Residential Real Estate FAQs
What do I need to provide to The Bradley Law Firm when I first sign a sales contract?
We need the following to insure that your closing proceeds quickly and smoothly:
A copy of your contract
Real estate agent's name and contact information
Your full legal name
Social security number
Contact information (address, home and cell phone numbers)
E-mail addresses (if available)
Sellers additionally need to provide:
Amount of real estate commission
Current lender(s) name, contact information and loan number
Information regarding repairs to be made
Existing Homeowner's Association (HOA) information
Whether the property is your primary residence or investment property
Name of termite inspector and a copy of the inspection
Forwarding address
Buyers also need to provide:
Name and contact information for the new lender
Name of your homeowner's insurance agent
Information on any repairs
Whether this property is for your primary residence or investment
What is title insurance?
This type of insurance protects the owners of property from past problems relating to the title of a piece of property. For instance, in the meticulous world of real estate, a technicality, such as misspelling of someone's name or an incorrect property description from a previous sale, could interfere with your ownership rights in the property. In addition, if you later sell the property, you would still be protected. In essence, title insurance provides you with peace of mind as to your rightful ownership in the property.
Why do I need title insurance?
When you buy real estate, you want assurance that you truly own the property. You don't want an old debt or lien or lost Uncle Alfred popping up and keeping you from borrowing against the property or selling it at some later date. Title insurance is a way of protecting your rights to ownership. If any issues arose after your purchase, the insurance company would defend against these claims and pay for any problems up to the policy limits.
What is a title search?
Typically when you buy real estate, a person performs an examination of public records to review past transfers, mortgages, liens and judgments. The search begins with the current owner(s) and can extend back in time for many decades (commonly referred to as the "chain of title"). All documents affecting the subject property are reviewed for accuracy, completeness and proper execution.
What can a title search reveal?
A title search can show such potential problems such as tax liens, judgment liens, outstanding mortgages, and unpaid taxes. A title search should also reveal any restrictions on the use of the property, and such as neighborhood covenants, utility and other easements, and problems with the execution of prior transfers.
If my lender obtains title insurance, why do I need it?
The lender obtains title insurance to protect its loan from potential title defects. However, the lender's policy covers only the amount of its loan, which is usually not the full property value. In addition, this policy would not pay your legal expenses in defending a claim. When a loan policy is being issued, the small additional expense of your owner's policy is a bargain.
What is a HUD-1 Settlement Statement?
This document is a summary of the financial aspects of the real estate closing. This form is required for virtually all residential closings and is also used in most other types of closings. The HUD-1 Statement will list the purchase price, loan amount, closing costs for the buyer and seller, and will show all sums being charged and disbursed to the parties involved. It also clearly summarizes the total amount due from the purchaser and the net amount being received by the seller.
What if I live out of state?
We often work with clients who live out of state and can either close the transaction in our office or conduct the closing via FedEx or Power of Attorney. We are also familiar with the needs of out of state investors and brokers and provide that extra level of service to make these transactions proceed smoothly. We are experienced in creating business entities (such as LLCs and Limited Partnerships) to protect individual investors.
Does a real estate contract have to be in writing?
Yes. Oral contracts to purchase real estate are not enforceable.
What is a deed?
Deeds are generally required to transfer ownership of real estate. A deed contains the names of the old and new owners and a legal description of the property and is signed by the person transferring the property. The different kinds of deeds, such as a Quit Claim Deed or a Warranty Deed, transfer different interests. For example, a Warranty Deed assures the buyer that the seller will defend his title to the property from all other persons. A Quit Claim Deed conveys only whatever title the seller owns, with no warranty against the claims of others (this type of deed is often used in divorces or transfers between family members who are not paying anything for the transfer).
Do I need an attorney?
You may think, "Of course you are going to say yes, since you are an attorney!" However, a real estate attorney plays a pivotal role in the closing process. Most lenders generate their own closing documents (called a "closing package") and send them to the closing attorney. Our office is responsible for examining and completing all of these documents and preparing all other paperwork necessary to complete the transaction. These documents include the Deed, HUD-1 Settlement Statement, Note, Deed of Trust or Mortgage, and other lender required documents. The final settlement, or closing, of the transaction is typically conducted in our office. At the closing, the closing documents will be explained and executed, and all matters relating to the transaction will be approved by the parties prior to disbursing the proceeds from the sale. Any funds owed by the Purchaser must be in a cashier's check or other certified funds.
Home buying involves a considerable number of official documents, and an experienced real estate attorney can walk you through the "legalese." There also are several fees and taxes to sort out at the closing. Your attorney will make sure that these responsibilities are divided fairly between you and the seller, as appropriate. These costs can include inspection and repair fees, settlement and recording fees, transfer taxes, and outstanding property taxes.
In addition to dealing with paperwork, conflicts can arise between the buyer and seller. That is when our firm's experience and authority can really help resolve any disputes.
Why can't I prepare my own Deed or other documents needed for my closing?
