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Legal advice for purchasing real estate
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With spring underway, sellers are eager to find buyers for property that sat dormant during the winter months. Likewise, buyers are ready to pound the pavement and find that perfect piece of real estate. The old saying “buyer beware” has never rung truer when talking about purchasing real estate. The American Dream is only just a dream if the buyer lacks clear title or is surprised by unknown defects in the property. Here are some helpful legal tips when purchasing real estate.
First, have a written contract. In Tennessee, contracts for the sale of land are governed by the Statute of Frauds, which simply means the agreement must be in writing. When dealing with real estate, oral contracts are unenforceable.
Within the written contract, be specific on what type of deed the seller is to execute.  With varying types of deeds available, buyers should always insist the seller convey a warranty deed, which carries the ultimate guarantee of title. In a warranty deed, the seller covenants that the property is free from any liens and encumbrances. Likewise, the seller promises to defend the title against all claims, and ensures the buyer quiet enjoyment.
Contrast a warranty deed to a quitclaim, whereby the seller conveys any interest he may have in certain property, but guarantees nothing. A quitclaim deed does not obligate the seller to defend the title. With the exception of intra-family transfers for zero consideration, a quitclaim deed is discouraged. 
Second, all deeds should be recorded at the Register of Deeds office to provide constructive notice to the world of one’s ownership. Tennessee law falls under a race-notice statute, which simply means a person who records first, without notice of prior unrecorded deeds, has priority. Failure to record a deed could jeopardize your lawful ownership. 
It is best practice for buyers to record their deed as soon as the title passes. A real estate closing performed by an attorney will usually provide this recording service. The state of Tennessee mandates a transfer tax of $3.70 per thousand on the purchase price or fair market value, whichever is greater. This is paid to the Register of Deeds at the time of recording. 
Third, buyers are advised to hire an attorney who practices real estate law to represent them in a transaction. One important service your lawyer will provide is a title opinion, which identifies any mortgages, judgment liens, easements, and restrictions on the property. A typical title search goes back 30 years throughout the records for an investigation into title defects.  Mortgages, judgment liens and back taxes need to be satisfied at closing to perfect clear title in the property.
Next, insist on a closing statement. A real estate attorney can prepare this. A closing statement prorates taxes, splits realtor’s commission, and divides settlement fees between the buyer and seller. But most importantly, the settlement statement ensures proper payoff of mortgages and judgment liens at closing, so the buyer has clean title.
Holders of mortgages are required to record a Release of Deed of Trust at the Register of Deeds within 45 days of written request. Failure to do so could result in a fine up to $1,000 plus attorney fees. The closing attorney will ensure the mortgage holder complies.
Since a real estate closing is non-adversarial, it is common for one attorney to represent both the buyer and the seller in a transaction. However, each may choose to use a different attorney to represent their respective interests.
Tennessee Code Annotated 66-5-201 et seq. is known as the Residential Property Disclosure Act, which requires sellers of property to furnish buyers one of two documents – a disclosure or in the alternative, a disclaimer. A disclosure states the condition of the property and any material defects known to the owner.
A disclaimer makes no representations as to the condition of the property. In this scenario, the buyer will be receiving the property “as is” with all defects that may exists. With a disclosure, a seller is not liable for any error or omission that was not within the seller’s actual knowledge. 
In Robinson v. Currey, the Tennessee Court of Appeals held that the owner shall not be required to undertake any independent investigation or inspection of the property in order to make the disclosure. Remedies for the buyer are actual damages and not the right to rescind the contract. Buyers have a one-year statute of limitations in which to initiate suit under this section.
If a buyer borrows money to purchase his dream home, he will most likely convey a Deed of Trust to a third party trustee on behalf of the mortgage holder. This security instrument is recorded in the Register of Deeds office and will be linked to the Warranty Deed. The Deed of Trust incorporates the promissory note, which pledges payment to the mortgage holder.
The Deed of Trust conveys a first and paramount interest to the mortgage holder as collateral for payment of the promissory note. Failure to make payments pursuant to the terms of the promissory note may result in foreclosure. 
When purchasing real estate, following the above guidelines will help protect a buyer from the many pitfalls that are all too common in today’s real estate climate.
A lifelong resident of Warren County, attorney Ryan J. Moore practices real estate law, criminal defense, domestic relations, and collections. His office is located in downtown McMinnville at 115 North Spring Street. He can be reached at 931-474-RYAN or ryan@attorneyryanjmoore.com.