About Gretchen Luke Gentry

Gretchen focuses her practice in the area of real property, primarily in real estate closings.

    Many real estate contracts in this area have a provision in the contract that the seller will give the buyer a non-homestead credit, if homestead is not in place on residential property as of January 1 of the current tax year. A non-homestead seller credit is a credit given to the buyer by the seller for the difference between the homestead tax rate and the non-homestead tax rate. When this occurs, Settlement Agents typically determine if the property is eligible for homestead. If the property is not eligible for homestead, the tax rate for the property is determined with homestead and without homestead.The homestead rate is subtracted from the non-homestead rate, and the seller gives the purchaser a lump sum credit for the difference for the entire year. The settlement agent then pro-rates taxes between the buyer and seller as of the date of closing at the homestead tax rate.

    Gretchen Gentry
    Attorney
    RANDALL | SEGREST

    4

    Purchasing a home will probably be one of the most if not the most significant purchase you will make in your life. It also involves the transfer of real property, which involves may aspects of law. A lawyer is trained in the legalities of transferring property and has the experience to deal with the unique problems which sometimes arise during the transfer of property.

    Legal Terms

    A lawyer can help you understand some of the terminology used during the transaction. It is important that you understand what you are signing and the legal ramifications of the documents you sign.

    Contracts or Purchase Agreement

    The real estate contract or the purchase agreement is the single most important document in the entire transaction. Although real estate professionals and buyers and sellers often use standardized pre-printed forms it is helpful to consult an attorney to make changes that correctly reflect the negotiations between the buyers and the sellers. There are many issues that will be addressed in the real estate contract or purchase agreement such as the exact legal description of the property and improvements being purchased, the purchase price, time of closing, earnest money, proration of taxes and assessments, contingencies, etcetera.

    Title Search

    Once the contract has been signed, it is necessary to establish that the sellers have good title to the property and that there are no clouds on the title and/or that the buyers and the buyer’s lender are satisfied with the condition of the title. Most attorneys order a title search from an abstracting company or a title insurance company. In Mississippi title insurance is optional so it is essential that an attorney review the status of title and render an opinion of title or issue a title policy. If you choose to purchase title insurance, an attorney can help review the title search and explain the title exceptions. They can explain what is and is not insured. An attorney can also explain the effect of easements and agreements or restrictions imposed by a prior owner or a homeowner’s association, and whether there are any legal restrictions which will hinder your ability to sell the property.

    Closing

    The closing is the event wherein the purchase and sale transaction occurs. The deed or assignment of lease and other closing papers must be executed. Title passes from seller to buyer, who simultaneously pays the balance of the purchase price. Often, the buyers pay the balance from loan proceeds loaned by a mortgage company or lender. Thus, the buyer must also close a loan at the closing. A closing statement should be prepared prior to the closing indicating the debits and credits to the buyer and seller. An attorney is helpful in explaining the nature, amount, and fairness of closing costs. The deed and mortgage instruments are signed, and an attorney can insure that these documents are executed correctly and explained to the various parties.

    The closing process is complex and can be confusing to the buyer and seller. Those present at the closing often include the buyer and seller, their respective real estate agents or real estate broker, the loan officer and the closing attorney. After the closing, the attorney will make sure the transfer instruments and deeds of trust are recorded with indexing instructions. They will pay off the sellers’ mortgages and any other liens. They will also collect payment for any third parties listed on the settlement statement and any real estate commissions due. Finally, the attorney will insure that the closing documents are returned to the lender and the originals of recorded instruments and title policy (if applicable) ultimately are sent to the buyer.

    Gretchen Gentry
    Attorney
    RANDALL | SEGREST

    2

    I am frequently asked if the settlement agent collects property taxes at closing to pay directly to the tax collector. Typically, the settlement agent does not collect property taxes unless they are currently due. In Mississippi property taxes are due when billed but delinquent after February 1 of the following tax year. If your closing occurs between November and February 1 and taxes have not been paid, then the settlement agent will usually collect property taxes and pay them directly to the tax collector. They will also collect any delinquent taxes and penalties and pay those to the tax collector.

    However, in most closings the seller gives the buyer a credit for the share of unpaid taxes from January 1 through the closing date, which is called proration. In Mississippi property taxes, and where applicable city or municipal taxes, are paid in arrears. Therefore, taxes are typically estimated using the tax bill from the prior year. Every closing is different; however, this is how property taxes are normally handled.

    It is also important to note that homestead tax rates are determined by the status of the property as of January 1 of the tax year. The name of the person or entity who owned the property as of January 1 will typically also be listed as the owner on the tax bill.

    Gretchen Gentry
    Attorney
    RANDALL | SEGREST

    2