Preferred Properties of Texas

The Preferred way to buy & sell property for over 25 years

Why You’ll Win by Selling with a Real Estate Agent This Fall

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There are numerous advantages to working with a real estate professional when purchasing your house. During hard times, like what we confront now, it becomes even more important to have an expert that you trust to help guide you through the procedure.

Your family’s safety should always come first, which is more critical than ever given the present health condition in our country. When you FSBO, it is incredibly hard to control entry into your house. A real estate professional is going to have the proper protocols in place to protect not only your belongings but your family’s health and well-being too. From controlling the amount of men and women in your house at one time to ensuring good sanitization through and after a showing, as well as easing virtual tours for buyers, real estate professionals are equipped to follow the latest industry criteria recommended by the National Association of Realtors (NAR) to help protect you and your family.

Recent studies in NAR have proven that, even before COVID-19, the first step 44% of buyers obtained when looking for a home was to search online. During the process, that number jumps to 93 percent. Now, those numbers have grown exponentially. Most real estate agents have developed a strong Internet and social media strategy to market the sale of your residence. Have you?

As a part of their instruction, brokers are instructed how to negotiate every aspect of the real estate transaction and how to mediate the emotions felt by buyers seeking to make what is probably the largest purchase of their own lives.

Possessing a buyer who wants to purchase your home is the first step. Making sure they can afford to purchase it is just as important. As a FSBO, it is almost impossible to participate in the mortgage process of your purchaser.

Further complicating the situation is the way the current mortgage market is quickly evolving due to the amount of households out of work and in mortgage forbearance. A loan program which was available yesterday could be gone tomorrow. You need someone who’s working with lenders every day to ensure your buyer makes it to the final table.

The documentation included in the selling process has improved dramatically as more and more disclosures and regulations have become mandatory. In a litigious society, the agent acts as a third party to aid the seller avoid legal jeopardy. This is only one of the major reasons why the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

Many homeowners believe they’ll save the actual estate commission by selling on their own. Realize that the chief reason buyers look at FSBOs is since they also think they can save the real estate agent’s commission. The seller and buyer can’t both save on the commission.The more buyers who view a house, the greater the opportunity a bidding war will take place.

Listing on your own leaves you to manage the entire transaction by yourself. Why do that when you can hire an agent and still net the same amount of money? Before you decide to take on the challenge of selling your house alone, reach out to a local real estate professional to discuss your options.

Preferred Properties of Texas is here for all your real estate needs. Give us a call today.

What is a 1031 Exchange?

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When property is sold, the seller pays national tax on any gain or deducts for reductions. Section 1031 of the tax code provides citizens an opportunity to defer any gain on the sale of qualified property. Most trades are completed through a business which specializes in 1031 exchanges (an intermediary). The IRS has published rules (safe haven rules) to get an intermediary aided swap. If these principles are followed, the IRS won’t challenge the trade. This safe harbor is a main reason for using an intermediary to assist in the market.

The 1031 exchange provision is only for investment and business property, and that means you can not swap your main residence for another residence. There are ways that you can use a 1031 for swapping holiday homes, yet this loophole is a lot narrower than it was. Many 1031 exchanges involve real estate, nevertheless, some exchanges of personal property (say a painting) can be eligible. Notice , that exchanges of corporate stock or partnership interests don’t qualify. On the flip side, interests as a tenant in common in real estate perform.

Most exchanges should only be of”like-kind”, a term that does not mean exactly what you think it means. You can swap an apartment building for raw land, or even a ranch for a retail center. The principles are amazingly liberal. You may even exchange one company for a different but there are traps for the unwary.

When an intermediary is utilized, an exchange may convey the sold property (relinquished property) right to a purchaser with the proceeds of the sale paid directly to the intermediary. When the exchanger purchases the replacement property, the intermediary pays the exchange funds to the vendor of the replacement property. Title to the house usually does not pass through the intermediary.

Under Section 1031 tax on a gain is postponed, maybe not entirely forgiven. Finally when the replacement property is sold, the tax on the deferred gain must be compensated unless additional provisions of this tax code are used to completely eliminate the taxable gain.

Timing
There are two critical time intervals for exchanges: the identification period and the trade period. Both start on the date the relinquished property is sold and operate simultaneously.

