Real Estate 101 with Attorney Elizabeth Falk
Dec 5, 2023
It’s no secret that the real estate market has been booming in the last few years. With so many purchasing and selling, it is not a shock to see common title issues arise. Allow Real Estate 101 with Elizabeth Falk to offer some reasoning behind these common mistakes so that you can be prepared for your next real estate venture.
Lesson 1 “What’s Yours is Mine”: Jim just purchased his first home. Shortly thereafter, he met a lovely new receptionist at work named Pam. Jim and Pam fell in love and, after a few years, the couple married aboard the Maid of the Mist in Niagara Falls. With Pam’s savvy financial influence, Jim’s credit score had gone way up, so he decided to refinance his bachelor pad at a lower interest rate to save some money. Jim is surprised to learn that Pam will have to sign some of the closing documents, even though she is not a title owner. WHY? Spouses of title owners must sign deeds, deeds of trust, and other documents for refinances and sales to waive the marital interest they hold in the property under NC statutes. For some purchases, spouses do not have to sign, but that is a lesson for another day.
Lesson 2 “Don’t be a Gretchen”: Gretchen owns a condo that her daddy, the inventor of a super popular breakfast treat, helped her purchase in 2016. Gretchen, unfortunately, has judgments against her for unpaid credit card debts from her spendthrift shopping days with her best friend, Regina. When Gretchen decides to sell her condo to Cady (pronounced “Katie”), who just moved to town from Africa, she’s told the judgments MUST be paid at closing. Gretchen’s other best friend, Karen, has what she considers to be the greatest idea! Gretchen should convey (or transfer) the property to Karen and Karen will just sell it to Cady and the judgments won’t have to be paid at closing! Brilliant, right? WRONG. WHY? Judgments against landowners docketed (or formally recorded with the court) within the last 10 years will be attached as liens to the debtor’s property and must be satisfied at closing, just like a lien for past due taxes or an existing mortgage. Therefore, Gretchen’s judgments must be paid at closing for Cady to receive a clear title.
Lesson 3 “Tone down, Mama”: Jessie and Slater are selling their primary residence and moving into an RV as Slater chases his dream of becoming a professional wrestler. Upon signing the deed, Jessie demands the proceeds check and breaks into a rousing rendition of “I’m So Excited”. The closing attorney hesitantly explains that no funds can be disbursed until the deed has been recorded. WHY? Although the sellers, Jessie and Slater, may have executed their seller documents, the title of the property does not officially transfer to the buyer until the deed has been recorded by the Register of Deeds office. Disbursement of proceeds, realtor commission checks, or other funds before recordation would be a violation of the Good Funds Settlement Act found in the North Carolina statutes.
Lesson 4 “Meredith’s Mess”: Derek, a surgeon, is on his way to the hospital when he’s in a serious car accident. Derek’s wife, Meredith, holds power of attorney for him. Derek and Meredith are scheduled to sell the apartment that Derek owned by himself the very next week. Sadly, Derek does not survive the accident. The buyers still want to close as scheduled and insist Meredith should be allowed to sign for Derek since she was his attorney-in-fact. The closing attorney says closing must be delayed until an estate can be administered for Derek. WHY? Meredith cannot sign on Derek’s behalf because powers of attorney are only valid during a principal’s lifetime. In other words, the power of attorney document died the second Derek passed. To pass a clear title within two years of a landowner’s death, an estate must be administered to determine who now owns the property and the first publication of notice to creditors must appear in the newspaper. Assuming Derek was under contract to sell the property, other statutes come into play and the Personal Representative of Derek’s estate may be able to sign the deed, BUT an estate must still be opened.
Lesson 5 “Bethenny’s Business Blunder”: Bethenny used her earnings from starring on the Real Housewives of Eastern North Carolina to launch a successful liquor company called SlimChick, Inc. Bethenny has acquired several pieces of real property in the name of SlimChick, Inc., including a warehouse she plans to use as collateral for an equity line. While Bethenny is generally a savvy businesswoman, she has neglected to make sure she has the proper governing documents for the company. The closing attorney informs Bethenny that closing will delayed without proof of authority for Bethenny to sign closing documents on behalf of SlimChick, Inc. WHY? The closing attorney must make sure only properly authorized individuals are signing documents on behalf of an entity/company. Without bylaws, minutes from board meetings, or consents from shareholders showing who can sign on behalf of a company, closing attorneys must often draft additional documents to verify the signatory has been duly authorized by the entity to transact business on its behalf.
As with every case, one fact can spin an entire matter on its head. So while the scenarios discussed in Real Estate 101 with Elizabeth Falk are a broad generalization of what to do in each situation, always be sure to check with YOUR closing attorney to guarantee the proper procedure is followed for your transaction. At White & Allen, P.A., we are always happy to assist in making your closing process as smooth and simple as possible.