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Always review papers before taking title to property. Error could be issue with real estate taxing authority
By Benny Kass
Inman News
Published on Saturday, Jul 05, 2008
Q: Dear Benny: I own a home that I bought approximately three years ago. I was going through my paperwork and realized that my initial appraisal was done on the house and indicated that it contained five acres. However, I bought only 2.5 acres. It appraised at exactly what I bought it for, so what does this mean? I have a loan based on a house that would not have appraised at the selling price when I bought it. — Sherina
A: Dear Sherina: I don't mean to be critical, but hopefully this will be a lesson for you. It is probably too late — almost three years later — to do anything about this.
You should have reviewed the appraisal before you took title to the property. However, this may have created a problem with your local real estate taxing authority. They may list your property as having five acres, so I suggest that you obtain a new appraisal and then review your tax assessment with the government's assessor.
Q: Dear Benny: After making a loan using your property as collateral, who is the owner — the bank or the owner (person who obtained the loan from the bank)? What period of time belongs to the bank and what period belongs to the owner? — Lili
A: Dear Lili: The short answer is that the person who obtained the loan remains the owner of the property.
Here's how it works: You own a house and get a loan from a bank. Although there are papers you have to sign (many of which in my opinion are unnecessary), the three most important documents are (1) the HUD-1 settlement statement; (2) the promissory note; and (3) the deed of trust.
Let's quickly look at each document:
HUD-1: This is the settlement (escrow) statement, which spells out all costs involved in your real estate transaction. I recommend that you keep this document forever because it will assist you when you file your tax return, and if the IRS should investigate your tax situation.
Promissory Note: This is basically an ''IOU.'' You promise to pay the lender a certain number of dollars, and the terms and conditions of the loan are — or should be — carefully spelled out in this document.
Deed of Trust: This is the mortgage document. In some states, only a mortgage is used. The deed of trust conveys your property ''in trust'' to one or two trustees selected by your lender. This document is recorded among the land records in the county where your property is located. In some states the trustees hold ''legal title'' to the property (in trust) while in other states the trustees have only ''equitable title.'' These are legal technicalities that should not concern you.
When you pay off the loan, the deed of trust must be released by filing a release document with your local recorder of deeds. Sometimes the lender does this, and sometimes they just send you the form for you to record.
However, if you do not make your mortgage payments and go into default, the trustees have the ''power'' to sell your property at a foreclosure sale.
Clearly, you never want to hear from your trustees until the loan is paid. Different states have different procedures about foreclosure, so I can provide only a general overview of the property.
But rest assured, so long as you are current with your mortgage, you own the property.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions can be submitted to benny@inman.com
Q: Dear Benny: I own a home that I bought approximately three years ago. I was going through my paperwork and realized that my initial appraisal was done on the house and indicated that it contained five acres. However, I bought only 2.5 acres. It appraised at exactly what I bought it for, so what does this mean? I have a loan based on a house that would not have appraised at the selling price when I bought it. — Sherina
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