The identification period is 45 days. During this 45-day phase replacement property must be designated or identified in writing. If the replacement land is not identified within this 45 day period, the exchange fails and all profit realized from the sale of the replacement home will be taxable.

The exchange must be completed within 180 days of the closing date to the relinquished property. This 180 day period runs concurrently with the 45-day designation period. It is not inserted to the end of the designation period. It is not feasible to extend either the identification period or the trade period.

If the exchanger records a tax return for the year of the trade, the exchange period is terminated. When an exchange has not yet been done by the date a tax return is expected, a request for an extension of time to file the tax return must be submitted in order to get the entire 180 day interval to complete an exchange.

Steps to Follow
After the sale of their relinquished property, the sales proceeds need to be sent to the qualified intermediary pending the purchase of the replacement house.
Identify replacement property within 45 days of the sale of their relinquished property. Following the 45-day identification interval, only real property identified as potential replacement property qualifies as replacement property.
Contract to Buy replacement property.
Notify the intermediary of the contract to purchase replacement property and supply information about the closing of the purchase.
Within 180 days of the date of sale of relinquished property, purchase the replacement property, using exchange proceeds held by the intermediary.
The 180-day purchase period runs concurrently with the 45 day identification period.

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1031 Exchanges & Real Estate

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If you’re thinking about a Section 1031 Exchange or even only would like to discover more about how a market functions, this is a great place to begin learning. By no signifies is this information full and in most all circumstances you may wish to check a professional tax advisor prior to starting an exchange.

Section 1031 of the IRC code contains many criteria that have to be followed to perform an effective trade. These subjects represent a subset of these provisions. As always, seek council early along with your accountant or taxation advisors.

QUALIFYING PROPERTY
The property that you intend to obtain (the”Replacement Property”) should also be utilized on your trade/business or held for investment, rather than obtained for private use.

The Relinquished Property and the Replacement Property shouldn’t be stock, or other land that is held mainly for resale in the normal course of business (“seller property”).

TAX DEFERRAL
Any money or alternative”unlike-kind” property obtained in the market is called”boot” and might lead to a taxable profit. “Old” debt has to be substituted with”fresh” debt or”fresh” money. Boot received might not be entirely taxable when the amount of boot received is significantly less than the profit realized on the trade or if a law differently exempts the profit from taxation.

SELLER FINANCING
While possible in certain instances for a minimum time period, seller funding makes the trade more complex and in many cases impossible.

SALE PROCEEDS
The Intermediary have to hold these resources to prevent”constructive receipt” problems.

Furniture, equipment, a few possessions and other private property transferred together with the Relinquished Property or the Replacement Property isn’t”like type” to property, and can be treated as transported unless the Replacement Property includes”like type” furniture, equipment, or other private property. When it’s treated as boot, then you have to pay tax on its own worth.

The title into the Replacement Property has to be accepted by precisely the same proprietor of the Relinquished Property. The replacement property ought to be acquired with the aim to hold. A disposition in a couple of years after receipt could call in to question the intent to maintain.

The Texas 1031 Exchange Company functions as the Intermediary from the exchange and doesn’t practice law or bookkeeping. You have to depend on the advice and counsel of your own tax advisor and/or lawyer for this foreign exchange trade.

You have to compose a letter that identifies each the possible replacement properties to Your Texas 1031 Exchange Company or the right party to the trade within 45 times after the transfer of the Relinquished Property.
Buy of the Replacement Property Has to Be performed within 180 times after the transfer of the Relinquished Property. The legislation permits couple extensions (catastrophe or combat zone support ). Any property obtained as Replacement Property has to be contained at the 45 day identification letter mentioned previously.

If you spot Replacement Property within the 45 — day trial interval and purchase a few but not all the property you have diagnosed with no constraints, then you shouldn’t withdraw any residual funds from the exchange account before the 180-day exchange interval is finished. Inappropriate withdrawal in the trade account destroys the trade. Therefore, to be secure, the capital should not be removed before the expiry of the replacement interval or until all qualified properties are bought.

