When it comes to buying a home in Memphis, buyers (and sellers) need to understand and follow Tennessee’s laws. These are a few of the most important laws for prospective homeowners to know about buying and owning in Memphis.
Home seller and buyer laws
Real estate property disclosures. In Tennessee, home sellers generally have to disclose any “material defects” or major problems when listing a home unless a buyer opts to purchase the home “as is.”
Despite the seller’s disclosures, buyers should be sure to pay an independent inspector before buying a home. A thorough inspection may reveal problems the seller didn’t know about.
How does foreclosure happen? When a homeowner stops paying the mortgage, a lender can begin the foreclosure process. In Tennessee, foreclosure is typically considered to be a non-judicial process. That means lenders have the power to sell a property on which the mortgage isn’t being paid as long as they have given notification. In Tennessee, lenders may also choose to pursue a judicial foreclosure in which the lender works through the courts.
How are assets divided in a divorce? If you’re married and plan to buy a home in Tennessee, it’s important to understand the rules related to divorce. Tennessee is an equitable distribution state. That means all assets acquired during a marriage, including equity in a home, is divided in what the court deems to be an equitable manner between both spouses in the event of a divorce. However, if you buy a house before marriage, it may be considered separate property in the event of a divorce.
No closing attorney required. Some states require an attorney to be present when buyers close on a home. In Tennessee, buyers may work with an escrow agent or title officer to handle the closing. However, that doesn’t mean working with a real estate attorney is a bad idea. An attorney can make sure the entire transaction takes place safely and legally.
Real estate transfer taxes: When closing on a property in Tennessee, buyers have to pay a real estate recording tax. The tax is $0.37 for every $100 in real estate transferred. That means when you buy a $200,000 house, you can expect to pay $740.
Property tax exemptions: If you’re a Memphis resident, and you cannot afford property taxes on your home, you may have some opportunity for relief. Tennessee provides for the following groups: low-income eldery and disabled people, disabled military veterans and select surviving spouses of military veterans. Depending on the value of your home, you may still have to pay some of your property taxes each year.
You can find more information on property tax exemptions in Memphis here.
Typical property taxes: In Shelby County (where Memphis is the county seat), the property tax rate is $4.05 for every $100 in “assessed” property value. For residential real estate, the assessed value is just 25% of the appraised value. That means a $200,000 home has just a $50,000 assessed value. The tax rate on that home would be $2,025 per year.
Conforming loan limits
In Memphis, the conforming loan limit for a single-family house is $484,350. That means, if you want to take out a conventional mortgage (the most common mortgage in the U.S.), your loan must be for less than $484,350. Each year, the Federal Housing Finance Agency (FHFA) sets the conforming loan limits, which dictate the maximum amount that will be backed by government-sponsored enterprises Fannie Mae and Freddie Mac. In some pricier areas of the country, the conforming limits can be higher. If you wish to buy a more expensive home in Memphis, you may be in the market for a jumbo mortgage.