Homestead Exemption question (Texas/Travis Co)

[Judge Roybeanbag 11821]

I've had a hard time getting a definitive answer from either our RE agent or a guy at Five Stone that I've worked with so figured I'd try here.  In July of this year my daughter and son-in-law purchased the house next door to mine.  My SIL is a CPA and has a good job, but just because his parents are doofuses, he did not have enough established credit to qualify, so I ended up co-signing the note for my daughter.  They are making the payments on the house and the escrow, but my name ended up on the note and title along with hers.

My wife and I have a homestead exemption on our current home, with both our names on the title.  The concern is and what I've been told is that because my name is also on the title of the other home, if my daughter applies for an exemption in her name, she will likely only get 50% of the exemption.  I kind of get that but I'm not claiming that as my primary residence.

Aside from them refinancing to get the note in their names, is there any way around this?  My advice so far has been to just have her file and hope the county just gives her 100%.

 

[Nice Guy Eddie 13523]

How would the county know if you are a 50% co-owner, or a 10% co-owner? I would think that the property has the exemption not the person, therefore it would be either 100% or 0.  But I have no idea but just using logic which is probably the wrong way to approach tax procedures.

[horn4life 3783]

Can you get his name added to the title? Just for 2/3 exemption if there are 3 names on the title? In the worst case scenario.

You can only claim one Homestead at a time. I am curious how this would work.  With the 6 month old sales price of the home being the appraised value (I assume) you are only really saving about 10% on the taxable value(and 10% value increase cap annually).  Likely you are only talking less than $1000.  My biggest concern would be with them messing your your own homestead because of the conflicting information and causing problems.  

Hopefully they can refi next year and remove your name from the title.  You also might try the all encompassing real estate thread for a more educated industry reply.https://www.surlyhorns.com/board/index.php?/topic/186-all-encompassing-mortgage-and-real-estate-thread/

 

[Judge Roybeanbag 11821]

9 minutes ago, horn4life said:

Can you get his name added to the title? Just for 2/3 exemption if there are 3 names on the title? In the worst case scenario.

You can only claim one Homestead at a time. I am curious how this would work.  With the 6 month old sales price of the home being the appraised value (I assume) you are only really saving about 10% on the taxable value(and 10% value increase cap annually).  Likely you are only talking less than $1000.  My biggest concern would be with them messing your your own homestead because of the conflicting information and causing problems.  

Hopefully they can refi next year and remove your name from the title.  You also might try the all encompassing real estate thread for a more educated industry reply.https://www.surlyhorns.com/board/index.php?/topic/186-all-encompassing-mortgage-and-real-estate-thread/

 

Yeah maybe I should have asked Phil lol.  I have a property in Hays Co. in my name that I don't claim homestead on, and that doesn't affect my ability to claim 100% homestead on my current residence, so I don't know why having my name on this one does.  That's kinda why I was asking here.  None of it is logical.

[TwiceHorn 31536]

https://comptroller.texas.gov/taxes/property-tax/exemptions/residence-faq.php

If I own only 50 percent of the home I live in, do I qualify for the residence homestead exemption on the home?

Yes. However, if you qualify for a homestead exemption and are not the sole owner of the property to which the homestead exemption applies, the exemption you receive is based on the interest you own. For example, if you own a 50 percent interest in a homestead, you will receive only one-half, or $12,500, of a $25,000 homestead offered by a school district.

A married person who qualifies their property for homestead and their spouse are treated together as community property and considered as 100% ownership for each spouse.

An heir property owner who qualifies heir property as the owner's residence homestead is considered the sole recipient of any exemption granted to the owner for the residence homestead.

 

[Judge Roybeanbag 11821]

Well yeah, twice, I qualify as 100% on my current with my wife, but I have no ownership of my daughters home other than liability.  

[TwiceHorn 31536]

Are you on the deed/deed of trust as well as the note?  Probably are.

2/3 is better than nothing.

It wouldn't affect your homestead.  You're only claiming the one.  They're claiming theirs.

Edited December 15, 2020 by TwiceHorn

[CooterBrown 18029]

Is there anything in writing that you’re 50/50 owners? Just call your daughter a 90% owner and let her effectively take the entire homestead exemption.

[TwiceHorn 31536]

Wait, so you and your daughter are on the note and the deed but SIL isn't?  That's super-weird, because a spouse can interfere with foreclosure to some extent, at least to an extent that lenders tend not to want to fuck with, so they usually put spouses on even if not obligors on the note.

You could try to either quitclaim your interest in the property, or file a partition agreement that says you own less than your 1/2 or 1/3 undivided interest as would seem to be the current ownership status.

Not sure what that would do to the note/deed of trust as far as creating a default condition.

[UTPhil2006 3812]

Goal should be that once they make 6 payments on their current loan to refi into his/her name.  Especially while rates are still crazy low.  He should be able to get some credit cards, get added to cards, etc to develop credit between July and say February/March

The rest of the 50/50 stuff from Twice above is good info as well

[RPM 26354]

44 minutes ago, UTPhil2006 said:

Goal should be that once they make 6 payments on their current loan to refi into his/her name.  Especially while rates are still crazy low.

Listen to this man.

[Judge Roybeanbag 11821]

20 hours ago, UTPhil2006 said:

Goal should be that once they make 6 payments on their current loan to refi into his/her name.  Especially while rates are still crazy low.  He should be able to get some credit cards, get added to cards, etc to develop credit between July and say February/March

The rest of the 50/50 stuff from Twice above is good info as well

Thanks Phil - yes he's gotten a couple of credit cards this year and is using them/paying them off, and put some of the utilities in his name.  As I mentioned above, his parents did not prepare him well at all.  He lived at home while going to Texas State, was on scholarships and had no student loans, his grandfather gave him his car, his parents paid for all his phone/insurance etc.  So when he got his CPA and got a job, he moved into an apartment, but the 8 months or so of that in his name wasn't enough.  

