After the property selection process has been completed, the purchase agreement negotiated, inspections completed and repairs resolved, and loan approval received, the focus turns to closing the escrow.
It is around this time that the buyers are faced with the question, “How do you want to take title?” It could have been brought up several times earlier, but usually not much attention is given to the matter until this time in the escrow.
Many buyers look blankly in response and ask, “What do you mean?” It is not their fault because most of the time the people talking to them about title — agents, escrow officers or loan officers — are speaking to them about it in passing during the early stages of the escrow.
Such discussions are usually a summary of the options without the actual selection of a preferred means to hold title. Since it may be their first time owning a home, or the first home purchase in 25 years, it is understandable that they are unfamiliar with this subtle, but very important, aspect of home ownership.
How title is held in real estate can have vastly different consequences during the course of ownership and beyond.
For example, if you decide to buy a house for your daughter and son-in-law and put everyone on title including the two of you, your daughter and at-the-time son-in-law, you can find yourself in a difficult situation if: the kids get an IRS lien, the kids default on payments, the kids get a divorce, etc. Being in title together means you are affected by those, and other things that can occur.
Unlike owning a corporation where the percentage of stock controls how things go, own 51 percent and you control the company, anyone with a fractional interest in real estate ownership has as much say as the others regarding the property.
If you want to sell, you will need their cooperation. If relationships have broken down that can be hard to get. For this reason inherited or gifted properties are often taken as “sole and separate” from the spouse.
The most common ways to hold residential title are tenants in common and joint tenants with right of survivorship. You may take title as an individual or in a trust or corporation.
Tenants in common allows for disproportionate interests in the property if you want, i.e. — 80/20 percent, and allows each of the owners to devise (will) their interest to the party(ies) of their preference.
Often used with second marriages when children are involved. You combine your assets, but on your demise you may wish to have your part of the property equity go to your children. This is usually done by a will and a probate process that is adjudicated by the court system.
Joint tenancy with right of survivorship is what we jokingly call “renewing your wedding vows.” Each party has an equal interest in the property. When one dies the ownership automatically transfers to the other parties without probate. Commonly used by married people to save the surviving spouse probate expense and hassle.
Our advice: There are other means to take title in Nevada that aren’t used very often, i.e. — joint tenancy without right of survivorship. It is important to understand that you must make the decision on how to take title on your own, or with the help of your lawyer.
Agents and escrow officers cannot advise you as to how you should take title for your personal circumstances. Other factors can come in to play such as the name of the party taking title. You can take it as individuals, family trust, corporation, etc. Each has its potential legal and financial consequences so choose wisely.
Title preferences can be affected by the source of the purchase money, short and long term holding objectives, estate planning and family harmony. It isn’t always as easy as it might seem, but it is very important to get it right going in.
When it comes to choosing professionals to assist you with your real estate needs… experience is priceless!
Lisa Wetzel and Jim Valentine, CDPE, SFR, work with RE/MAX Realty Affiliates in Carson City. Visit carsonvalleyland.com to learn more.
