Realtor Education Archives

Authority Issues

As a Realtor, it is crucial to know you are dealing with the true owner(s) of the real estate you are trying to list and sell. If you sign up a listing agreement with someone who thinks they are the sole owner and aren't, you may not get paid. In addition, if you advertise a property on MLS and elsewhere, it is a representation to the public that the seller has title to the property. If the property doesn't close because some or all of the true owners are not on the contract, you could get sued.

Death

The death of a property owner is a very common situation that creates an authority issue. Contrary to common belief, a surviving spouse does not always inherit the family home. Even where circumstances are such that the surviving spouse does inherit, something must occur in the public records to cause the chain of title to reflect the transfer.

  • If there is a last will and testament, it must be accepted to probate in the County Probate Court. A will is not effective unless it is probated.
  • If the heirs of a decedent elect not to probate a will or there is not a will, title can be transferred to the heirs at law by use of an affidavit of heirship.
    1. An affidavit of heirship has the effect of transferring title to the "heirs" versus the named beneficiaries in the will.
    2. An affidavit of heirship will cause title to pass solely to the surviving spouse only if the property is community (not separate) and the decedent had no children from a previous marriage. Otherwise, ownership passes one-half to the surviving spouse and one-half to all the children.
    3. An affidavit of heirship requires two (2) disinterested parties who are knowledgeable of the life and marital history of the decedent.
  • When a Will is probated, you will usually have one or more persons appointed as Independent Executors.
    1. Typically, the Independent Executor can sell the property by himself, but the Will must contain language that grants the Independent Executor power of sale. Otherwise, joinder of the beneficiaries under the Will is required.
    2. Executors are fiduciaries and fiduciaries are not allowed to delegate their authority to another under a power of attorney.
    3. If Co-Executors have been appointed, Co-Executors can act independently of each other on all transactions except real estate. All Co-Executors must join in a transfer of real estate.
  • If a property has been transferred to a trust, you should verify who the trustee(s) is/are. To do this, you will need to have the trust document reviewed to confirm who the trustee(s) is/are and if they have authority to sell or buy real estate.

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Divorce

  • Dealing with a Seller - If divorce is pending (no final divorce decree), both spouses must sign. A deed from one spouse to the other does not change this requirement. Reason: the property, even though conveyed, is still a community property asset and is still the marital homestead. If the property is the seller's spouse's separate property both spouses must still sign. Reason: it is still the maritall homestead.
    1. If the divorce is final (final decree signed by the judge and entered in the court's record) one of the following is required:

    2. (a).  A deed from the ex-spouse to the seller spouse dated after the date of the
             divorce decree, or
      (b).  The divorce decree must clearly award the seller spouse the property, divest
             the ex-spouse from title and a certified copy of the divorce decree must be
             recorded in the County Real Estate Records.
  • Dealing with a Buyer- If divorce is pending, the non-purchasing spouse will have to sign the deed of trust. By signing the deed of trust the non-purchasing spouse is not in any way liable to repay the debt.
  • Dealing with a Receiver - When spouses cannot agree and both spouses will not cooperate in the sale of property, a divorce court will appoint a Receiver.
    1. The Receiver should have already filed an Application of Sale and received from the Court an Order Approving Sale before signing the listing agreement.
    2. When a contract is signed, it should be made contingent upon final court approval.
    3. It takes 10 to 14 days to get final court approval. Receiver must file a Report of Sale with a copy of the contract, an appraisal (or brokers opinion of value) and an estimated HUD-1 settlement statement.
    4. If the court approves the sale, the judge signs a Decree Confirming Sale. Then, and only then, you can close.

 

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Business Entities

Dealing with business entities

  • Corporation
    1. Texas or Foreign.
    2. Must be in "Good Standing" with the State of Texas.
    3. If foreign, must be authorized to do business in Texas.
    4. Identify who the authorized officer is.
    5. Is the sale or purchase of real estate in the "ordinary course of business" for the corporation? If not, may require board approval.
  • Limited Partnership - Need a copy of the limited partnership agreement.
    1. Defines who (or what) the general partner is.
    2. May contain limitations on general partners authority and require a vote of limited partners.
  • Limited Liability Company - Need copy of the Company's agreement.
    1. The Agreement determines who is authorized to sign. Usually a "member" or "managing member".
    2. May contain limitations on authority and require a vote of the members.

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Contract Issues

TREC One to Four Family Residential Contract (Resale) Issues (version  2/13/06)

What should be inserted in the blanks in section 6.D.?

If you are dealing with the purchase and sale of an existing residence and the purchaser does not intend to make any structural changes or change the established use of the property, nothing should be filled into 6.D.

Some examples of the kinds of things a purchaser would want to put into 6.D. are the following:

  • The ability to rent a garage apartment.
  • The ability to construct an addition that requires the grant of a variance to encroach established city set-back lines.
  • The ability to construct a pool of a certain size in a certain area of the yard.
  • The ability to use a portion of the residence for business purposes, such as accounting practices, piano lessons, or child daycare.


