, roof materials, etc. What is fine with one new homeowner may be completely unacceptable to another.

The Resale Certificate discloses the amount and frequency of dues and assessments, any lawsuits they are involved with, and other information. A current resale certificate is required from the HOA to state if they are aware of any current violations to their rules and restrictions.

The HOA disclosure on the resale certificate gives the buyer notice of any violations prior to closing.

As stated in the contract, after receiving the HOA documents and resale certificate, the buyer has three days to terminate the contract if they don’t like what the resale certificate or other documents reveal.

Or the buyer could address any issues with the seller within that three-day period and come to an agreement. The buyer and seller could amend the contract to require the seller to fix a violation.

In the case of our new homeowner, they did not take notice of the violation disclosed by the HOA or the fence restrictions. And they did not object to the HOA documents in the three-day period. The seller claimed to have no previous HOA notice of the violation and therefore had no obligation to disclose an unknown issue.

Know your responsibilities

When it comes to HOA documents, the buyer must be proactive. It is the buyer’s responsibility to review the HOA rules, restrictions, requirements, and resale certificate prior to purchase. The three-day period for objections is important. HOA documents can total more than 100 pages. That’s a lot of reading to do in less than three days.

If the HOA has a website, they are required by law to post their restrictions on their site. If you’re considering the purchase of a property with a mandatory owners association, why not go to their website and review the rules, regulations and restrictions prior to executing a contract?

The buyer has a duty to ask questions and resolve any HOA item they have an issue with. This should happen as soon as they receive HOA documents. The three-day period is their opportunity to request that the seller fix any violations. If they fail to do so, then along with buying the property, they are buying the problem that comes with it.

A buyer of a property with a mandatory HOA is obligated to pay assessments and to follow the restrictive covenants governing the use, maintenance, and occupancy of the property and community. They need to take the time to understand their HOA commitment.

Buyers have the right and responsibility to make an informed decision on their purchase.

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The opinions expressed are of the individual author for informational purposes only and not for legal advice. Contact an attorney for any particular issue or problem.

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Texas 2021 Real Estate Related Updates

Real estate topics took a back seat to big issues like the pandemic and power grid failures in 2021 with the Texas Legislature. Of the 3,800 bills enacted into law, real estate still got a little attention. Some of the welcome changes coming next week are due to lobbying efforts from the Texas Association of Realtors and the Texas Land and Title Association. New real estate contracts reflecting these laws are now available and are required to be used by Realtors starting September 1, 2021.

Homeowner Associations 

The law from Senate Bill 1588/House Bill 3367 requires more transparency from HOA management companies. It puts a cap on the costs for obtaining subdivision information, resale certificate updates, and HOA transfer fees. The limit for the fee to obtain subdivision information will be $375 and the fee for an updated resale certificate is topped at $75. 

The new law also states that the HOA’s publicly filed management certificate must disclose the amount of any transfer fees charged with the sale. That information will be made available in the Texas Real Estate Commission (TREC) database. This will allow agents to look up the transfer fees on a property prior to listing it for sale or submitting a purchase offer for their buyer. It offers protection to homeowners and buyers against unreasonable fees and surprises. Additional consumer privacy protections for homeowners are included in this new law. 

Effective September 1, 2021, the law is being phased in. TREC will establish a database to accept management certificates from HOAs and make it available to the public by December 1, 2021. HOAs must electronically file their management certificate with TREC no later than June 1, 2022. 

Unfortunately, some HOA management companies (and companies that provide HOA resale certificates and documents) have already found a way around the new law limiting their fees. A resale package from Condocerts.com last week included a transfer fee (normally paid at the time of closing) and a processing fee. Instead of $375 for the resale package, the upfront cost to the seller was $650. Fortunately, we had enough time to avoid their outrageous rush fee.

Public Improvement Districts (PIDs) 

House Bill 1543 is now a law that requires a property owner in a PID to disclose that the property is in a PID and certain details of the PID prior to executing a contract with a buyer. The PID notice must be acknowledged by the buyer and seller and will be recorded in county records at the time of the sale. A PID is a special district created by a city or county. It allows a special assessment tax against properties within the district for improvements or maintenance. The existence of a PID on a property can currently be found in the county appraisal district tax records. More details of a PID must now be filed with the county deed records starting September 1, 2021. 

Appraisers 

House Bill 2533 specifies that unless a lender requires a full appraisal for a financial transaction, a licensed appraiser is not required to comply with Uniform Standards of Professional Appraisal Practice (USPAP) when performing an evaluation. If an appraiser performs an evaluation that is not in compliance with USPAP, then it must include a notice stating that the evaluation is not an appraisal performed in compliance with USPAP. This takes effect on June 14, 2021. A new Statute of Limitations law from House Bill 1939 provides for a two-to-five-year limit for lawsuits filed based on an appraisal or appraisal review. This excludes lawsuits based on fraud or breach of contract and is effective September 1, 2021. 

