Jul 21, 2018

MERP Certificate requirements when selling a home

A Realtor recently asked: “My title company is now requiring a MERP certificate from the state any time a deal involves a deceased seller, and it’s slowing closing down BIG TIME. Does anybody else have the same process with their title company, or am I on my own here?  How can I speed this up?”

Dear Reader,

MERP stands for Medicaid Estate Recovery Program. This program allows the state to file a claim against the estate of a deceased Medicaid recipient, age 55 or older, who received payments for certain long-term care services.  Claims can include the cost of services, hospital care and drugs paid for by Medicaid.

If the deceased owner of the property received Medicaid, their estate (or heirs) may have to pay it back to the state. This is why when you’re selling the property of the deceased, you will very likely need a MERP Certificate if a will has not been probated. If a will has been probated, then it shouldn’t be an issue because probate will have taken care of it.

The heirs selling the property should already know about the MERP requirement because they should have received a claim “letter of intent” from MERP when the homeowner died. Often people ignore it, hoping it will just go away. Or they are dealing with grief and other aspects of losing a loved one. But ignoring it will only set them up for a shock when they go to sell the inherited property.

Any good title company is going to require a MERP certificate when there is no probated will. Hopefully, they will get the process started quickly – when they first learn of the situation. The “MERP Cert” requires the deceased owner’s Medicaid and/or social security number and must be signed by an heir/beneficiary of the deceased owner’s estate. The title company can only file the request as fast as the heirs give them information.

The reason your title company is just now requiring a MERP Cert may be because they had to pay a title insurance claim regarding a missed MERP claim.

It typically takes about 30 days to get the MERP Cert. But the time could be longer or shorter depending on a lot of circumstances. MERP collections are usually contracted out to Health Management Services (HMS). They are essentially the collection agency for MERP and they get a percentage of what they recover. HMS will request information from the estate regarding assets and bank accounts. The longer the estate takes to respond to them, the longer it will take to get the MERP Cert.

Heirs (and their real estate agents) should start getting all documents (death certificate, will, inventory, …) and file with MERP before getting a property under contract. If you have your paperwork together the process is much faster.

We look at a MERP claim the same as a claim by any creditor. MERP claims must be addressed before closing the transaction, issuing title insurance and transferring title to a new owner. If there is a MERP claim, the title company will withhold that amount from the proceeds of the property sale and pay the claim.

Some important details about the MERP program –

  • MERP claims are against a deceased’s homestead as of the time of death.
  • Only remaining assets left by the deceased are liable for the MERP claim.
  • MERP will not make a claim if there is a surviving spouse or dependent children under 21.
  • The Texas statute of limitations for a MERP claim is 4 years.
  • There are several exceptions to MERP claims that can be found on their website.
  • The state allows a hardship waiver to be filed in certain situations.
  • The timetable for exemptions and waivers is very strict.
  • In Texas, a MERP claim is paid after funeral bills, administration expenses, secured claims, child support and taxes. It is paid before most other types of creditors and before the beneficiaries are compensated.

While it won’t help you with a current MERP claim, it might be good to know that there are a couple of ways to protect your home from MERP prior to your death. You can deed your property to someone through a life estate deed, or “Lady Bird Deed.” Basically, a Medicaid recipient deeds their homestead to someone while simultaneously reserving the right to live there during the Medicaid recipient’s life. For Medicaid purposes, they no longer own the property after death. As long as the deed is prepared correctly and filed correctly with the county prior to the recipient’s death, the home is protected from claims like MERP.

There is also a Transfer on Death Deed. Texas will allow a properly prepared and filed Transfer on Death Deed to protect a Medicaid recipient’s homestead from a MERP claim. Both of these types of deeds have several strict and specific requirements. Properly filing a deed is a step that must not be overlooked. Check the Texas Estates Code 114.151. Consult an attorney or accountant if you have questions.

MERP exists to protect the tax-paying public that supports the Medicaid program. For more MERP information, go to:  https://hhs.texas.gov/laws-regulations/legal-information/your-guide-medicaid-estate-recovery-program

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. [where: 75230]

Jul 14, 2018

Real Estate Closing Costs in Texas

Closing costs are a big expense when selling a property in Dallas. Who pays them are sometimes mandated, sometimes standard practice and sometimes can be negotiated. Any way you look at it, the cost of selling a property in Texas is high.

