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Thomas McJD
Thomas McJD, Lawyer
Category: Real Estate Law
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Experience:  Real Estate Attorney
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Texas Real Estate - Here is a messy one. My wifes mother

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Texas Real Estate -

Here is a messy one. My wife's mother ("Mom") passed away in 2011 intestate. While trying to sell the house, we uncovered some interesting title issues raised by the title company. Turns out that although her parents were divorced in 1981, nothing was ever done to transfer title to Mom. The only deeds recorded show my wife's father ("Dad") and Mom as having title to the property.

A divorce decree was filed which appeared to award the house to Mom as her separate property but nothing was ever filed in the property records. According to my research, it appears that a divorce decreee does not actually transfer title. So now, the title search includes exceptions related to Dad from 2008 as well as exceptions related to Mom and her new husband ("Step Dad").

In 2004, Mom and her new husband ("Step Dad") took out a home equity loan against the property without Dad's signature. Although I noted a "Title Search" fee in the loan documents, I am perplexed that their search did not reveal that the title was still in Dad and Mom's name. Surely, they would have issues with loaning the money to Mom and Step Dad if they saw that Dad's name was on the deed. There did not appear to be any title policy for the transaction but there was a clause in the loan agreement where the borrower "warrants that borrower owns the property and has the right to enter into the loan agreement". Step Dad figured out that because Mom died without a will, he only has the right to live in the house but will never be able to attain title to it so he "walked away" from the house and the loan.

Question 1: Since the divorce decree awarded the house to Mom as her separate property, can an AJ in 2008 against Dad affect title to the house?

Question 2: Are there issues (flaws) in the home equity loan that could invalidate the lien against the house since the house is still titled in Dad and Mom's name? I am wondering if the lien is legally binding against the house or if their only recourse is to pursue Step Dad for the repayment of the debt. When we spoke to the lender about the loan, they seemed nervous about what we were going to say, as if they may have screwed something up. My wife has been sending payments to the lender to make sure that the loan is not in default until the house could be sold.

TMcJD :

Hi, I will be happy to assist you, and it is my goal to make you a very satisfied customer! This may take a few minutes, so thanks for your patience.

TMcJD :

Is "Dad" still alive? Did the divorce decree attempt to make a conveyance of title or just direct one party to deed the property to "Mom"? Have you looked into recording the divorce decree as a muniment of title?

Customer:

Dad is still alive. Not sure what a muniment of title is.

TMcJD :

If he is still alive, then the title issues can be resolved by obtaining a deed from him pursuant to the divorce decree. If he refuses, he can be forced to sign over the property or face a petition for indirect contempt of court (failure to follow the directive in the divorce decree).

TMcJD :

Further, in TX, certified copies of divorce decrees can sometimes be filed to serve as a deed.

TMcJD :

The loan would be fine regardless of the purported title issues because the divorce decree extinguishes any legal right that
"Dad" has to the property. Thus, it doesn't matter that he did not sign any of the loan documents.

TMcJD :

Unfortunately, if her step-father signed the loan document, he is still liable for the loan regardless of whether he has any interest in the property.

TMcJD :

Once the title issues are resolved by getting the deed or recording the decree as a muniment of title, then the mother's will can probably also be filed as a muniment of title so that title is solely in the names of the beneficiaries named in the will. They can then proceed to close on the sale of the property and transfer good title.

TMcJD :

There are several steps to the process and given the money at stake in selling the home it would certainly be worth spending a few thousand dollars to retain a local TX attorney to assist you with getting everything in order. www.martindale.com and the TX bar association's website are both good starting places to locate a TX real estate attorney.

Customer:

Okay. Since Dad has no legal right to the property, can a judgement issued against him personally in 2008 impair our ability to transfer good title to the buyer? The title company seems to think that a release is required before they can issue a title policy. Maybe the steps you discussed above might correct that problem. Also, if Step Dad is still liable for the loan, would the entire loan balance be required to be paid from the sale proceeds?

TMcJD :

Yes, taking the steps above should resolve the issues. Yes, there is still a valid lien against the property for the loan so the loan will need to be paid in full in order to transfer good title.

TMcJD :

Please let me know if I can provide additional assistance. If not, I would be grateful if you could please leave me a positive rating. I cannot receive credit for my work without your positive rating and that is the sole means of compensation for JustAnswer experts. Thanks.

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