Are you a real estate investor?  If so, we hope to see you at one, or all, of the following upcoming events!!

Probate Issues and Solutions
​Join American Title Company - Park Ten and the attorneys from Theander & Grimes, PLLC to learn how to resolve common title issues that arise after a property owner passes away. We will present different scenarios that investors run into when purchasing investment properties and then provide possible resolutions. So bring your questions and join us for this very informative, free seminar. 

B&M Law is excited to announce that Veronica Martinez will be a panel member at the upcoming Real Acquisitions November Summit. Veronica, and other real estate professionals, will be providing insight into hot topics in the real estate industry and sharing how they are preparing for 2019. For more information please visit https://realacquisitions.com/events/. 

Real estate investing is an ever-growing business in the Houston area and wholesaling seems to be a popular way for many investors to get their feet wet. We conduct multiple consultations with budding real estate investors each month. In this blog we will provide you with some of the information we discuss with new investors who come to us wanting to ensure they are legally prepared to dive into the wholesaling business. They sound like smart investors already, don’t they?

What does it really mean to be a real estate wholesaler? A real estate wholesaler is someone who enters into a purchase contract with a property owner and then assigns the purchase contract to another buyer for a higher price or an assignment fee. The wholesaler has an equitable interest in the property and it is that equitable interest they are marketing and selling. The wholesaler is selling the purchase contract, NOT THE PROPERTY.
**Some wholesalers seek to “double close” the transaction, which is a topic for another day***

Why are you making a big deal out of marketing the contract and not the property? Isn’t the property what the Assignee really buying? No, the Assignee (person buying the wholesaler’s purchase contract) is not buying the property from the wholesaler because the wholesaler does not own the property. The wholesaler has only entered into a purchase contract with the owner and can only offer to sell and sell what he owns – his right to purchase the property subject to the terms and conditions of the contract.  It’s as simple as one can only sell what one owns. While this might sound like an attorney just being picky with words, what we are trying to avoid is the real estate wholesaler violating the law by performing acts that constitute real estate brokerage without a license.

The Texas Real Estate Licensing Act defines Broker as a person who, in exchange for some form of valuable consideration, performs certain acts with regards to real estate. Two of those acts are selling and offering to sell real estate.  So, an investor that offers to sell real estate that they do not own is performing one of the listed acts and must be licensed.

In 2017, the law was amended to clarify that an unlicensed person may acquire an option or an interest in a contract to purchase real property and then sell, offer to sell, or assign the real estate option or contract. See Section 1101.0045 of the Act. These are the acts a wholesaler performs, or can perform, so it is important to know the difference.  

Must I disclose to my buyer that I am a wholesaler? YES. The Act goes on to state that a person that does not disclose the nature of their interest to a potential buyer is engaging in real estate brokerage services. Additionally, the Texas Property Code Section 5.086 requires the wholesaler to make the disclosure prior to entering into a contract with any potential buyer. Specifically, that disclosure must state that:

Title Insurance: Your Questions Answered.
 
What is title insurance? Do I have to buy title insurance? How do I get title insurance? If I buy a title insurance policy does that mean I am guaranteed to have perfect title to the property? How much does title insurance cost? Can I shop around for a better premium amount?
 
These are often the first questions clients ask when they are buying a property, and we recommend, or the lender requires, that they purchase a title insurance policy.
 
What is title insurance? It is a contract of indemnity that protects people from losses arising from a real estate transaction. Unlike homeowner’s insurance, title insurance protects from past errors related to ownership history and not future risks, such as fire, flood, or other physical damage to the property.
 
Do I have to buy title insurance? The better question is “Should I buy title insurance?” The answer to that question is almost always yes.  Your home, vacation home, ranch, or investment property is most likely one of your most valuable assets, and title insurance is one of the best ways to protect your ownership of that asset. 
 
How do I get a title insurance policy? Take a signed property/home contract to a title company, and the company will submit your order to a title agent. A title plant then carefully reviews the records affecting the property. Next, the underwriter makes insuring decisions and issues a Commitment for Title Insurance. The Commitment is the promise to issue the insurance policy. You must carefully review the Commitment because it contains any exceptions or exclusions to the policy. Title insurance is regulated in Texas, and each Commitment contains four parts:

• Schedule A – This section sets forth the type of transaction that will be insured, current owner of record, legal description of the property, amount of the policy, and date the Commitment was issued.
• Schedule B –This section reflects the various exclusions and exceptions to coverage. In other words, it lists issues that will not be covered by your policy. You should request copies of all documents identified in Schedule B, and closely review each document. 
• Schedule C – This section lists matters that must be cleared before or at closing. If these items are not cleared, they will appear on Schedule B of the insurance policy. 
• Schedule D – This section lists all parties who will receive any part of the insurance premium.

 
Once the transaction is closed and funded, you receive a policy of title insurance with only the exceptions to coverage disclosed on Schedule B of the Commitment and any unresolved matters listed on Schedule C. So, read the Commitment carefully!
 
What is covered?  An owner’s policy protects the buyer against losses due to ownership problems that originated prior to the date the policy was issued. In other words, losses that originated before you became the owner of the property. Below are a few examples of what a standard policy may cover:

• Fraud;
• Forgery of title documents in the chain of title;
• Undisclosed or missing heirs; unknown or forgotten heirs;
• Mistakes in recording legal documents;
• Undisclosed but recorded prior mortgage, lien, or easements;
• No right of access to and from the land;
• Inadequate legal description; and
• Deed not joined by a necessary party.

 
What is not covered? Title insurance is not a guaranty of title. The title insurance company is not promising perfection of title but is instead reviewing the title and letting you know whether they are willing to insure title and under what terms they are willing to insure title. Defects created after the policy is issued or defects you create or knew about are not covered. Additionally, any claims related to the exclusions and exceptions in the policy are not covered. Again, it is important to carefully review the Commitment.
 
How much does title insurance cost, and can I shop around for a better rate? Title insurance in Texas is fully regulated and enforced by the Texas Department of Insurance (TDI). Coverage may only be offered on the forms promulgated by the Texas Department of Insurance, and only the premium rates adopted by the TDI may be charged. This means that you pay the same premium at each title company. What you can shop for is good customer service, a reputable title company, and knowledgeable escrow officers!!! 
 
For more information you may visit the Texas Department of Insurance at http://www.tdi.texas.gov/index.html.   
 
Banahan & Martinez, PLLC serves as a fee attorney office for American Title Company of Houston and can be reached at (281) 394-3122 or by email at info@bmlawhouston.com. 

​Each person’s situation is different, but everyone can benefit from having a Will. If you do not want to do it for yourself, do it for your loved ones who will be handling your estate in the event of your death.
 
If you still are not convinced, here are five good reasons to have a will.

1. Tomorrow is not promised. Few people plan to die soon, but death is a part of life. Save your family and loved ones from unnecessary stress and anxiety during an already difficult time.
2. You get to decide how your estate is distributed. Wills are not just for the wealthy. You worked hard for what you have and a will allows you to select the recipients of your property instead of leaving it up to the State.
3. You can make an informed decision about who will care for your minor children. Who do you trust to care for your minor children? It might not be who the State designates if you die without making your wishes known.
4. Your family may avoid a lengthy and expensive probate. Having a will can avoid unnecessary costs and delays during the administration of your estate. If you die without a will, Texas law determines how your property is distributed.
5. You can always change your mind. A will can be revoked or changed at any time in the future.

 
To discuss your estate planning questions, please call Banahan & Martinez, PLLC at (281) 394-3122 or email info@bmlawhouston.com to set up a consultation.