Each state has its own set of rules for homebuyers and sellers alike. Tennessee is no different. Here are a few homebuyer and seller laws to keep in mind during your home search.
Home seller and buyer laws
What must sellers disclose? Tennessee state law requires home sellers to disclose any defects in the property for sale. This includes environmental hazards, issues with plumbing or electricity, previous remodeling work and past fire damage, as well as any knowledge the seller may have of defects in the roof, basement, foundation or doors. However, if a buyer and seller come to their own agreement, Tennessee allows sellers to forego the disclosure form to sell the house “as is.”
How does foreclosure work? Upon failure to pay a mortgage, lenders may choose to foreclose on a home. During the foreclosure process, some states require lenders to take the foreclosure process through the court system. These states are known as judicial states. Other states follow a non-judicial process, meaning that the foreclosure can proceed without a lender filing suit in court to begin foreclosure. Tennessee allows for both judicial and non-judicial foreclosures.
How is property divided in divorce? In what are known as “community property states,” joint assets such as income and real estate holdings are divided equally (50/50) during divorce proceedings. However, Tennessee is not one of these states. Rather, it is an “equitable distribution” state. In Tennessee, if a divorcing couple cannot come to full agreement on the division of all assets, a judge will do so, making a decision based on each party’s earnings and needs.
Does a lawyer need to be present during a home closing? Some states, referred to as “attorney states,” require a lawyer be present during a home closing. Others, called “escrow states,” do not mandate the presence of an attorney during these proceedings. Tennessee falls into the latter camp: it does not specifically require an attorney to attend proceedings; rather, buyers and sellers can work through an escrow agent during the homebuying process.
Real estate transfer taxes: Upon closing, some states, including Tennessee, will impose a transfer tax. This tax typically is determined based on the total value of a property, and mortgage lenders are mandated to disclose the exact amount to any potential buyers. In Tennessee, buyers should prepare to pay a transfer tax rate of 0.37%, or $0.37 for every $100 in home value.
Property tax exemptions: Some homeowners in Tennessee may be eligible for property tax exemptions. These individuals include low-income seniors, homeowners with disabilities, veterans with disabilities or veterans’ surviving spouses, all of whom may qualify for tax relief through the Tennessee state government.
Typical property taxes: Homebuyers should always take property tax rates into account before deciding on a property. Depending on the location of the home, these property taxes can add up to significant costs each year. Tennessee has the 10th-lowest median property tax rate in the U.S., with a median statewide property tax rate of 0.68%. However, these rates can vary significantly by county and metropolitan area, so it’s important for homeowners to check with county governments to make sure they understand property tax laws in their area.
Conforming loan limits
For a single-family home, much of Tennessee has a maximum conforming loan limit of $484,350. Those in more expensive areas of Tennessee, such as Davidson County, where Nashville is located, may be eligible to borrow up to a maximum of $534,750.
Conforming loans are mortgages that follow guidelines set forth by Fannie Mae and Freddie Mac. These government-backed entities set national loan limits each year, as well as individual maximums by county or municipality. These are known as conforming loan limits — the maximum amount an individual may borrow for a mortgage loan, limiting the size of the loan.