In summary, section 6.D of the One to Four Family Residential Contract (Resale) is useful to create a grounds for objection (and possibly an excuse for the purchasers to not close) that is separate from the option to terminate or any other contingency created by a Section 22 addendum. So if a purchaser is thinking "I love this house, I just want to build a pool" or "I have to be able to build a workshop" etc., Section 6. D. can be of use.

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When should a Realtor use Section 11 Special Provisions?

The answer is almost never. A good rule of thumb is, if there is any TREC promulgated addendum or form that covers the issue at hand, TREC wants the Realtor to use it. TREC has revised and revised the contract and added and added addendums to almost eliminate any need for special provisions. If the parties to a contract are convinced they cannot accomplish their intent by using promulgated forms, they should consult an attorney for language appropriate to the situation.

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When does a contract become a contract?

"Meeting of the minds" is the operative legal concept here. Every single term must be agreed to (initialed) by all parties to make a contract.

A physical delivery of the accepted contract is not necessary. When a buyer submits a contract initially, the buyer is making an open offer to buy. The seller then has an option to do one of 3 things:

  • Accept
  • Counter
  • Reject

The buyer's offer stays open until the buyer notifies the seller that the offer is terminated. An offer can be terminated at any time prior to acceptance. It may be a good idea to have a drop dead provision in special provisions that requires that the offer automatically terminates at a specific time and date if it is not signed and delivered back to the offering party.

The reverse is true for the seller. If a seller changes anything in the contact (closing date, title company, option period, improvements to be removed) it constitutes a counter-offer.

The roles are then reversed; the Seller now has made an open offer to the buyer. The buyer now can:

  • Accept
  • Counter
  • Reject

A contract is not created until every single term is agreed to in writing. Legally, delivery is not required. Practically, without delivery it is hard for the other party to prove it was ever fully accepted.

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Beware of section 6.C.(1)

If the parties to the contract agree on and check box 6.C.(1) of the TREC One to Four Family Residential Contract (Resale), the seller has taken on the burden of making a timely delivery to the buyer of both the existing survey and the Texas Department of Insurance promulgated Affidavit. The affidavit must be signed before a notary and notarized. All this must happen within the number of days specified in the blank. If the seller fails to meet the specified delivery deadline, the seller has to pay for a new survey regardless of whether the "buyer" box was marked to pay for a new survey in 6.C.(1) or not.

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Oil, Gas, and Other Minerals

Production Trends

  • From 1995 to 2005 gas production is up from 4.5 trillion cubic feet to 5.1 trillion cubic
    feet.
  • The Barnett Shale accounts for most of the increase in production. Barnett Shale production reached 450 billion cubic feet in 2005, doubling the 220 billion produced in 2002.
  • Tarrant County, for the first time in history, became one of the state's top 10 gas
    producing counties.
  • Johnson County is projected to be the real "sweet spot" for the Barnett Shale gas
    production.
  • The primary counties involved in the Barnett Shale play are: Wise, Denton, Jack,
    Parker, Tarrant, Hood, Johnson, Ellis, Hill, Somerville, Bosque, and Hill.

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Mineral Rights

Mineral Estate

  • In Texas, the mineral and surface estates can be severed from each other.
  • The five essential attributes of the mineral estate are:
    1. Right to explore and develop.
    2. Right to lease (executive rights).
    3. Right to receive bonus payments (signing bonus for entering a lease).
    4. Right to receive delay rentals (payment to extend time to drill).
    5. Right to receive a royalty.
  • The Greatest Possible Estate Rule is the rule of law that requires that a conveyance of real estate will pass all of the estate owned by the grantor at the time of conveyance, unless a specific reservation is made limiting the estate being conveyed.
  • A royalty is a right to receive a cost-free share of production. This is usually reserved in a lease, but can also be severed from the fee in a deed.
  • Right to Explore and Develop Minerals.
    1. The right to explore and develop minerals includes the right to use the surface to the extent reasonably necessary for development purposes. If damage occurs to the surface estate, that is reasonable and necessary to develop the minerals, the surface estate may not be entitled to any compensation for damage.
    2. The right to explore and develop minerals includes the right to lay pipeline across property without the surface owners consent.
    3. The right to explore and develop minerals includes the right to place well sites wherever is reasonably necessary. Most cities have an ordinance requiring 200 feet or more of space from a dwelling. If you are outside the city limits, that protection does not exist, but still would need to be reasonable and necessary. Most leases (not all) have a distance provision of 200 to 600 feet.
    4. The Mineral Estate has the right to use all the water they need.
    5. Well spacing could be as little as every 2 acres for very shallow wells.
    6. Waivers of Surface Rights must be joined by 100% of mineral interest holders and any mineral lease holders.

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