Quitclaim Deeds 

Transferring title in Texas with a Quitclaim Deed should become easier after September 1, 2021. This law will allow a purchaser of a property with a Quitclaim Deed to be considered a bona fide purchaser if at least 4 years have passed since the deed was recorded. Title companies are wary of quitclaim deeds because, unlike a warranty deed, they only convey whatever interest the signer may or may not have in the property. The signer of a quitclaim deed may have limited or no ownership of the property. There is no warranty of full ownership being transferred. This new law may remove quitclaim deed concerns if at least 4 years have passed. It does not affect quitclaim deeds recorded prior to September 1, 2021.

Mechanic’s Liens 

A new law extends the description of lien rights. Subcontractor liens must now be filed within a particular time period and notice requirements are detailed. Limitations for filing suit to foreclose a lien and who must be licensed to file a lien are now updated. 

Judgments on Homestead Properties 

Using a homestead affidavit to remove a judgment on a property just got clarification. Previously, a homeowner seeking to remove a judgment in order to sell or refinance would sign a homestead affidavit, send it to the creditor, wait 30 days and see if the creditor disputes the homestead claim. The new law allows the owner to sign a homestead affidavit and record it with the county at any time. The creditor is still notified of the recording and has 30 days to dispute it, but the homeowner can get the affidavit and issue of homestead resolved ahead of a transaction. 

 Racial Restrictive Covenants 

Some older subdivisions in Texas have original restrictive covenants regarding certain racial or ethnic groups. These have been invalid and unenforceable for decades but they still show up in the county records as legal documents. This new law allows a property owner to request that the County Clerk actually remove the language of the racial restrictions from the public record. The county would remove the document and attach another document stating that a restriction that is void has been removed. While a good concept, this law just changes the county paperwork. 

Freedom of Expression 

House Bill 3343 prohibits insurers (like title insurance or homeowners’ insurance) from discriminating on the basis of political affiliation or expression. 

 And if the rules of real estate are driving you to drink, then you may have notice House Bill 1024. Restaurants may start including alcoholic beverages in delivery and to-go orders. It has no effect on real estate transactions but cheers to that law anyway.

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Are Cash Buyers Better? 4 tips to decide

Why would a home seller prefer a cash buyer? After all, the seller gets their funds from the title company the same way regardless of how the buyer pays.

Sellers often do not care where the purchase money is coming from, as long as the buyer can get their loan approved in a reasonable amount of time – and the seller gets their money. However, the mortgage loan process can be time-consuming and comes with no guarantees.

Let’s look at four reasons why a cash homebuyer may be more appealing than a buyer getting financing:

1. Skip the appraisal.

Mortgage lenders require an appraisal of the property to determine if they will lend funds for the purchase of the property. Let’s face it. Home appraisals are unpredictable. In our changing market of rising prices, the uncertainty of an appraisal adds risk. There is less chance of the deal falling through if a home sale does not require an appraisal.

2. Disregard buyer loan approval.

When a homebuyer is financing a purchase, the sale is typically contingent on the buyer obtaining loan approval within a specified amount of time. If the buyer can’t get their financing, they can’t buy the property. They may get out of the contract (within a specified time) if there is a financing contingency. Despite promises and pre-approval letters, a seller cannot be certain that a buyer will qualify for their loan.

3. No property loan approval.

In addition to a buyer qualifying for their loan, the property must also meet lender’s requirements for the loan. Those requirements involve the appraisal, insurability of the property and any lender-required repairs. Depending on the terms of the contract, the buyer may be able to get out of the contract if the property does not meet the lender’s terms for their loan.

4. Quicker closing. 

The loan approval process often takes weeks. Cash sales can take just a few days to close. The vetting of both the buyer and the property condition is effectively skipped when no lender is involved. However, just how quickly a sale can close also depends on how ‘clean’ the title may be. The same title search is conducted on both cash and financed transactions to uncover all liens and encumbrances on a property.

Money is Money

A cash buyer will not actually be paying in actual cold, hard cash. In Texas, real estate must be purchased with “good funds” such as a wire transfer or cashier’s check. The title company has the discretion to determine which good funds it will accept.

All title companies are legally required to report any cash or personal checks used to close a transaction that total more than $10,000 to the IRS. This is designed to discourage money-laundering, tax evasion, drug trafficking, and other illegal activities.

Regardless of the source of the funds, the money passes hands through the title company.

Historically, most cash buyers are investors, second homebuyers, or older buyers who are using the proceeds from the sale of another property. Traditionally, the percentage of cash homebuyers in the U.S. hovers just above 20 percent.

For many sellers, a cash offer does not overly impress. Just because a buyer is paying cash does automatically earn them the right to bargain or jump to the head of the buyer line in this hot market. While there are advantages to picking a cash offer, most sellers will agree to an offer with terms that suit them best.