Repairs or improvements made into the Replacement Property once you get the titles don’t count as a portion of the expense of the Replacement Property for trade functions. If repairs or improvements are essential, and should you will need the cost represented since the Replacement Property, then the Replacement Property must be originally deeded into the Qualified Exchange Accommodation Titleholder before the repairs are finished. To be included in the trade improvements have to have been finished from the 180th day of the market. Prepaid materials or labour costs don’t qualify. You will find additional fees when developments are created as a member of this market.
LIKE-KIND PROPERTY
In respect to property,”in-house land” is defined as property and whatever which are permanently connected to the property. By way of instance, a ranch could be traded for a home, office building, or shopping centre. The fair market value of this furniture at work building you get isn’t”like-kind”, but instead is considered”boot” received. You may pay tax on the fair market value of this furniture obtained unless you do a different Personal property market by buying”like-kind” furniture.

IRS REPORTING DEADLINE
RELATED PARTY EXCHANGES
Please contact your tax advisor to learn more if this expression applies to your trade.

The above advice isn’t legal or tax information however presented for your consideration and information. Please consult with your legal or tax advisor for queries related to finishing your 1031 exchange.

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Buying Hunting Land

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From the searching discourse, few competitions the sense of owning your own hunting property. Hunters, who have searched to a buddy’s property or public property in prior years, will notably experience unprecedented liberty. For once, they’ll be the sole owner setting and creating the governing rules and regulations of the searching land.

Hunters possessing their own territory will have the ability to handle several aspects of this land they would need to compromise . How a lot of people would you like access to your property? Would you need to be the sole hunter on the property? You have to pick.

These advice for purchasing hunting property will direct first-time buyers through all the main variables to take into account while buying that ideal back 40.

1. CONSIDER YOUR BUDGET

The main suggestion to consider when buying your hunting property is to ascertain your budget before starting to look for the ideal property. A hunter’s funding will determine a good deal of different facets surrounding potential searching plots. These variables include the size, place, and carrying capacity of their property (how many human animals in certain species that the property can hold).

This step in the procedure also includes determining if you’re going to write a check to your property or fund a loan connected to the property.

2. Pick a RECREATION REALTOR

Individuals seeking to purchase their first home usually get in touch with a residential property specialist. Hunters seeking to purchase their very first plot of land must behave similarly and get in touch with a realtor that’s familiar and comfortable with hunting hosting and for searching territory.

A realtor that’s knowledgeable about the recreational land-owning procedure and understands what to look for while purchasing hunting property won’t just speed up the searching process but also supply additional wisdom which may positively impact your buying experience.

3. TYPE OF HUNTING LAND

Not all hunting property is made equally. Are you seeking to construct a hunting cabin or other construction on the home? Are you really going to get the property from the street or from ATV or alternative procedures? Are there sufficient trees to maintain different tree stands?

Every one these questions, together with a couple of other people, should be taken into account when assessing a possible article of hunting property. Other concerns to be considered include the properties situated adjacent to the searching territory.

4. DO THE NEIGHBORS HUNT?

Allowing to landowners in the region is a good way to learn extra information related to the property you’re assessing. Do your neighbors follow pest control practices? Are they seekers themselves? Can they allow many different seekers to get their territory?

Establishing a wholesome relationship with your adjoining neighbors early on from the landowning procedure will provide you a fantastic idea of how things will unfold later in the season if you’re competing for wildlife.

5. FOOD & SHELTER FOR WILDLIFE

The entire reason to get hunting property is in order to search on it. It is difficult to search on a plot of land which retains no wildlife. The ideal method to judge the carrying capability of a specific plot of land, besides really seeing deer or other species around the property, is to gauge how much shelter and food are gift for wildlife around the house.

ENJOY YOUR HUNTING LAND!

Owning your own article of hunting property can be quite a rewarding and pleasurable experience. Hunters after the prior strategies for purchasing hunting property will certainly understand what to look during the land-owning procedure. If you are thinking about buying hunting property, take a look at the wide choice of properties accessible at Preferred Properties of Texas, now.

 

5 Reasons About Selling A Home That Aren’t As Scary As They Seem

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For the vast majority of homeowners, there’s a practically inevitable event somewhere on the horizon: Eventually, you will probably sell your property. Thousands of homes are sold every day. It’s only the nature of the real estate business; properties are constantly being sold and bought. Nevertheless, when it is time for everybody to be one of those properties, it can be somewhat scary. Any home sale could be susceptible to hang-ups that seem uncomfortable. The process of getting your house ready to market can be daunting. Handing over the keys to complete strangers can be discomforting. That said, there are a number of things that prospective home sellers appear to fear the most. But not everything needs to be so scary!

