Closing Process FAQs

1. How are prorations determined?
2. What is considered a Homestead in Texas?
3. What are the Community and Separate Property Laws in Texas?

1. How are prorations determined?

Taxes for the current year, interest, maintenance fees, regular condominium assessments, dues and rents will be prorated through the Closing Date. If taxes for the current year vary from the amount prorated at closing, the parties shall adjust the prorations when tax statements for the current year are available. If a loan is assumed and the lender maintains an escrow account, the escrow account must be transferred to Buyer without any deficiency. Buyer shall reimburse Seller for the amount in the transferred account. Cash reserves from regular condominium assessments for deferred maintenance or capital improvements established by the Association will not be credited to Seller. Any special condominium assessment due and unpaid at closing will be the obligation of Seller. Buyer shall pay the premium for a new insurance policy. If taxes are not paid at or prior to closing, Buyer will be obligated to pay taxes for the current year. Source: TREC Promulgated Contract (TAR 1605)

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2. What is considered a Homestead in Texas?

A homestead in Texas is a place of residence for the family, where the independence and security of a home may be enjoyed, without danger of its loss or harassment and disturbance by reason of the improvidence or misfortune of a head or any other member of the family. It is a secure asylum of which creditors cannot deprive the family. Within its sanctuary, however urgent may be their demands, they cannot intrude.

There is no formal procedure to create a homestead. The burden of establishing the property as homestead is on the party claiming the homestead protection. To establish the property as homestead, a claimant must show a combination of both (1) overt acts of homestead usage, and (2) an intention on his part to claim the property as his homestead. The mere act of using and enjoying the property as a home also qualifies for the protection of the Texas Constitution.

To establish property as homestead, the claimant must intend the property to be his homestead. The intent can be established by overt acts sufficient to impart notice of purpose to occupy premises as a home. Each homestead exemption is established by a particular set of facts. For example, the filing of a tax homestead exemption with the county appraisal district is not enough to establish a homestead but shows one fact towards proving intent to do so. Therefore, there must be some overt action coupled with intent to establish a homestead. A mere intent to occupy an undeveloped property, by itself, is not sufficient to impress the property with homestead character.

A person can only have one homestead. Another property cannot be homestead, when the claimant owns and occupies another premise as a home. Types of Homestead include Urban Homestead, Rural Homestead, and Business Homestead.

Once a homestead is established, it cannot be terminated except through the specific conduct of the homestead claimant. Neither an offer to sell nor an executory contract to sell will constitute an abandonment of the homestead. Temporarily renting the homestead will not terminate the homestead character unless a new homestead is acquired.

The claim of homestead can be lost by abandonment of the property as a homestead. The two requirements to establish abandonment are (1) the intention to permanently discontinue use of the property, and (2) an actual discontinuance of such use. If a homestead claimant is married, the homestead cannot be abandoned without the consent of the claimant's spouse.

Death terminates the homestead if other members of his family entitled to the homestead exemption do not survive the claimant.

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3. What are the Community and Separate Property Laws in Texas?

Community Property consists of the property, other than separate property, acquired by either spouse during marriage. The Family Code of Texas provides that property possessed by either spouse during or on dissolution of marriage is presumed to be community property.

Separate Property consists of:
1. The property owned or claimed by the spouse before the marriage.
2. The property acquired by the spouse during marriage by gift, devise or descent.
3. The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.

Recordation of Separate Property
The Family Code of Texas further provides that a subscribed and acknowledged schedule of a spouse's separate property may be recorded in the deed records of the county in which the parties (or one of them) reside and in the county or counties where the real property is located. As to the real property, a schedule of a spouse's separate property is not constructive notice to a good faith purchaser for value or a creditor without actual notice unless the instrument is acknowledged and recorded in the deed records of the county in which the real property is located.

Management Control & Disposition of Marital Property
The Family Code of Texas also provides if:

1. A spouse is unable to manage, control or dispose of the community property subject to his or her sole or joint management, control and disposition.

2. A spouse disappears and his or her location remains unknown to the other spouse, except under circumstances such as missing in action while in public service.

3. A spouse permanently abandons the other; or

4. The spouses are permanently separated, then not less than 60 days thereafter the capable spouse, or either spouse in the case of permanent separation, may file a sworn petition stating the facts that make it desirable for the petitioning spouse to manage, control and dispose community property (described or defined in the petition) in a district court of the county in which the petitioner resided at the time the incapacity or separation began or the abandonment or disappearance occurred for an order that the described property be subject to the management and control of such spouse. On entry of an order, the court may impose restrictions and conditions thereon. Such an order is not constructive notice to a good-faith purchaser for value or a creditor without actual notice unless the order is recorded in the deed records of the county in which the real property lies.

Management & Control Where One Spouse is Incompetent
Where one spouse is judicially declared incompetent, the other spouse acquires full power to manage, control and dispose of the entire community estate. A guardianship is not necessary.

Succession to Title to Community Property Where a Death Occurs
The Texas Probate Code provides:
(1) On the intestate death of one of the spouses to a marriage, the community property estate of the deceased spouse passes to the surviving spouse if:

    (a) No child or other descendant of the deceased spouse survives the deceased spouse; or

    (b) All surviving children and descendants of the deceased spouse are also children or descendants of the surviving spouse.

(2) On the in testate death of one of the spouses to a marriage, if a child or other descendant of the deceased spouse survived the deceased spouse, and the child or descendant is not a child or descendant of the surviving spouse, one-half of the community estate is retained by the surviving spouse and the other one-half passes to the children or descendants of the deceased spouse. The descendants shall inherit only such portion of said property to which they would be entitled under Section 43 of the Probate Code. In every case, the community estate passes charged with the debts against it.

Texas law governs real property owned by parties not resident in the state of Texas and the presumptions of community property still apply.

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Source: Title Resources Guaranty Company, Dallas, Texas