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The Texas Real Estate Contract Kick Out Provision

A Kick Out provision goes by many names in the world of Texas real estate contracts. It’s also known as a Knock Out clause, a Sale of Other Property contingency or simply a contingent contract.

A Kick Out provision is actually an addendum to the contract that takes into consideration the sale of another property by the buyer. It makes the contract conditional on the buyer selling a property they currently own.

“When a property goes under contract with this contingency, the property is shown in the MLS system as ‘Active Kick Out.’ This classification is different than the “Under Contract,” “Pending,” or “Active Option” categories. The property is technically not off the market.

According to the MetroTex Association of Realtors, the description of Active Kick Out, or KO, status is:

“Property has an offer contingent upon the sale of another property by buyer. Still available for showings and backup offers. Will expire on the original expiration date the agent entered.”

While this provides the buyer a benefit, in return it affords the seller a benefit as well. This Kick Out addendum essentially allows the seller to “kick out” the buyer if the seller receives an offer from another buyer. If the seller accepts an offer from another buyer, they must give notice to the current buyer and allow the current buyer the option to either remove the contingency or terminate the contract. If the contract terminates, the backup contract moves into the primary position.

As always, there are a couple of important items to note and to make this provision work.

 This option is not available to the seller without this addendum.

Our Texas real estate contracts generally don’t give a seller the option to get out. This addendum does. It gives the seller the opportunity to require that the buyer waive the contingency with a day or two notice AND it lets the seller require the buyer to put up additional earnest money if they waive the contingency. Many real estate advisors suggest the additional earnest money amount should be a “meaningful” enough amount to reflect the buyer’s sincerity.

This contingency on the sale of other property is actually a contingency on the buyer’s receipt of proceeds from the sale of other property.

The buyer must receive the funds from the sale of their property in order to move forward with this purchase. If the buyer doesn’t receive the funds from their sale, they may get out of the contract. This could become an issue if the buyer were closing their sale on a Friday afternoon and funds were not disbursed before end of business. They wouldn’t have the proceeds from their sale until the following Monday (or later if that Monday were a holiday). Or there could be some sort of judgment or lien on the property that prevents the buyer from receiving any proceeds from their sale.

Sellers sometimes welcome a Kick Out provision because it allows them to continue marketing their property while they have it under contract. Buyers can appreciate a Kick Out addendum because it reduces their risk if their sale proceeds are a necessity for their purchase.

Cooperation from both sides can help keep a deal from landing on its bum.

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The New 2021 Real Estate HOA Addendum

If you are selling a property that is part of a Homeowner’s Association, get ready for a potential surprise. I’m finding some upset sellers dealing with the recent change to paragraph C in the HOA addendum.

Last month (April 2021), the Texas Real Estate Commission made a slight change to the form titled Addendum For Property Subject to Mandatory Membership In A Property Owners Association — a big name for a small document that can have a big impact on your closing costs. This addendum is considered part of the contract when the property is part of a mandatory HOA.

The previous HOA addendum addressed the limit that the buyer would pay for “association fees or other charges association with the transfer.” Buyer and seller would agree on an amount and fill it in on the addendum. Typically, the amount filled in on this addendum was between $100 and $300 for the buyer’s limit. The seller would pay any association transfer fees that exceeded the buyer’s responsibility filled in on the addendum.

The previous HOA addendum also had a paragraph D that stated the “buyer shall pay any deposits for reserves required by the Association.” That changed in April.

The new HOA addendum states the limit that the buyer will pay for “association fees, deposits, reserves and other charges associated with the transfer.” I am still seeing the amount filled in between $100 and $300.

What many sellers and agents do not notice (until it is too late) is that paragraph D no longer requires the buyer to pay for the reserves. That part of the addendum was deleted. The deposits and reserves paid by the buyer are now lumped together with the transfer fee and are limited to the amount filled in the addendum. The seller must pay any amount over that limit. These charges are in addition to the usual seller expense for the resale certificate and HOA documents that must be provided to the buyer.

That is not a problem unless your HOA has a fee for reserves. HOA reserves are sometimes referred to as capital reserves, capital contribution, mandatory reserves, reserve deposit, etc. Some folks call it a ‘buy in.’ It is the HOA fee charged to new buyers in a development to build up their funds.

The reserve fee can be hefty. I’ve seen it range from $1,000 to $10,000. Some sellers are getting an ugly surprise when they realize the capital reserve fee is now mostly their responsibility.

Imagine you are a seller who purchased a property a few years ago and paid the HOA capital contribution when you bought your home. Now you may be paying it again for your buyer because the amount listed for the buyer’s limit is only $150 and barely covers the transfer fee.

Do not count on your HOA or HOA management company to guide you on this new addendum. Most HOA management companies are unaware of this change.

Many HOA documents state that the capital reserve fee is a buyer responsibility. However, if the addendum signed by the seller states that the buyer is only paying up to a small limit for fees, then the seller must adhere to the contract that they signed and pay the balance.