Creating (and keeping) your house presentable
One of the common complaints of home sellers is the requirement to wash, repair and stage their homes so that visitors can pop in each time and poke around. The reality is, however, that getting a house ready to reveal frequently means a de-cluttering process that would be necessary before proceeding anyway. It is a seller’s chance to have a jump onto the moving process, to purge unneeded possessions and get personal touches prepared to move to the next home. Should you think of this as a chance, instead of a chore, getting a home ready to show to potential buyers may have significant advantages. And if you are working with the right listing agent, you shouldn’t ever be made to drop everything and straighten up for an unexpected showing. A fantastic listing agent will adapt your daily life without forfeiting sales attempts.

Criticism from buyers

When push comes to push negotiations, buyers will point out what they view are deficiencies in your property. It is merely a part of the sales process, and hearing that the carpeting you love needs to be torn out or the wall color on your youngest one’s nursery needs to be altered aren’t personal indictments of you or your property. It’s hard to hear that other folks don’t enjoy what you love about your home. But if you’ve been searching for another home, you’ve likely made the same kind of observations. You want to be able to put your touches on your new space, and you do not mean any insult to the present owners by having that desire. It is nothing personal, so it is not anything to fear when the shoe on the other foot.

Home inspections

At the same time, it is nerve-wracking to have your home gone over with a fine-toothed comb with a home inspector, that can be by contract, working for the purchaser. Frankly, any dwelling inspector will point out some flaws in almost any home. That’s their job, and they have a fiduciary duty to the buyer to communicate their professional opinion. However, odds are, most of what is shown by the inspector is what you already understand. By way of example, when you’ve got 20-year shingles on the roof and you have not replaced it in 18 years, it’s just true that the roof is near replacement era. If your furnace isn’t operating efficiently, it is probably something you have noticed, and you may make sure that a professional inspector will corroborate that. Remember that nothing that comes up in a house inspection is always a deal-breaker. Everything is negotiable, and when you were not selling the house, it’s likely you were going to absorb any cost to remedy anything shown by a home inspection anyhow.

Unqualified buyers

There’s no question that there are”tire-kickers” on the market, or people who simply prefer to look at homes on the market but have no real interest or capacity to actually purchase the house. It just goes with the land. But should you be certain to just consider offers from potential buyers who have been pre-qualified with a creditor, you are more inclined to avoid bogus purchase offers. No lender’s pre-qualification correspondence is ironclad, but it means that the purchaser is somewhat honest about their capacity to buy a home such as yours. And any critical buyer’s agent is going to insist on mortgage pre-qualification of their customers before presenting a deal.

Saying good bye

That is an oft-overlooked facet of the procedure, but it’s not always easy to leave a house in which you have lived for a long time. It may be uncomfortable and scary because each home purchase is quite an emotional one. However there are a couple things to keep in mind, perspective-wise. Certainly one, giving up a space you have considered home usually means that you’re going to embark on that exciting adventure . You have to experience that anew, get to put your own personal stamp on a fresh place of your own. It is a goodbye that accompanies an exciting brand new hello. Second, you are providing that same experience for someone else by entrusting to them the place you have grown to appreciate. You are giving somebody else the opportunity to appreciate that house exactly the way you did when it fit one of the best. You’re not walking away from all that’s meaningful; you’re only giving somebody else the same opportunity you’re given to make meaningful moments.

The bottom line is that selling a house can be sort of scary. There’s nothing wrong with admitting that. But looking at things from various viewpoints, and recognizing that just about every homeowner at one point or another goes through it, and hiring the right agent might make it somewhat less scary.

Preferred Property of Texas is here for you and to make the real estate process less scary and go smoothly. CALL TODAY!

Seller Beware

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Understanding the General Warranty Deed

The sign reads “FOR SALE BY OWNER.”

A buyer calls, and an agreement is made to buy the property. The parties agree to leave the real estate brokers and lawyers out of this. It’s a simple transaction. There’s no need to pay commissions and attorney fees.