This is a frequently asked question and is becoming more common as more clients attempt to use information they obtain on the Internet. However, real estate law is a highly complex and specialized area of legal practice. Attempting to "do it yourself" can have serious long-term consequences. In addition, problems with real estate title issues do not become apparent for many years. A mistake made at the time of a purchase, which could have been easily corrected at the time of purchase, may not make itself known until the time comes to sell the property many years later. By that time, it may be very difficult to correct the error because the appropriate person needed to sign a corrective deed or other instrument is either dead or cannot be located.
There are many generic forms on the Internet and in form books at office supply and book stores. Unfortunately, these forms are often not state-specific and may not be effective. Certain requirements, such as granting clauses and proper notary acknowledgments, etc., often cause these generic forms to be legally defective and can cause marketability problems if they are used. Further, many lenders do not allow the use of a Power of Attorney, and the ones that do require very specific language relating to the particular transaction for which the Power of Attorney is being used. Generic forms may not contain this language and the proper notary acknowledgment.
It is never a good practice for a non-lawyer to prepare his or her own legal documents. You may try to save a few dollars, but could likely end up paying dearly for it in the end.
What happens after the closing day?
An attorney's job does not end at the closing. Details still remain, such as recording the Deed and Mortgage in the County Register's office, mailing all executed closing documents to the lender, correcting any errors at closing, and issuing the title insurance policies.
What can I do if my air conditioning system stops working after I close or there are repairs that need to be done that I did not notice prior to closing?
Under many circumstances, previously occupied homes have no guarantee regarding their condition. Existing homes are sold in their existing condition. This is called "caveat emptor" or "buyer beware." It is the responsibility of the buyer to have any inspections he or she feels necessary in order to determine the condition of the property prior to closing. Once the transaction closes, the seller typically has no responsibility for the property or for any repairs or maintenance items.
An exception to this rule relates to "latent defects," or defects or conditions on the property which could not be reasonably discovered through an inspection of the premises. These conditions must be disclosed by the seller, since a buyer could not be expected to discover these defects through an inspection of the premises.
The "caveat emptor" rule usually does not apply to new homes. Most states have an implied Warranty of Habitability on new construction; however, most builders offer a one year limited new home warranty, during which time the builder agrees to be responsible for all workmanship and materials incorporated into the home. The written warranty is in lieu of the implied warranty. There are certain items which are excepted from the areas covered by the written warranty, and it is advisable to make sure that your builder provides you with a copy of the warranty he offers at the time of the execution of your purchase agreement in order in assure yourself that there are no surprises at closing.
Can I get a separate home warranty to cover defects?
Typically yes. There are several companies which sell warranties on existing homes. Most real estate agents have access to these companies and the cost ranges from $350.00 and up per year. Home warranties are often negotiated in the sales contract, and can be paid for by the buyer or seller. Because the deductibles and coverage vary, it is important to investigate before making a purchase of a warranty.
How Death Can Affect Title and Timing of Your Real Estate Closing
When real property is owned by a person who suddenly dies, it immediately raises questions of about what happens next. Who owns it? How can the property be transferred? What if the decedent passes one week before the closing? What legal requirements are there on distribution of the sales proceeds? When will the sales proceeds be distributed?
Real Estate Ownership Types
When a property owner dies, the first issue to consider is the nature of the owner's interest in the land. There are four types of real property ownership:
Sole Ownership
If the deceased owned the property alone, there are no co-owners to consider and one complication has been eliminated.
Tenancy by the Entirety
A Tenancy by the Entirety (or "Entireties") can only exist between a husband and wife, and it provides an automatic right of survivorship to the surviving spouse. It also provides special protection for married couples, as one spouse cannot validly mortgage the property without the consent of the other, and creditors can only take the property if their judgment is against both the husband and wife. A Tenancy by the Entirety is typically terminated by death, divorce or transfer by both. If one spouse dies, the other automatically owns the entire interest in the property. If divorced, the Court will usually grant one spouse possession of the house or order it sold.
Joint Tenants with Rights of Survivorship
Any two or more persons can hold real property as Joint Tenants with Rights of Survivorship (JTROS), where each owns an equal share of the whole and is granted a survivorship interest in the property. On the death of one owner, each remaining owner receives an equal share of the deceased owner's interest. The "last man standing" receives the property with Sole Ownership. Thus, a joint tenant's interest does not pass to his heirs, it is automatically transferred to the surviving owners until they are all deceased.
Title held as JTROS may be terminated by any of the joint owners if they transfer their interest. Further, a creditor of one of the joint owners may attach its lien to the property held as JTROS, thus destroying the JTROS status and creating a Tenancy in Common.
Tenants in Common
The final type of property ownership is called a Tenancy in Common, where each owner holds an undivided share of the whole. This ownership interest is much like the JTROS described above, with one notable difference: the lack of survivorship rights. When one owner dies, his interest passes to his heirs, not the other owners. Tenants in Common can also own unequal shares of the property rather than equal shares.
What Happens to Real Property When You Die?