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Six Tips to buying a home in a seller's market

Anyone with their finger on the pulse of Texas real estate knows that we are in the midst of a hot seller’s market. Anxious buyers are making generous offers in a desperate attempt to buy a home. However, an offer well over the asking price is not always enough to win the right to buy your dream home.

Let me pose a unique perspective to our readers and potential buyers. At the title company, we see the winning contracts. The buyers whose offers are rejected never make it to the title company.

The successful contracts in today’s market share a few common characteristics that potential buyers may want to note. If you want to win in this competitive market to buy a house, consider these tips:

1. Keep it simple.

Make your offer clean and with just a few, short contingencies. Contingencies include financing, inspection periods, right to object, etc. Any contingencies should appear reasonable and easily attainable. Most of the contracts I am seeing have short option, financing, and objection period contingencies. In this market, you won’t have much luck including a contingency such as the sale of another property.

2. Close within a reasonable time.

Ask the seller when they want to close. Then check to see if your lender can meet that date. Most lenders require 30 days or more. The longer the time to close, the more risk to the seller. Too many things can go wrong that the seller has no control over. The buyer could lose their job or change their minds. Acts of nature can occur (remember the deep freeze of a couple of months ago?). Many savvy sellers want to narrow the time from contract to closing.
3. Provide proof of financial ability.

Knowledgeable sellers often realized that a verifiable buyer might be a better proposition than a questionable buyer making a higher offer. The buyer should show documentation that they have the financial means to pay what they are offering. They should already be pre-approved for a loan at the terms they are offering.

As is often the case, cash is king. When there is no lender involved, concerns about appraisals and financing are gone. The lower the buyer’s cash down payment, the higher the likelihood that the financing may not materialize.

4. Put down substantial earnest money and option fee.

This is a reflection of the buyer’s commitment. The option fee enables the buyer to essentially take the seller’s house off the market for a period of time. Once all parties sign the contract, it is unavailable to other buyers. The buyer should offer enough to the seller to make it worth it.

While earnest money can be any amount, it also reflects the buyer’s sincerity and ability. It can be concerning when a buyer offers a contract with a substantial down payment but the earnest money they are offering is a small fraction of the down payment.

5. Write a love letter.

I am not a fan of cover letters but I’ll admit that they sometimes help. Nothing said in a buyer’s nice cover letter is binding. Some sellers, like myself, feel that everyone’s money is the same color of green. They don’t care about a sappy story. However, people are emotional beings and sometimes a sweet letter can tug at the heartstrings. If a buyer’s agent thinks it will help them, why not give it a shot?

6. Make it easy for the seller.

Many contracts today provide a temporary lease back to the seller that allows them to move out a few days or even weeks after the closing. Some allow them to take specific fixtures with them. A buyer may offer to purchase a pool table or piano that the seller won’t be using at their next house. A buyer perceptive to the seller’s needs will find themselves a step ahead.


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Understanding the Underwriting Process

In the real estate world, we often reference underwriting requirements, underwriter approval, and underwriting review. Many buyers and sellers don’t understand what underwriting means or how much it affects their transactions. Let’s pull back the curtain for a peek at that mysterious thing we call underwriting.    

Underwriting is a sophisticated decision making process that involves interpreting data to determine if a company will take on a financial risk. The underwriter’s job can include conducting research, investigating details and weighing the known risk factors to determine if insurance coverage or a loan will be issued.

Types of Underwriters

With the possibility of sounding like Bubba from Forrest Gump, there are different kinds of underwriters. There are mortgage underwriters, homeowner’s insurance underwriters, life insurance underwriters, health insurance underwriters … and title underwriters.

Your mortgage underwriter will verify your income, assets, debt, and property details in order to issue final approval for your loan. Your homeowner’s insurance underwriter will determine the insurability of the property and how much to charge you for insurance. And we’ve got title insurance underwriters too.

How Title Underwriting Works

Before a sale is officially closed and title insurance is issued, a property must go through the underwriting process. This is a vital component of a real estate transaction because we cannot complete the sale without this due diligence. A title agent cannot waive requirements or make special provisions to offer you insurance without the consent of the underwriter.

A title insurance underwriter is responsible for checking title to the property to ensure ownership, rights and compliance with Texas real estate laws. They evaluate your property’s history and the title company’s research of the chain of title, looking for anything that could present challenges with ownership and/or owner’s rights.

The underwriter also looks for common issues like liens or judgments attached to the property, legal description errors, deed mistakes, unreleased marital rights, rights of heirs or minors, etc. To ensure a clear title, issues like boundary disputes, divorces, probate proceedings, adverse possession, bankruptcies, and more must be addressed to determine the significance of risk.

Furthermore, the underwriter must review and disclose anything that would be an exception to the title insurance policy. These include issues that could affect the owner’s use and enjoyment of the property such as easements, encroachments, rights of way, survey matters, and restrictions.