Of course the buyer wants a general warranty deed. The seller readily agrees. After all, the general warranty deed is what everyone uses. The contract forms promulgated by the Texas Real Estate Commission even require a general warranty deed. That’s how it’s done.

The seller does a quick Internet search and finds a form for a general warranty deed, quickly fills it out and signs it, delivers it to the buyer in exchange for a check, and deposits the check. On the way home, the seller congratulates himself for saving money.  Little thought is given to the legal mumbo jumbo contained in the deed.

This scenario plays out all over Texas, and countless buyers and sellers put themselves at risk of being left holding the bag. They are, of course, free to do so, and brokers and lawyers are not required.

Although the most common deed in use in real estate transactions is the general warranty deed, the parties to the transaction rarely know the legal ramifications of its use, especially when real estate professionals, lawyers, and title companies are not consulted. Participants in real estate transactions should know what it means to sign (and accept) a general warranty deed.

Implied Warranties

Generally speaking, a deed is an instrument that conveys an interest in property. While not all deeds contain warranty language, certain warranties are implied in almost every deed. The Texas Property Code provides that any time the words “grant” or “convey” are used in a deed, the grantor (seller) promises 1) that the grantor has not transferred any part of the property to anyone else, and 2) that the property is free from encumbrances (Section 5.023).

The implied warranties are made only to the grantee (buyer) in the deed. That is, they are not attached to the land. Only the immediate buyer may sue the grantor if the warranties are breached.

Express Warranties

Express warranties are stated specifically in a deed. They are similar to implied warranties, but they give greater protection to the grantee and subsequent grantees, and they expose the grantor to greater liability.

A general warranty deed contains a warranty that looks like this:

And grantor hereby binds grantor, grantor’s heirs, executors, and administrators to warrant and forever defend all and singular the said premises unto the said grantee, his heirs, and assigns, against every person whomsoever, lawfully claiming or to claim the same, or any part thereof.

What does this mean? It means that the seller is guaranteeing to compensate the buyer for any failure of title, all the way back to the time of the land patent from the sovereign. In Texas, that means the original grant from Spain, Mexico, the Republic of Texas, or the State of Texas. Additionally, this warranty is appurtenant to the land, meaning that it is attached to the land and “runs with” the land. In other words, the seller’s guarantee is made to the buyer and to all subsequent grantees, and includes all title defects, even if the seller had nothing to do with them and had no knowledge of them, and even if they originated over 180 years ago.

When a general warranty deed is given, the grantor promises that 1) the grantor will defend and protect the grantee against the rightful claims of third parties to the property (warranty of title), and 2) the property is free of encumbrances (covenant against encumbrances).

An encumbrance is any impediment to the title that does not change the ownership of the land, but that diminishes the value or use of the land. Examples include liens, tax assessments, leases, and easements.

Note the similarities and differences in the implied and express warranties. The implied warranty extends only to the immediate grantee and only says that the grantor has not previously conveyed the property to a third person. The express warranty goes much further. It extends to all subsequent grantees and covers every potential defect in the title.

A warranty does not strengthen or enlarge the title conveyed. It does not even guarantee that the grantor owns the property. It simply promises to compensate the grantee in the case of a failure of title.

Breach of Warranty of Title

A breach of the warranty of title occurs when a third party has a valid claim to the property—a failure of title. For example:

  • The seller may have previously conveyed part or all of the property to a third party.
  • A previous owner may have previously conveyed part or all of the property to a third party.
  • A third party may have adversely possessed the property prior to the date of the transfer of the property.
  • A third party may have obtained title through a separate chain of title.

A failure of title may be total or partial. A total failure of title occurs when no interest in the property passes to the grantee as a result of the deed. A partial failure occurs when only part of the property interest passes to the grantee.

In the event of a total failure of title, damages are the purchase price paid the grantor, with interest.

In the event of a partial failure, the damages depend on the circumstances. If title fails as to a certain part of the land, then the damages are calculated by determining the value of the part to which title fails in proportion to the value of the entire tract, and then multiplying the resulting fraction by the purchase price.