TLDR - make sure your kids establish credit before leaving the nest.  Credit cards, student loans in their name, whatever.

[Enchubben 5510]

7 hours ago, Judge Roybeanbag said:

Thanks Phil - yes he's gotten a couple of credit cards this year and is using them/paying them off, and put some of the utilities in his name.  As I mentioned above, his parents did not prepare him well at all.  He lived at home while going to Texas State, was on scholarships and had no student loans, his grandfather gave him his car, his parents paid for all his phone/insurance etc.  So when he got his CPA and got a job, he moved into an apartment, but the 8 months or so of that in his name wasn't enough.  

TLDR - make sure your kids establish credit before leaving the nest.  Credit cards, student loans in their name, whatever.

Another perspective - he was prepared enough for college to get scholarships, provided a place to live, a vehicle, and had his phone/insurance paid for.  Seems like a pretty sweet gig if you can get it.  I would have given up credit history for no student loans and car payments without hesitation. 

[Judge Roybeanbag 11821]

4 minutes ago, Enchubben said:

Another perspective - he was prepared enough for college to get scholarships, provided a place to live, a vehicle, and had his phone/insurance paid for.  Seems like a pretty sweet gig if you can get it.  I would have given up credit history for no student loans and car payments without hesitation. 

True, but even though we paid for most of our kids stuff, we made sure they had bank accounts and a credit card that they used.  They didn't educate him at all about personal finances.  When they went to apply for the home loan he was pretty embarrassed,  cause it was like "wow I never thought about the fact that not having any credit history could keep me from getting a loan!"  

[Austinvines 318]

HS qualification is determined as of January 1 of the tax year, so she can only qualify for 2021. Check your deed of trust language but what if you granted your daughter a life estate? She'd be the 100% owner at that point and would qualify for the full exemption. You do not have to record a deed for it to be effective between the grantor/grantee and I have even seen some HS exemptions get approved by TCAD when the deed wasn't acknowledged and filed with an effective date until months after 1/1.

A timely application for the HS exemption is before May 1, but you can file up to two years past the delinquency date, which would be 2/1/23, and still get the exemption. Seems like they will have their financing straightened out way before then so the unfiled life estate grant, should get them the full HS exemption for 2021. Of course it depends on the exemptions clerk that is working the paperwork and none of this is legal advice.

[TwiceHorn 31536]

14 minutes ago, Austinvines said:

HS qualification is determined as of January 1 of the tax year, so she can only qualify for 2021. Check your deed of trust language but what if you granted your daughter a life estate? She'd be the 100% owner at that point and would qualify for the full exemption. You do not have to record a deed for it to be effective between the grantor/grantee and I have even seen some HS exemptions get approved by TCAD when the deed wasn't acknowledged and filed with an effective date until months after 1/1.

A timely application for the HS exemption is before May 1, but you can file up to two years past the delinquency date, which would be 2/1/23, and still get the exemption. Seems like they will have their financing straightened out way before then so the unfiled life estate grant, should get them the full HS exemption for 2021. Of course it depends on the exemptions clerk that is working the paperwork and none of this is legal advice.

That's a good idea and kind of what I was sniffing around above.  If it doesn't queer the deed of trust note.

[Nice Guy Eddie 13523]

Not having a credit history, or much of one, can be a blessing in disguise to some extent. Look for a life in paying cash when possible.  I would assume that 2 similar people except one uses credit and the other who uses cash, the cash person should end up further ahead in the long run. The difficulty in obtaining a mortgage could be the main thing holding back the cash person but that isn't a problem now in this case.

Some people focus too much on their credit score but that shouldn't matter much if you're in a house and presumably have a car. 

 

[horn4life 3783]

5 hours ago, Nice Guy Eddie said:

Some people focus too much on their credit score but that shouldn't matter much if you're in a house and presumably have a car. 

 

Just try getting a house or a car without good credit... Though I must say I was slow on the younger kid, simply as I didn't want her screwing up her credit instead of build it.

[Bernard 879]

You and your daughter are tenants in common on this house. Write up a tenants in common agreement saying she owns 99% of the house and you own 1% of the house. Sign it. Notarize it. Present it to the appraisal district and/or the county tax office. This should be enough to get her a homestead exemption, or at least 99% of it. 
 

Alternatively, you can prepare a deed that transfers your ownership share of the property to your daughter. Sign it. File it with the county clerk’s office. Any title company can handle this for you in like 5 minutes. Your loan certainly has provisions that say you cannot transfer title without lender consent, but you should be OK transferring it to your daughter since she’s already on the loan. Transferring to a third party is a no-no. You’ll still be liable for the loan of course. 
 

My girlfriend and I did this two years ago. We owned a house together. I moved out. She wrote me a check for my half. I deeded my half to her. Lender would not approve transfer. We did it anyway. Fannie Mae loan serviced by BofA. Real estate lawyer I’ve known who also owns a title company said me transferring to her was a non-issue. 
 

Bernard

[luke duke 6414]

Not having a credit history, or much of one, can be a blessing in disguise to some extent. Look for a life in paying cash when possible.  I would assume that 2 similar people except one uses credit and the other who uses cash, the cash person should end up further ahead in the long run. The difficulty in obtaining a mortgage could be the main thing holding back the cash person but that isn't a problem now in this case.
Some people focus too much on their credit score but that shouldn't matter much if you're in a house and presumably have a car. 
 

Actually using credit (smartly) will put you way ahead.

How long would it take you to save up to pay cash for a house while paying rent and saving for retirement? How much more would that house cost when you’re 60 vs 30?