After evaluating the title risk, the underwriter may seek ways to mitigate a risk, if possible, and will ultimately decide whether to insure the title to the property. We all want to protect a buyer from closing on a property that does not have clear title.

An underwriter authorizes the title company to write the title insurance policy, assumes the financial risk and insures the property against insurance defects. The title insurance underwriter will then legally defend the property owner if any undetected issues arise with the title. In simple terms, the title company sells the title insurance policy and the underwriter determines whether they should and will sell that coverage.  

A title company may have one, two, or several underwriters. The title company must meet strict standards to qualify to write title policies with an underwriter. I work with nine different underwriters and each has a slightly different approach.

Title companies and underwriters are cautious because a simple mistake can lead to paying out thousands of dollars on a title insurance policy. Every title insurance policy carries a risk that the customer will file a claim — a potential loss to the insurer.

Title companies must be diligent and knowledgeable to comply with state and federal regulations and to also conform to their underwriter’s standards. Avoiding claims and issuing marketable title is the goal of every title company.

If you are purchasing a property, make sure you are selective about your title company and their title insurance underwriter. Not all title underwriters are alike. As a buyer, you have the legal right to select the title company you want.  Have someone you feel is dedicated to your best interests.

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Cash Offers in Real Estate

We often hear that cash is king is real estate. A cash offer is more appealing to a seller than an offer contingent on the buyer financing the purchase. How much a cash offer appeals to a seller is debatable. Some buyers think it entitles them to offer less for a property. Let’s get to the heart of that conversation.

Why a Cash Offer Appeals to a Seller

When a homebuyer is financing a purchase, the sale is typically contingent on the buyer obtaining loan approval for that financing. That means if the buyer can’t get their financing, they can’t buy the property. The approval process can take days or weeks.

Additionally, the property must meet lender’s requirements for the loan. Those requirements involve the appraisal, insurability of the property and any lender required repairs. Depending on the terms of that specific contract, the buyer may be able to get out of the contract if the property doesn’t meet lender terms or if the buyer can’t qualify for their loan.

While all that is going on, the seller is in limbo waiting for the loan approval. A cash offer can typically close quicker than a purchase involving a lender. But that really depends on the lender and how ‘clean’ the title may be. 

The buyer’s financing typically makes little or no difference in the seller’s closing costs unless it involves a VA or FHA insured loan. For that reason, sellers often don’t care where the money is coming from, as long as the buyer can get their loan approved in a reasonable amount of time. For many sellers, a low cash offer doesn’t sweep them off their feet.

How Much a Cash Purchase Saves The Buyer

Paying cash for the property can save the buyer on closing costs. Of course, we’re not talking about actual cold, hard cash – as in paying for a property with $100 bills. The U.S. government doesn’t allow that to discourage illegal activities like money laundering.

But a purchase without a mortgage can save on various title and lender fees. Assorted lender fees include the application, processing, credit report, appraisal, flood certificate, doc prep, etc. Borrowers may also opt to pay points (a percentage of the loan) up front to secure a lower interest rate on their mortgage. That adds to their costs to purchase the property.

If buying with cash, the buyer also saves on the cost of recording the lien with the county court. Most lenders require additional endorsements to the title insurance policy to cover items such as restrictions, lease holds, taxes, etc. Those endorsements can add more than $100 to the closing costs.

Obviously, some purchasers finance their property because they don’t have the cash. Others may have the cash assets and don’t want to tie up their money in a non-liquid investment like real estate.

Regardless of the source of the funds, the money passes hands through the title company. In the end, the seller looks for their money from the title company. At that point, it’s all the same color of green.

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New Real Estate Survey measurement rules

Not all surveyors have two right feet. But some do.

For more than 100 years, there have been two different survey definitions of the 12-inch measurement known as a foot. But change has been afoot for some time for the official measurements used by U.S. surveyors.

Many land surveyors use the widely accepted International Foot for measurements. However, the “U.S. Survey” foot is still used by some land surveyors in 40 U.S. states and territories. Texas is one of them.

Soon the International Foot will be mandated for use throughout the U.S. The National Institute of Standards and Technology states that the International Foot will become officially used by all surveyors by 2022. That means the Texas system of using the U.S. Survey Foot will need to get the boot. The Texas Legislature designates the state standard for survey measuring applications in the Texas Natural Resources Code, Subtitle B, Chapter 21.

The difference between these measurements is miniscule. When measuring a mile, the International Foot is about an eighth of an inch smaller. So it’s not going to make a difference in your average residential survey. But it can make a difference when measuring large distances. In a measurement of 1 million feet, the difference is 2 feet.

The problem started almost 90 years ago. In 1893, the U.S. government definition of a foot was 1,200 meters divided by 3,937. That makes a foot equal 0.3048006+ meters. In 1933, the International Foot was created. It was defined as 0.3048 meters, exactly. The last digits were eliminated. By 1959, the U.S. government switched to the International Foot and mandated its use – except for surveying and mapping applications.

