As if selling your home is not hard enough, there are legal aspects that can complicate the process and must be considered. During these emotionally draining and legally complex transitional periods, it is important to think about the legal aspects of selling your home to ensure you protect your family and investments. Below are a few steps you can take to avoid potential issues and unexpected costs during the sale process.
Clear the Title
Upon closing on the purchase of a home, buyers are entitled to receive marketable title. When talking about “title,” lawyers and realtors are referring to the part with ownership and usage rights to the property. For title to be marketable, there cannot be any encumbrances or title defects on the property. Encumbrances and title defects include past ownership claims, liens, outstanding unpaid taxes, and recorded covenants.
To protect yourself, it is important to verify clear ownership by conducting a title search at the recorder’s office in the county where the property is located. A proper title search will reveal the current owner and whether there are any defects. Different title defects and encumbrances can be removed or cured in different ways. The best way to ensure that you receive a clear title is to consult a real estate attorney or title agent during the closing process.
Liens are commonly placed on property due to nonpayment of taxes, civil court judgments, homeowner association fees, and child or spousal support. Selling a home does not automatically dissolve such liens. To protect buyers, liens will appear in the land records and on a title search of your property. At closing, sales proceeds should be reduced by an amount necessary to satisfy all liens. If you know your property has liens attached, address them before you reach a final agreement with a buyer.
Real Estate Disclosures
In the process of selling your home, there are certain disclosures you must make to potential buyers. Sellers are required to disclose potential issues that could affect the value of the property. In most states, it is considered illegal to intentionally conceal major defects. Although it is not required by law in all states, it may be helpful to hire a professional to inspect your property for defects. The inspector’s report can be used to protect you against future claims by the buyer of inadequate disclosure.
Most states require contracts for the sale of real estate to be in writing. State law might also require that you make disclosures in writing and that both parties sign the disclosures. Even if you live in a state that does not require signed, written disclosures it is the best practice to follow. Considering the significant amount of money involved, and the complications that can arise without proper documentation, it is recommended to always make disclosures in a writing that is acknowledged by the buyer.
Get Joint Tenants on the Same Page
The ownership characterization of your property may affect your ability to sell your property. Joint tenancy, the ownership of property in equal shares, requires all co-owners to agree to sign a transfer deed. If you own property as joint tenants, it is important to make sure all parties are on the same page. This will help you avoid going to court, which can be a lengthy, expensive, and combative process.
Gather Important Documents
Finally, when preparing for the sale of your home, it helps to gather all the important documents relating to the value of your property. Before selling, make sure you have the following documents in order:
- a plat or survey of your property;
- comparable sales (if available);
- evidence of encumbrances;
- documentation of major repairs;
- a deed or your mortgage agreement;
- the most recent real estate tax bill; and
- any homeowner association documents.
Bianca Ybarra is a Staff Writer for GetLegal.com. She is a graduate of the University of Houston Law Center and a member of the State Bar of Texas.