In Dallas, it is common for the seller to incur the following expenses (and their approximate costs per my experiences):
  • Mortgage payoff - dictated by your lender
  • Selling broker's commission - typically 3%
  • Buyer broker's commission - typically 3%
  • Title insurance policy - roughly half a percent of the sales price
  • Prorated taxes - seller's share of current year taxes
  • Survey $0-$900
  • Release of lien - $20 to $50
  • Courier fee - $10 to $50
  • Document Preparation fee $100 - $450
  • Recording fees $40 - $195
  • Escrow fee $0 - $500
  • Home warranty $0 - $1,100
  • Homeowners Association transfer fee - $50 - $900
  • Homeowners Association resale certificate - $100- $600
  • Flood certificate $0 - $50
  • Tax certificate $150-$500
  • Deed $20 - $145
Please keep in mind that these expenses vary depending on the sales price, size of the property, county it is located, type of property (condo, single family, acreage, ...) and other factors. Many title company fees are regulated by the state, so your closing costs are not going to vary much based on which company you use.
Title insurance rates in Texas are determined by Texas Dept. of Insurance and all title insurance companies must charge the same.

So what is title insurance and do you need it? Title insurance protects you from other claims of ownership, outstanding debts of previous owners, and other title potential problems. It does not insure against fire, flood, or any other types of property damage or loss.

Before selling a title insurance policy, the title company will check for problems with your title by researching public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps. If there is a claim against your property after purchase, the company will then defend you in court and will pay you for covered losses up to the amount of your policy.

The following Title Insurance Premium Rates are based on the sales price of the property. Premiums for policies $100,000 and over in Dallas County are:

$100,000 is $843 and up to $875
$500,000 is $2,979 and up to $3,091
$1,000,000 is $5,649 and up to $5,861
$2,000,000 is $10,039 and up to $10,421

In Texas the title insurance policy is usually paid for by the seller, but it is negotiable. Banks and mortgage companies will require title insurance in order to loan on a property.

If you are not experienced with selling a home, it is unlikely you would know what closing costs can be negotiated with the buyers. A knowledgeable and experienced Realtor can not only guide you through the paperwork and navigate the legal issues, but assist you with writing a contract to help save you money at the closing table. If you need help determining if you can afford to sell, call me to help make this part of the process easier.

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.

Jul 7, 2018

Title Insurance vs. Other Kinds of Insurance

There are lots of kinds of insurance. There’s homeowner insurance, auto insurance, health insurance, life insurance, liability insurance, … You can insurance just about anything of value. “We focus mostly on property and casualty insurance,” says insurance agent Amanda Campbell of Smith Allen Insurance. But she and other insurance companies offer all kinds of insurance. “You can insurance your pet for loss, accidents, medical bills and more.”

“You can also get wedding insurance,” she adds. “It covers loss of deposits or money lost on wedding expenses if you have to move your date due to weather or the venue ends up flooding or something. It can even cover if you serve alcohol and someone leaves and has an accident.” 

And speaking of alcohol - “You could insure your really nice wine collection if all the bottles were to break or were ruined.” She says. “You can even insure body parts. That’s more for famous people.” Apparently, J Lo has her butt insured to protect her ‘assets’.

Regardless of what you want to insure or protect, almost all insurance is purchased annually. You typically pay for it annually or monthly and you must continue to pay the premiums in order to continue to receive coverage. 

That’s where title insurance and other types of insurance differ dramatically. When you purchase a property and get title insurance, you pay the premium up front at closing and it stays in effect for as long as you own your home.

Lots of new homeowners get confused between their title insurance, homeowner’s insurance and home warranty. Homeowners insurance protects against loss or damage to your home and contents. It covers things like fire, flood, theft. A home warranty is a service contract that covers repair of most major home appliances and systems. They typically cover items like air conditioning, water heaters, and plumbing.

Title insurance protects your ownership in your property. It insurances the owner against someone else trying to lay claim to it.

Most insurance protects against what could happen in the future. Title insurance protects against what could have happened in the past. Homeowners – and their mortgage companies – want to be covered against losses from ownership issues that existed before they bought the property. No one wants a previously an unknown heir, ex-spouse, lien-holder, … showing up to claim ownership. 

Before a title company issues title insurance, they conduct research for outstanding liens, encumbrances or other title defects. But there could always be unknown factors. Like other types of insurance, title insurance gives the owner protection against what could be catastrophic loss. Because, life can be like a box of chocolates. You never know what surprises it might hold. 
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.