The minor difference may seem insignificant, but it has caused problems for surveyors, engineers, and planning officials for high-speed rail and bridges in some states. It seems prudent to use the same measuring stick like the rest of the world to avoid errors, confusion, and additional costs. Discontinuing the use of the U.S. Survey Foot is expected to bring uniformity and accuracy for professionals in the surveying, mapping, and engineering businesses.

Industry icon Barry Rhodes with Burns Surveying has worked in the surveying business for more than 50 years and is responsible for more than 120,000 surveys in North Texas.

“The difference in measurements are so minute for local surveyors,” says Rhodes. “The difference isn’t usually a big deal unless you’re dealing with long pipelines or something similar. When you go really long distances, you have the curvature of the earth to deal with.”

Rhodes doesn’t expect the change to create problems for Texas surveyors. “I always use the U.S. Foot. But if the state says to make the change, we’ll do it,” Rhodes said. “Our software probably has the option to convert.”

The next time someone tells you that a foot is 12 inches, you might want to add that the official definition of a foot is actually 0.3048 meters. Even in Texas.

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The Truth about Title Theft Protection

You may have seen the ads or heard the buzz about companies offering title monitoring services or “title theft protection.” Are they legitimate or just a scam? Is there any real value in these services?

First, let me clarify that “title coverage” offered by some of these unregulated companies is not title insurance. They do not actually protect you from fraud, title thieves, scammers, etc.  Their standard service does include taking any actions regarding the rightful ownership of your property.

What is Title Theft Protection?

Monitoring services like Secure Title Lock and Home Title Lock offer subscriptions that say they will alert you to court filings affecting your home’s title. For $100-150 a year, they will monitor court records to show title fraud or theft. The “protection” they offer is basically a notification that someone has changed the ownership or deed to your property.

“Title theft” is a fairly new term that has generated a handful of companies feeding on consumer fears. These companies suggest that criminals can “steal” your property by forging your name on a deed, then resell the property or take out a mortgage loan against it. They claim a title thief can stick you with a debt that isn’t yours.

That isn’t true. Though a title thief or forger could attempt to steal your home, the consequence is actually a lot of headaches and legal hassles for a property owner. Proving and dealing with fraud can be time consuming and expensive.  Title theft protection services are meant to be proactive in helping you shut down mortgage fraud.

The benefits of a title monitoring service are ambiguous. They are only designed to alert you to a change in your title. They don’t prevent the fraud and they don’t actually help you deal with it if it happens. A title theft monitoring service will not help to clear or correct a title. They have no legal obligation to assist the owner with a title theft and they don’t offer protection against financial losses. That’s what home title insurance is for.

What is Title Insurance?

Title Insurance protects the owner and their lender from the possibility of someone contesting their ownership of a property. When buying or refinancing a home, you need a title insurance policy if you are closing at a title company or getting a mortgage loan. The title insurance premium paid at closing protects you for the entire time you own the property.

Title insurance not only protects you from financial loss, it requires the title company to legally defend you if your ownership is ever challenged. However, it insures against issues on the title when you purchase the property. It doesn’t cover future criminal incidences.

How to Protect Your Home Title

You don’t need to pay a company to protect you from thieves putting their names on your home title. You can easily monitor your title yourself for free. Just go to your county’s tax web site and periodically check your property record. Ensure that it shows your correct name and address. 

If you discover that your property ownership has been fraudulently changed, contact an attorney. The county clerk at the property recording office can also advise you on filing a notice affidavit with the county court.  [where: 75230]

Drawing the line - Texas Counties

One might think that a home in the city of Dallas would naturally also be located in Dallas County. And one would wrong. 

Your home may be located in Dallas and likewise in Collin, Dallas, Denton or Rockwall County. For many people in Dallas-Fort Worth, their next-door neighbor could be in a different county. The folks across the street might be in a different school district as well. 

Convoluted boundaries can make for some interesting scenarios of where the kids go to school, who your elected officials are, which police department you call, and where you register your car. Texas has 254 counties, more than any other state. We also have more incorporated cities and more school districts than any other state. 

Imagine a map of D-FW counties, overlaid with city borders, and then place the school districts on top of that. Try not to get cross-eyed.

There is a reason county, city, and school district boundaries don’t match up. When the Republic of Texas was established, boundaries of counties were vague and not precise. Rivers or creeks often defined them. Eventually the Texas Constitution set out policies to establish more consistent size and shape for new counties. The rules evolved into county sizes of about 900 square miles with the goal to be as square as possible. Ideally, the county seat is located near the center of the county. 

When it comes to town and city limits, many area municipalities have consolidated or split over the years. Often the reasons are economic. Texas school districts are independent and do not necessarily follow city or county borders. Over time, some school districts might have merged into one, while others split into unique entities. These actions have resulted in boundaries that look like a jigsaw puzzle.

