There is more than one Big D in Dallas-area real estate. These important “Big Ds” represent the circumstances that often demand that someone sell their property. I’m talking about death, divorce, downsizing, disaster, debt, and default. These difficult situations can make transferring the title to a property more complicated.
Folks don’t like to think about most of these situations, but they are a real fact of life that many homeowners must deal with. In the coming weeks, we’ll take a closer look at the challenges in buying or selling a property when it involves one of these.
Death
Death is a sensitive subject — we all must face at some point. Death isn’t an “if something happens to me’ situation but a ‘when something happens’ event. When a person dies with real estate held in their name, it becomes more complex. Inheriting a property upon a death can be complicated and cumbersome for the beneficiaries. Often the heirs are not prepared to maintain the property or pay the mortgage, taxes, and insurance. Selling the property means the heirs must prove they have the authority to sell. All ownership and heirships must be addressed and resolved before a title company will close and ensure the sale of the property. This is not a quick or easy process. And then there’s what happens when a buyer or seller dies during a transaction.
Divorce
When a marriage ends, the couple often sells any property they share. Cooperative from all parties is required and sometimes tough to obtain. In Texas, if the divorce is not finalized then both spouses are required to sign selling documents of their homestead property. If the divorce is final and the deed is still recorded in both names, the title company will need to review the divorce decree and confirm ownership rights.
Downsizing
The average Texas property owner is over 60. A number of these folks are downsizing. Some owners embrace the idea while others are compelled by necessity. Moving to a less expensive property or opting not to purchase a replacement home, can have major tax implications. Title companies are required to report property sales to the IRS. Tax laws change, but as of now, if you have owned and lived in your home for two of the five years before the sale, then up to $250,000 of the profit is tax-free. If you are married and file a joint return, the tax-free amount doubles to $500,000. Title companies require sellers to disclose and swear to this information.
Disaster
Fire, floods, hail, tornadoes and other catastrophes can happen when people are in the process of buying or selling a house. According to the standard Texas contract, if any part of the property under contract becomes damaged or destroyed, the seller must restore it to its previous condition before closing. There is a clause that allows the buyer accept the property in its damaged condition with an assignment of insurance proceeds. However, the lenders and insurance company must be on board as well.
Debt
Financial disasters that rack up debts include job loss, lawsuits, and bankruptcy. Then there are other debts that folks just haven’t dealt with. Often these debts are attached to a property. They are discovered in a title search and must be paid off before the property can be sold or at closing. Title companies deal with liens from mortgage companies, creditors, the IRS, child support agencies and such on a regular basis. The seller’s timely cooperation with the title company is essential to completing the sale. Without it, the property ends up in the next category – default.
Default
In Texas, a property is typically foreclosed on by either a mortgage company or a taxing authority. The bank or other entity takes possession of the property and sells it. Since title insurance protects the buyer against unknown liens and claims, the title company will want to be diligent and may make exceptions to what they will insure in a foreclosure situation.
If you’re buying or selling a property that involves one of the Big Ds, be prepared for the red tape. Your title company will be working to cut through it.
.JPG)
