Tips For Transferring A House Title

By Greg McFarlane | August 29, 2012 AAA

With your nest finally empty, you and your spouse decide it's time to buy a Winnebago and travel the continent, indefinitely. You decide to hand over ownership of your house to your daughter, and save her the trouble of renting.

If you want to sell your house to someone you aren't related to, you need a written sales contract. One big reason for that is taxes. A piece of property, whether raw land or developed, isn't just an asset for you. In some respects, it's an annuity for your municipality or other local jurisdiction. By way of assessments, that property generates revenue that's ultimately used to build schools or pave roads.

Pay Taxes in Full
When you transfer title, those real estate taxes need to be paid up in full. Usually that's not a problem, as tax bills are sent out well in advance. If you're transferring ownership, and have already paid the taxes owed on a property beyond the date of sale, the buyer/transferee should reimburse you for the difference. The same goes for taxes paid in arrears.

Making sure the right proportion of taxes are paid by the right parties is one of many reasons why you're probably going to want a real estate agent or even an attorney to help you with the transaction. Calculating the tax balance one party owes to the other is a simple thing, but being able to recoup after the fact if someone makes a mathematical error is something else.

Of course, taxes are just one obligation that comes with owning a property. There are also sewer fees and other property assessments, which are typically billed quarterly or monthly. Unless you transfer the property on the exact date of billing, you and the buyer are going to have to exchange some amount of money.

Homeowners' Associations
A large number of U.S. residents fall under the auspices of a homeowners' association (HOA). Each HOA is entrusted with keeping the sidewalks clear and approving certain lawn decorations. HOAs need money to enforce conditions and restrictions. This is why any HOA fees need to be explicitly mentioned in your sales contract.

A smart buyer is also going to want to look at the HOA's financial statements. If the association is financially unsound, or if its directors aren't being forthright with the members' assessments, it's better to find out before the deal closes than after a scandal erupts. Every HOA by definition puts limits on ownership. Those limits need to be stated up front so the buyer won't get an unexpected fine every time a guest parks on the street overnight without a permit.

Formal Appraisal
If there's a loan on the property you're selling, you'll need a formal appraisal. The appraiser's fee usually comes out of the seller's pocket, as do any fees associated with delivering a clear title to the property.

That doesn't mean the buyer just sits back and watches the seller spend. When assuming ownership of a property, the buyer has to pay the lender's title policy, the origination fee and any points associated with the loan. The buyer is also on the hook for paying the home inspector.

It'll Cost You
Unless you're lucky enough to live in Alaska, Idaho or one of 11 other states, you'll also have to pay for the privilege of transferring your property to another party. The cost is negotiable between the buyer and seller unless the buyer is receiving a loan via the Veterans' Administration or Federal Housing Administration.

There are two types of formal deeds usually involved here and they are easy to confuse. You use a Grant, Bargain, Sale deed anytime title insurance is issued. As for title insurance, that's a policy you need at closing to show that you have the legal right to sell the property and haven't incurred any encumbrances on it other than the ones explicitly listed.

A Grant, Bargain, Sale deed's weaker cousin is a quitclaim deed. It states that if you have any interest in the property referenced on the deed, you're giving it to the named buyer. You're "quitting" your "claim" to the property and offering no guarantees. Quitclaim deeds are usually used when transferring property to an ex-spouse or child. In many states, if you use a quitclaim deed, the transfer tax is waived.

The Bottom Line
If transferring title seems complex, that's because it is. For the enormous responsibilities involved, doing everything by the book is time and money well spent.

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