Real
Estate Articles from Inman News
Selling
home difficult when name's not on title
Mother-son
partnership struggles with ownership rights, transfer taxes
Wednesday, September 13, 2006 Q: A few
years ago I purchased a house. The house wasn't habitable because it didn't
have a heating system, so I couldn't get a mortgage. I put money down at
closing and my mother provided the rest. However, the deed is only in her
name. I am thinking about moving and need to prove that I own
this property. I did all the work on the house and it is worth considerably
more than when it was purchased. My mother has never lived in the house. What is the easiest way for me to prove ownership
without paying real estate transfer taxes? Does this tax even apply to family
members? If I can prove that I put money down does this make me an owner even
though I am not on the deed? A: If you're thinking about moving and selling in the near
future, the most important thing for you is to make sure your mom and you are
in agreement as to where each of you stand with regard to the property. If your mom agrees that the house is yours, you should be in
good shape. If she decides to make the claim that she owns the house
outright, you've got a rough road ahead of you. But let's start at the top: You should have documented your
arrangement better. The deed should have been made out in your name if your
mother provided you with the money to purchase the home. If your mother
had to take out a mortgage to help in the purchase of the home and she was
required to be the only person on the title to the home, your life got
complicated the day the property was purchased. If the true intent of the transaction was for you to be the
owner of the home, you should have taken title to the property early in your
ownership of the home. To deduct interest and real estate taxes, you need to
have been the owner of the property or otherwise have some legal ownership
right to the property. Since it does not appear that you have had this ownership right,
you might have a problem when you sell the property. To avoid paying federal income taxes on the sale of the home,
you needed to have owned and lived in the home as your primary residence for
two out of the last five years. If you did, you could exclude $250,000 in
gains (or $500,000, if you are married). But if you did not own the property
and have gains on the sale, you may have to pay taxes on the gains. If you don't mind the tax issue or are not selling at this time
and just want to get your things in order, you can have your mother quitclaim
the property to you. In many places, the transfer of title to a home when no
money is being exchanged can be done without triggering a transfer tax. A transfer tax is generally a tax on the sale of real estate. In
some places, the tax is a flat fee and in others it is a rather hefty sum of
money based on the sales price for the real estate. If your mother bought the property for you and paid for it, you
should have been making payments on the "loan" to her. You said you
put down the initial down payment in cash. Since you purchased the property, you should have been making
additional payments for the money that was used to buy the home. If you have,
you should have sufficient information to prove that the initial funds for
the purchase and subsequent payments to your mom closely resemble a loan
transaction and the current transfer of the title from your mom to you is, as
a result of the final payment to your mom on the loan she made to you, akin
to the final payment on an installment contract for the deed to the home. If you have this documentation, you probably shouldn't have to
pay the transfer tax. That's because your taking title to the home now
satisfies the debt that you have paid or because your mother is transferring
title of the home to you and is not receiving payment for that transfer. Please check with the recorder of deeds in the county in which
you are located to find out what exemptions are allowed and then determine
which one best describes your situation. If your circumstances are more complicated or you are running
into roadblocks, you should hire an attorney to help you sort through the
documentation and your options. |