Several DFW subdivisions lie within two counties. When the neighborhood was developed from farm and ranch land, county representatives decided where to draw the lines between neighbors. They agreed on who would claim which homes – and who would tax them.

Why does this matter? While your county tax assessor may collect your property taxes, you actually are paying property taxes to your county, city, and school district. Often the county collects all of your property taxes, making it easier to pay with one payment. However, that is not the case in every county, city, or school district. 

Many Dallas area homeowners write two or more checks to different entities for their property taxes each year. Your taxing authorities determine more than who collects your taxes, the location of your local library, or the identity of the local dogcatcher. The county that collects your taxes also maintains your property records. They record your deed and keep ownership records.

Your county is where you look for information about a piece of real estate. When you need to know more, just follow the money. The sheriff may not pursue you past the county line, but the school, city, and county tax collectors will.

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Closing Costs in Texas - A Comparison

Recently released national closing cost data showed that in 2019 average closing costs remained flat despite an increase in home prices. The average closing costs in Texas was $3,744 with an average sales price of $274,163.

The average closing costs in Texas was 1.75 percent of the sales price. That put Texas ranked 28^th in the country for closing costs based on percentage of sales price.

The closing cost data, announced by ClosingCorp, calculated the cost of title insurance, appraisals, settlement fees, recording fees, surveys and transfer taxes. We don’t have transfer taxes in Texas. If we exclude those transfer taxes, Texas still ranks 28^th in the country.

The states with the highest average closing costs, excluding taxes, were Washington DC, New York, Hawaii, and California. That is a reflection of both closing costs and average sales prices being high. If you look at the highest closing by state based solely on percentage of sales price, the highest states were Pennsylvania, Delaware, Washington DC, and Maryland. Their percentage averaged more than double the closing costs in Texas.

In most states, consumers can shop around and compare closing costs like they would a mortgage loan or homeowner insurance. Title insurance rates often vary based on several factors such as the purchaser’s credit scores or amount of their down payment. The escrow, legal, and closing fees can even vary from county to county within a state.

In Texas, the cost of title insurance is set and regulated by the state. All Texas title companies are required to charge the same for a title policy. The debate comes up every few years that Texas title insurance should be unregulated. The argument is usually that the free market and more competition would help reduce the cost to the consumer. The Texas Department of Insurance actually lowered title insurance rates in September 2019. For now, the system seems to be working well for our state. 

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How title companies pay home sellers

When selling a property, everyone wants to collect a big check. Well, maybe not an actual paper check, but lots of money. If you’re getting funds from the sale of your house, there are a couple of ways to collect your money from the title company when it closes. Just a couple.

Would you like a check or a wire? Those are your basic choices. Title companies can also transfer the funds to another transaction if you are purchasing another property. But we’re not going to pay you in real paper cash, foreign currency, with PayPal, Venmo, Bitcoin or anything else.

If you want your funds as a paper check, keep in mind that your bank is likely to put a hold on the funds, thus keeping you from accessing the money immediately. How long a bank may hold a check depends on the check amount, how long you’ve had your account and the status of your bank account.

Your check deposit will have an automatic hold between one and 10 days business days before you can withdraw the money. You read that right. Up to 10 business days = two weeks. Check with your bank for details on held checks.

Most sellers prefer to receive their funds via wire transfer to their bank account. It’s pretty quick and simple. The title company will need your bank information, including account number, routing number, bank name and how your name appears on the account. All of that information is on a check. We know, no one writes checks anymore. So, dig one out of your desk drawer and bring it to closing. Or just look up your account information on your bank web site.

Don’t fret that sharing this information is risky. We’re all about protecting your financial data. This bank information is like a roach motel (where bugs check in but they don’t check out). We can send money into your account, but we can’t draw it out.

Typically, title companies don’t need your wiring information days in advance. I prefer to get the information at the closing table, directly from the sellers. Then there isn’t a risk of email hacking regarding their funds.

Banks have different wiring deadlines, which is why title companies like to schedule closings for earlier in the day. The deadlines for processing wires often range from 2 until 4:30 in the afternoon depending on which time zone the bank is located.

Before your funds can be wired there are several steps that must take place. Both buyers and sellers must sign all documents before they are scanned and sent to the buyer’s lender for review and approval. After the lender gives funding approval and all funds to close are at the title company, proceeds can be disbursed. That can take anywhere from 15 minutes to two or three hours.

Title companies are here to ensure sellers get their money. Help me, help you – and we’ll show you the money quickly.
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Title Companies are still Open for Closings

As the situation with the novel coronavirus continues to evolve, the title business is responding. Currently, the title business is not seeing many interruptions in business. For the most part, transactions are not being delayed or canceled due to current restrictions. Aside from a few inconveniences, it’s mostly business as usual in the title world. 