When someone dies, they either have a valid Will or they don't (validity requires the testator to be an adult under state law, of sound mind and disposing memory). If there is a valid Will, the estate is called "testate." To take effect, a Will must be produced, admitted to Probate Court, and "probated" (administered by a personal representative of the estate). The purpose of probate is to validate the Will and allow any potential adversaries to challenge the Will.
Wills may be probated in "solemn form" or "common form." Probate in solemn form, which is uncommon today, requires that all interested persons be made parties to the proceeding and given notice of the hearings. This process is used most often when there is some issue as to the identity of the Decedent's heirs. Wills probated in solemn form are presumed valid and may not be challenged unless fraud is alleged.
More common is probate in common form, a less formal process used when the heirs are all known (such as children of the deceased). This procedure is faster than probate in solemn form, allowing the estate to be opened and closed in relatively short order. The downside is that a Will probated in common form is subject to being challenged and may be challenged for up to two (2) years after admission to probate.
What if There is No Will?
An estate without a Will is called "intestate," meaning the Decedent's last wishes were not put in writing. Even without a Will, an estate can be opened by an heir or interested party in order to administer the Decedent's property. However, in the case of real property where there is no Will, no survivorship rights, and no probate has been opened, the real property may be eligible to be transferred using a relatively simple document called an "Affidavit of Heirship." In this process, probate can be avoided if two or more disinterested people who personally knew the Decedent sign a sworn affidavit outlining their knowledge and identifying all heirs to the Decedent to the satisfaction of the title examiner.
Closing a house using Affidavits of Heirship can be risky, however, because under Tennessee law, a conveyance by Affidavits of Heirship may be set aside within 6 months of the Decedent's death if a valid Will is produced and filed for probate. But once the 6 month period has lapsed, any bona fide purchaser takes their ownership free from any claims of someone who later produces a Will. The Affidavits of Heirship must be filed along with other closing documents including Warranty Deeds, Quit Claim Deeds, or Deeds of Trust.
If an intestate estate must be probated, Tennessee has taken the liberty of dictating who receives your property, outlined in the following chart:
| If, at the time of your death you: | Your estate passes to: |
| Are married and have children | Your children and your surviving spouse |
| Are unmarried and have children | Your children |
| Are unmarried and have no children | Your parents, if living; otherwise to your siblings |
| Have no living relatives | The State |
Waiting Period
Tennessee law prohibits the transfer of real estate within the first 60 days after the death of the property owner. Generally, creditors have 1 year from the owner's date of death to file a claim against the Estate. However, if a probate proceeding is filed, this time period for filing a claim is typically shortened to as little as 4 months from the date of first publication and notice to creditors is published.
If the purchaser of the Decedent's real property is obtaining a loan for the purchase, the lender will invariably require Title Insurance. If probate is not opened and the creditor's period reduced to 4 months, title insurance companies will universally require that the net proceeds of the sale be escrowed for the full one year period. Therefore, a closing performed using Affidavits of Heirship, although certainly a speedy process, usually requires the net proceeds to be escrowed for one year from the date of death.
Unique Circumstances
What if the Decedent Signed a Contract to Sell Real Property but then Died Before Closing?
In this circumstance, the personal representative of the estate can be given authority by the Court to execute closing documents to consummate the sale as intended by the Decedent. The personal representative in essence functions as an agent of the Decedent. However, be aware that most title insurance companies still require each of the heirs or beneficiaries of the decedent to join in the conveyance to avoid potential conflict.
What If the Value of the Estate is not Enough to Pay the Creditors?
When an estate is insolvent, or without sufficient assets to pay the claims filed against the Estate, the Court may step in and take control of the real property. The personal representative of an insolvent estate or an unpaid creditor may ask the Court to have the real property sold to satisfy the debts. To allow the sale of the land, the court must find that the personal assets of the estate are insufficient to pay the decedent's debts and expenses and authorize the sale of the decedent's real estate. Any Contract must be approved by the Court, which typically requires a formal appraisal to satisfy the Court of the property's true value. When the purchase price is less than 90% of the appraised value, the Court will typically require testimony from the appraiser or realtor justifying the lower price.
What if the New Owner is a Minor?
Minors in Tennessee (under 18 years of age) have no legal authority to sell or convey real estate. If a minor or the family of the minor wishes to convey the minor's interest in the property the family must petition the local court having jurisdiction over the matter, (in Shelby County the Probate Court, in most other Counties the Chancery Court) for guardianship. The court will appoint a local attorney to serve as guardian of the property of the child and make a recommendation to the court whether or not the proposed transaction is fair and adequate and whether or not the transaction is in the best interest of the minor.
Estate Tax Liens
A special lien for any unpaid estate taxes exists upon the Decedents gross estate for a period of ten years unless paid in full. This special lien does not have to be recorded in the Register's office or anywhere else to be effective. This lien may even affect real property depending on the circumstances. If real property passes directly to an heir, such as a surviving spouse in a Tenancy by the Entireties, the real property can be sold to a bona fide purchaser free and clear, but the lien may attach to the proceeds of the sale. Consequently, the title examiner must satisfy himself that the Estate is below the taxable threshold or that the estate taxes have been paid in full.
DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.
