The Top 10 Things First Time Texas Homeowners Wish They Had Known
At the Traeger & Ricks Law Firm we realize the necessity for practical advice and answers to real questions. Sometimes, the hardest part is knowing what questions to ask. In considering the New Braunfels real estate market and the needs of our own generation, we have compiled the following educational resource.
1. We wish we had filed & recorded our deed:
When an owner of property properly purchases land, the transaction is memorialized by use of a deed. A deed describes the property, explains who the parties are in the transaction, provides for any limitations as to what is being conveyed, and legitimizes ownership in the new buyer. Deeds protect purchasers of real property from bad acts of fraudulent sellers. Deeds can come in many different forms and may say a variety of different things, but the point is the deed is an avenue for the conveyance of real property interests in land. Deeds are recorded in the County Clerk’s Office in which the land is situated to give constructive notice[1] to the public of the interest exchanged and now owned by the purchaser.
Tip: Don’t completely rely on others to make sure your deed has been taken care of. Search your name in the County Clerks Records as “grantee” and confirm that the deed is properly filed and recorded.
2. We wish we had an attorney review our sales contract:
The sales contract controls as the agreement between a buyer and seller up and until the deed is executed or the parties say otherwise. A sales contract is important because it identifies the property, explains what interest in said property is being contemplated, determines when things shall happen, who shall pay for them, what happens if something unexpected comes up, and finally, what the rights of the parties to the transaction are. In most residential home transactions, the sales contract is filled out by the buyer’s and seller’s respective sales agents (real estate agents). Sales agents add value to deals because they have a knack for understanding the market, have knowledge of home values, understand what is attractive in a home to buyers and sellers, and generally, makes a complex process simpler. Contrary to popular belief however, sales agents cannot amend contracts and must work off forms promulgated by the Texas Real Estate Commission (TREC). Therefore, some deals that may require contracts outside the standard provisions promulgated by the state will need to be reviewed by a qualified attorney. This most often comes up in situations where non-standard things are going on in a residential deal, in some farm and ranch transactions, and in most commercial transactions. Sales agents are usually able to spot situations where an attorney could add value to a transaction.
Tip: Consider consulting with an attorney, who offers free consultations, before signing your real estate sales contract or entering into negotiations.
3. We wish we knew that our escrow could change:
Lenders may require an escrow account to be set up in order to ensure that taxes and insurance are timely paid and ultimately, so their collateral is protected. Usually, escrow will be required until 20% or so of the loan has been paid down, at which point the homeowner may ask for the escrow to end. While in existence, the monthly escrow payment CAN fluctuate even with a fixed mortgage. As taxes and insurance costs go up and down the amount of funds needed to be held in escrow changes. Additionally, as the total amount of escrow funds needed changes the lender will change how much of a cushion, they may require is kept in the escrow account. The money sitting in escrow is your money and is simply being held for you in order to ensure timely payment. Understanding that your monthly budget may be affected by changing escrow requirements is an important lesson that is better appreciated before it happens.
Tip: Work with a qualified and experienced lender to fully understand escrow requirements and how anticipate changes accordingly in your personal budget.
4. We wish we knew about trees:
Trees are often one of the main items that neighbors tend to fight over. However, the law in Texas appears pretty simple. If the trunk of the tree is on your property, then the tree is your responsibility. Even if roots grow across the boundary, the tree is yours if you have the trunk. If, branches fall or the tree itself is pushed over and causes damage then you may be held liable. If you are living next to someone who is not trimming their trees properly and you feel that your property is at risk, you may trim the tree of another. However, you must only cut the overreaching limbs back to the property line and must make reasonable efforts to maintain the health of the tree. In fact, if you destroy the tree in your pruning exercise then you may be held liable for damages.
Tip: Don’t allow this to be a legal issue. Work with neighbors to enjoy trees while also keeping your respective properties safe. Hire a qualified (licensed & bonded) tree expert to help if needed.
5. We wish we knew we were covered – Texas Title Insurance:
Like any insurance policy it is important to understand what is covered and who is covered when considering title insurance. Lenders require title insurance (Lender’s Policy) to protect their collateral when making loans. The lender’s policy does not directly benefit the new buyer but instead the lender. A buyer usually is advised to purchase a title insurance policy that covers some of the loss they may experience (Owners Policy). The trick is you must understand what is actually being covered. The title commitment will provide various exceptions for coverage which vary by each individual title situation on each separate property. Schedule B of the title commitment will list all exceptions from coverage. Schedule C will list various curative requirements that must be completed before coverage will be extended to those items, otherwise the issues noted in Schedule C will become exceptions to coverage. Various supplemental products are available for purchase. A common example is coverage for discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements. Finally, title insurance does not cover anything over the sales price unless supplemental coverage is purchased. Therefore, if you purchase a piece of property for $100,000.00 which over time increases in value to say 200,000.00, if title fails, you are only covered for the sales price of $100,000.00.