Most Title Company Work Isn’t Public 

More than 95 percent of the work a title company does is away from public interaction. The actual in-person, signing of documents is just a small piece of the entire closing process. In my office, tables are being wiped down after each closing. Doorknobs, counters and other areas of public contact are being cleaned throughout the day.

Many offices are requesting that only the people required to sign documents attend the closing of the transaction. Agents, lenders, and any other unnecessary parties should not come in. Demand for mobile notaries and in-home closings has increased while the availability of mobile notaries is in short supply. But there is no panic surrounding the ability to close a transaction.

Government Closings Affect Real Estate Closings

What may affect real estate transactions are coronavirus-triggered closings of local government offices. Currently, many county courthouses, district clerks, recording offices, registrars, and other depositories of public records are implementing temporary closures of an undetermined period. How ‘closed’ they are varies between cities and counties. 

There are varying degrees of office closures. Some closures are basically “We’ve gone home and no one is here until we decide to come back.” For others, it’s business as usual, but only people who work there will be allowed in the building. 

The title business relies on government offices to obtain and record vital legal documents. We record deeds and search ownership documents, liens, judgments, etc. through government offices. Fortunately, many county recording offices accept and process electronic recording of documents from title companies. Since that doesn’t involve face-to-face contact, hopefully the process won’t slow much.

Business Continuity is Critical

Government office closures are not the only concern. Private office closings may affect our ability to get mortgage payoffs, HOA documents, lien releases, and other information necessary for normal transactions. Hopefully, those companies want to keep working as much as the rest of us. 

“We have put in place a business continuity plan so that we can continue to service our customers,” says Dawn Moore, CEO of Allegiance Title. “Currently, our offices remain open. The health and well-being of our customers and employees remain our first priority. To that end, Allegiance Title is taking every precaution to prevent potential service disruptions and do our part to slow the spread of the virus.” 

Many title employees are able to work from home and remain accessible through normal channels including web-based tools, email or telephone. Social distancing is also possible given the layout of many title company offices. 

Like other businesses, the buzzwords I’m hearing in the title world are ‘evolving’, ‘flexible’, ‘patience’ and ‘monitoring the situation.’ Regardless of the current situation, the people who want to buy or sell a home are still able to do it.  [where: 75230]

The World of Home Warranty companies

Home buyers often like the sense of protection they feel when getting a home warranty on the property they are buying. Until they discover their home warranty is much less effective than expected.

Seasoned and savvy buyers know that a home warranty policy offers limited coverage. They aren’t all-inclusive. In my opinion, some are kind of useless.

Why hate on home warranty companies? I order a lot of home warranty policies as part of my job. And I’ve had home warranty policies on my own properties. Seems like we all have stories of rejected claims and paltry payouts.

Most homeowners who get a home warranty policy do so at the time they purchase a home. Sometimes they negotiate for the seller to pay for a one-year policy as part of their purchase contract. That may be the best reason to get one.

“Any person can buy a home warranty in most cases,” says Julie Jones, Vice President of Real Estate Sales for Nations Home Warranty. “There are different plans and different pricing. You might get your best deal if you’re getting it at the time you are buying a home. “

Just what are home warranties and what do they cover?

A home warranty is also known as a Residential Service Contract. Residential Service Contracts cover a wide range of systems including appliances, plumbing, electrical, heating, cooling, pools, and water heaters. They are intended to repair or replace an appliance or system when there is a mechanical failure due to normal wear and tear. They may cover a lot or a little. It depends on the company and the annual coverage you purchase.

“A home warranty policy basically covers mechanical failures,” Jones says. “Many home warranty companies also offer option coverages outside of mechanical failures such as rekey services, pest control, carpet cleaning. “

There are actually a few good reasons to get home warranty coverage. A new homeowner may use the property in a different way than the previous owner. Kitchens, bathrooms and appliances tend to be used more or less frequently by different families. You may run your heater, AC or utilities differently than the former occupants. This may cause stress on some systems.

“Homes get used to a certain rhythm. Things change when different people move in,” adds Jones. “And when you’re buying a used house, all you have is a home inspection and seller’s disclosure to tell you about the home.”

In Texas, home warranty companies must be licensed by the Texas Real Estate Commission. A visit to the TREC web site shows the 50-plus licensed Residential Service Companies in Texas.

A handful of these companies are based in Texas. The only reason this carries weight with DFW consumers is the location of the call center. When your AC goes out in July, would you rather dial up someone in Dallas, out of the state or out of the country? “Our entire operation is here in DFW,” Jones states.

Keep in mind that a residential service contract is not homeowner’s insurance. Homeowner’s insurance covers loss to your home and property as a result of theft or perils like hail, wind and fire. They don’t cover appliances or household systems due to mechanical failure or normal wear and tear. A residential service contract can cover those types of losses but it will not cover damage to an appliance or system caused by those perils like fire, tornado, etc.

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