If title fails as to an undivided interest, damages are calculated by dividing the price paid to the grantor for the entire tract by the number of acres in the entire tract at the time of the conveyance to obtain a price per acre and then multiplying by the percentage of undivided interest for which title failed, unless the value of the failed interest is affected because it is an undivided interest.

If the grantee obtains full title by purchasing the outstanding interest from a third party who is the lawful owner, the buyer may recover the price paid for the outstanding interest, but these damages are capped at the price paid to the grantor for the entire tract.

A grantee may also recover other costs, taxes paid, and attorney fees.

Breach of Covenant Against Encumbrances

Encumbrances include liens and tax assessments. Easements or restrictions on use may also be encumbrances. However, easements and restrictions are often excepted from the warranty.

An example of a breach of the covenant against encumbrances is the existence of a lien on the property. The breach technically occurs at the time the covenant is made. However, the buyer may not sue until 1) the lienholder forecloses and takes the property from the buyer, or 2) the buyer pays to discharge the lien. In this event, the grantor may be sued for the cost necessary to discharge the lien or encumbrance.

If the breach is based on an impediment, such as an easement or restriction, the damages are the difference in the value of the property without the impediment and the value of the property with the impediment. These values are calculated at the time of the transfer of the property.

Allocating Risk

There are several common ways the parties to the transaction may allocate the risk involved.

Limit or eliminate the warranty. If the parties agree, a special warranty deed may be used. In a special warranty deed, the seller reduces his risk by limiting the warranty. The covenant of warranty in a special warranty deed looks like this:

And grantor hereby binds grantor, grantor’s heirs, executors, and administrators to warrant and forever defend all and singular the said premises unto the said grantee, his heirs, and assigns, against every person whomsoever, lawfully claiming or to claim the same, or any part thereof, by, through, or under grantor, but not otherwise.

The effect of this warranty is that the seller is liable only for claims that arise through him. Of course, this shifts the risk to the buyer should some other failure of title occur, so a buyer may be reluctant to accept a special warranty deed. Another type of deed, called a deed without warranty, eliminates the express warranties altogether. Implied warranties still exist unless the deed expressly disclaims them. Deeds without warranty are uncommon in real estate sales.

Usually, a deed has a section entitled, “exceptions to conveyance and warranty.” Known and existing encumbrances are listed here and specifically excluded from the warranties made in the deed.

Title Insurance. A real estate broker or salesperson is required to advise each buyer that the buyer should 1) have the abstract of title examined by the buyer’s attorney, or 2) obtain a title insurance policy. Buyers would do well to listen to this advice.

Title insurance may be purchased to protect the buyer from defects and encumbrances. When purchasing title insurance, it is important to remember a few things.

First, even though the title policy is often paid for by the seller, title insurance typically protects the buyer (an owner’s policy) or the lender, if any (a loan policy). The buyer (or lender) is the insured, and if a valid claim is made, the insured gets paid. This is much better for the insured than suing for breach of warranty. After all, the seller could be nowhere to be found or judgment-proof (broke).

No legal protection is provided to the seller. In fact, if a claim is paid, the title company is subrogated to the insured’s rights, meaning it could seek to recover from the seller. However, as a practical matter, title insurance is good for everybody, including the seller.

Second, the title policy only covers the property for as long as the buyer owns it. Once it changes hands, the general warranty still applies (runs with the land), and the original seller is still on the hook.

Third, title policies come with numerous exceptions, which help the title company avoid liability. Many of these exceptions may be changed or deleted by paying an additional premium for an endorsement. Ask your title company or lawyer about other options for additional protection.

One pleasant side effect of title insurance is that defects may be discovered (and often corrected) during the title examination process, significantly reducing the likelihood of a claim. However, one should remember that the title company examines the records to protect itself. It does not have a duty to inform of defects. If a defect occurs, the title insurer’s duty is to compensate for loss or damage, up to the face value of the policy. The insurer also has a duty to defend as set forth in the policy.

THE TAKEAWAY

The general warranty deed is the most commonly used deed in Texas. It’s important for a seller to be aware of the potential liabilities created when real property is conveyed by general warranty deed. Parties to real estate transactions can reduce their risk by obtaining effective legal counsel and by purchasing title insurance.

For specific warranty deed advice, an attorney should be consulted.

Preferred Properties of Texas

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