Tip: Hire a qualified attorney to review all title insurance products and help you understand what you are covered for.
6. We wish we knew to file for our Homestead Exemption:
A Homestead Exemption provides purchasers of real property with a property tax reduction on their principal residence. This deduction cannot be claimed on multiple properties so don’t try it. Most new buyers have someone advising them to do this, but it is often overlooked. This can be a very valuable exemption depending on the value of the property and your personal financial situation. The paperwork is simple and can be found and filed in the County Appraisal District’s Office in the county in which the property is situated.
Tip: Call the appraisal district and ask for help. Since they are usually having to fight people over taxes and their appraisals, giving an exemption is something easy that they enjoy.
7. We wish we knew that our co-signers might partially deny Homestead Exemption benefits:
New prospective homeowners often need some assistance from a co-signer who can help qualify the prospective homeowner for a loan. The usual agreement is that the new homeowner will then re-finance and get the helpful co-signer off the note at a later date. An unexpected issue arises when the County Appraisal District proclaims that because you only own ½ of the home (or whatever the actual ownership is) you are only entitled to ½ of the homestead exemption you would otherwise enjoy. You may reply that “Oh no, our co-signers are just helping us qualify for our loan, we own the house”. Unfortunately, this may be incorrect even though conventional wisdom might say otherwise. If the co-signers were included on the deed, then they are not just co-signers, but co-owners. Usually, the co-signers/co-owners have their homestead somewhere else and therefore are already receiving their homestead exemption. Therefore, our new homeowners may only be able to benefit from the exemption proportional to their ownership interest and the property may be left with a portion of it enjoying no homestead exemption benefit.
Tip: Co-signers do not have to be included on the deed. This decision is made by the various lenders and is negotiable.
8. We wish we knew where our property line was:
Boundary disputes are common in Texas as land frequently changes throughout time. A survey can be a helpful tool to keep track of historical changes to actual tract boundaries and size. It is very important to pay close attention to where true boundaries are and that they are preserved as new fencing our new uses are utilized on property. Before purchasing a piece of property, it is important to understand what currently exists by way of boundaries and to consider any possible issues that may arise. Check to see if the boundary is disputed, if it’s clearly marked, what the condition of any barriers (fences) are, and whether neighbors are open to maintaining mutually agreed boundaries.
Tip: Surveyors help identify true boundaries; attorneys help enforce boundaries. However, the best thing to do is work out boundary disputes with neighbors in a neighborly fashion.
9. We wish we knew about the rights of others on our property:
Land is comprised of various valuable interests and is suitable for many different uses. These interests can be alienated freely, and the sale or production of certain interests in land is encouraged by the state. These interests consist of things like mineral Interests, interests in surface, water, royalty interests, interests in property for certain terms, or certain uses. Research into ownership of these interests is typically done by attorneys, landmen, and title companies but the record is preserved for anyone to contemplate in the County Clerk’s Office.
For new homeowners, it is important to understand what rights others may have in your property. This can be discovered through the deed records as discussed above or through other methods such as in a report from the surveyor or information listed in a title commitment or policy. You certainly don’t want to be surprised to find out that an electrical company or gas company has an active easement or that maybe a neighbor has a right to use of your driveway.
Tip: Consider obtaining title insurance that identifies these various interests and how they may affect your use and enjoyment of the property. Or hire a qualified attorney to research those various interests and provide a report or opinion.
10. We wish we knew that minerals matter (even in town):
Despite the current price environment causing much angst and maybe some depression in the oil patch, minerals matter more than ever. Oil and gas companies are utilizing incredible technologies and opening up new and efficient possibilities to maximize production and save costs. Townsite plays, while a nightmare for landmen (or maybe job security), are becoming more and more common. Therefore, buyer and sellers of homes should keep minerals in mind even in residential sales. Buyers should insist that minerals convey with the property. Sellers should reserve any and all interest they have or at least be paid properly for the valuable interest that they may be unknowingly handing over. While owning 100% of the minerals under a ¼ of an acre may not make someone rich, it could mean hundreds to a couple of thousand dollars a year in the right oil price environment.
Tip: Make sure your sales agent is familiar with mineral rights. Contact a qualified attorney should you have any questions. (Especially if you’re buying or selling property with minerals anywhere near the prolific Eagle Ford Shale, which lies thousands of feet below the surface but only a few counties to our south).
If you have an interest in the commentary above, please reach out to our firm so that we can provide legal advice for your unique situation. Nothing in the commentary above, alone, constitutes legal advice as it is purely hypothetical and educational, and it is not intended to, nor does it create, an attorney-client relationship with Traeger & Ricks, PLLC.