Aug 18, 2018

Hidden Hazards on Dallas Properties

A hidden hazard on your property is not the kind of thing you’re going to stub your toe on. At least not the kind of hidden hazard that we’re talking about here.

In the title business, a hidden hazard is an issue that is not uncovered in a traditional search of property records. Most title companies are really good at finding potential problems in the research of deeds, maps and plats, mortgages, tax records, court records, liens, abstracts of judgement, probate and divorce actions, etc.

Issues that can be found by a typical title search are considered “discoverable.” These would be items like outstanding mortgage loans, tax liens, court judgments, utility easements, and such. Anyone with enough time, resources and expertise could likely find these things in court records and a search of the chain of title. Or they would find most of them at least.

But even the most fastidious title search may not reveal a hidden hazard. Sometimes they are impossible to uncover until an event brings it to light.

For example, there could have been a previous act of forgery or fraud in the transfer of a title that surfaces many years later when someone with rightful ownership appears with a claim. Identity theft is alive and well in the real estate business.

If the legal description of the property is incorrect due to error, the deed may be defective. Clerical errors still happen in this electronic age. Or the error could have occurred two or three sellers back in the chain of title.

More common hidden hazards include claims by previously undisclosed heirs or spouse. An unknown heir can show up with a legitimate claim to all or part of a property. Or a married seller may claim to be single and then transfer the property without informing the spouse. This undisclosed spouse may appear after closing to claim a stake in the ownership.

No one wants to buy their dream home only to have a stranger serve them with notice that granny wasn’t mentally competent to sell her property to them. These kinds of hidden hazards can jeopardize your right to ownership in your property. This is why property owners get title insurance.

Title insurance protects the buyer against loss if a hidden hazard results in a claim against their ownership. If someone makes a claim of ownership against their property, title insurance will assure the owner of a legal defense and pay court costs, according to the terms of the policy. If the claim is determined to be valid, the owner may receive financial compensation for loss up to the amount of their policy.

A hidden hazard is unforeseeable difficulty and an unpleasant shock for anyone. Without title insurance, a hidden hazard on your property can hurt a lot more than a stubbed toe – and take a lot longer to recover.

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]

Aug 11, 2018

Signing Real Estate Docs: Doting I's and Crossing T's

When signing documents for a home sale or purchase, the numbers are figured to the penny and the signatures are scrutinized to the letter. Quite a volume and variety of paperwork is involved. Signatures and initials are required on deeds, disclosures, waivers, affidavits, notes, supplementary lender and title company documents, and other miscellaneous papers.

Real Estate closings involve getting “wet signatures.” That means papers are physically signed in ink, in person, by hand. Remember something called cursive writing? That’s what we’re talking about. Documents must be witnessed and signed by a notary as well.

Both buyers and sellers must sign in a very specific way. The seller’s signature must exactly match the legal name that the property is vested in. Buyer signatures must comply with their lender’s instructions.  Most signatures must match either the lender documents, the driver’s license, the recorded documents, or however the title company wants it.

If your name is John James Doe Jr., you may be asked to sign one document as John J Doe, another as John Doe Jr, or JJ Doe or J James Doe — there can be different variations of your name that require different signatures for the same closing.

In a typical transaction, the number of documents signed or initialed at closing by the seller often ranges between 10 and 25. For a buyer getting a mortgage loan, the number of signatures and initials required on closing day can be between 20 and 50. Those are just the signatures and initials needed at the closing table.

From the start of the transaction to the close of the deal, even more autographs are involved. The buyer will sign documents at the start of the loan process including the application, good faith estimates, and disclosures. Getting the property under contract requires signatures from both parties on the offer, responses, final contract, disclosures, representation agreements and various addendums.

It adds up before you even get to closing day. If there is a homeowner’s association involved or any special situations, more signatures are involved.

I had a closing this week with the out of state buyers using a Power of Attorney. Their mom was signing as the POA for both her daughter and son in law. Not many folks realize what a huge gift this was for this purchasing couple.

Signing as the Power of Attorney, this dear woman had to sign or initial on the dotted line with exact instructions from the new lender 109 times. Yep, we counted. For each signature line, she had to write the daughter’s name, her name, and write out “agent and attorney in fact.” And she had to do the same for the son-in-law’s signature lines. They were long ‘signatures’ x 109 times. I got writer’s cramp just watching it.

When you’re prepping to buy or sell a home, in addition to packing, you may need to brush up on your penmanship. Every I needs to be dotted and every T should be crossed. Get it wrong, miss a signature or forget an initial and you’ll be called back to the title company to fix it before the deal is done.

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]

Aug 4, 2018

How much should Earnest Money be in Dallas?

When putting a contract on a property, a buyer can usually expect to write two checks to accompany their contract — an option fee check and an earnest money check. There is no strict rule about how much each of these checks must be. The amount of this up-front money is negotiable between buyer and seller. However, the amount sends a strong signal to either buyer or seller.

A buyer offering too little in either option or earnest money can indicate they are not serious or very interested in the property. Perhaps they can’t even afford it.  A demand of too much option or earnest money from the seller may send the message that they are unreasonable or mistrustful. The state of the real estate market also influences the amount of option fee and earnest money.

The option money is a non-refundable fee that the buyer pays to the seller for the option to terminate the contract within a specific time period. This option period is when the buyer may perform inspections. And they have the right to back out of the contract for any reason before the option period ends. The option fee is typically anywhere between $100 and $1,000. How much really depends.

If it is a slow time of year or a buyer’s market, then the buyer may be able to negotiate a long option period (10-14 days) with a small option fee ($100-200). It it’s a fast moving, seller’s market or there are multiple offers, the option period may be three to five days with an option payment closer to $250-500. It’s actually a small price to pay considering that the seller is taking their property off the market and is locked into selling, while the buyer has the option to change their mind and walk away.

The other, much larger, check that the buyer will write is for the earnest money.

Earnest money is deposited by the buyer with an escrow agent and it is forfeited to the seller if the buyer defaults on the contract. These funds are delivered to the escrow agent after the contract is executed and before three business days are up.

Earnest money demonstrates that the buyer is acting in good faith with the intention of buying the property. The money is held by the title company. At closing, the earnest money is credited back to the buyer. If the contract terminates after the option period, the title company will either deliver it to the seller or return the money to the buyer, depending on why the contract terminated.

Earnest money is usually somewhere in the range of 1 percent to 2 percent of the contract sales price. An amount much lower or higher says a lot. Like the option fee, the amount of earnest money depends on several factors.  If the real estate market is slow or the seller isn’t getting any offers, you might pay less than 1 percent of the sales price in earnest money. In a busy market, where there is more demand for homes, you might have to make a bigger deposit than is typical.

On average, the earnest money deposits that I see in my Dallas office are 1 percent of the sales price. However, it’s been a busy spring, and right now that average is slightly higher. In the past month, I’ve seen earnest money range from $2,000 to more than $50,000. Eager buyers are often willing to put significant money down to show they’re serious. And sometimes the higher earnest money helps them win the contract in a multiple offer situation.

Understandably, sellers prefer to see their buyers make a substantial earnest money deposit. They want the amount to be large enough that the buyers will avoid defaulting. Sellers typically feel they are the ones shouldering the risk when they take their property off the market and trust that the buyer will be able to close. No one wants to spend weeks packing up their home and making moving arrangements only to have the deal fall through.

If you’re serious about buying a home and want to send the sellers that message, forget the personal notes and sentimental letters about how much you love their house. Show them the earnest money. Preferably a lot of it.

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]