Do you own your property - or could you have inadvertently signed a document that said “Sole & Separate”?
Recently, we had a client ready to put his house on the market. His wife passed away last year and he was ready to move on. When he brought us paperwork to review, we noticed something interesting. The tax records showed that the house was only in his wife’s name. The phrase "Sole and Separate” beside her name set off an alarm bell for us.
Since New Mexico is a Community Property state, a Sole and Separate agreement is used when a married person wishes to acquire title as their sole and separate property. This document relinquishes the spouses’ rights and legal interest in the property. Essentially, it allows a person to purchase a property independent of their spouse. In order to achieve this, the spouse must agree to sign the Sole and Separate agreement before the closing takes place.
As soon as we saw the words Sole and Separate in the tax record, we contacted the title company and asked them to perform a title search so we could see exactly what happened when the deed was signed back in 2007. As a result of the title search, we found out that when the couple purchased the home, the wife was earning an income, but the husband was not. For this reason, the bank had the husband sign a Sole and Separate agreement at closing. When he signed this agreement, he had no idea he was relinquishing his interest in the property. The husband didn’t realize he was signing anything out of the norm because the document was buried within a bunch of other documents for the closing. By the time he came to us, ready to sell his home, he had been making payments on this property for 12 years.
It was also interesting to learn that by signing all the mortgage documents, the man was still responsible for the loan, but had no legal interest in or rights to the property. In layman’s terms this means he was responsible for the loan - but didn’t own the house.
We had a long conversation with the owner of one of the title companies and were surprised to learn that this has been a fairly common practice with many banks for many years. Often, when one of the buyers has no income, bad credit, or a lot of debt and doesn’t qualify for the loan, the lender has simply thrown in a Sole & Separate Agreement for a spouse to sign. And, according to the title company this doesn’t just happen to buyers; it can happen when a property is refinanced or if a reverse mortgage is taken out on the property.
If there is a death or a divorce, the ramifications of discovering you signed a Sole and Separate agreement can be pretty devastating! In the case of our client, he’d been married for 25 years, but this was a second marriage for both him and his wife, and his wife had adult children. Had the Sole and Separate agreement not been signed, the property would have gone into his name, and there would be no probate process or legal action required. But since the Sole and Separate was signed, our client had to hire an attorney and begin the probate process. He had to contact all their grown children so that they could sign the property over to him.
In our discussion of this with the title company, we heard of another case where an elderly couple had taken out a Reverse Mortgage. During the closing, the wife unknowingly signed a Sole and Separate agreement. The husband died and the bank was trying to foreclose on the property because the wife technically did not own the property. Imagine paying off your home and getting a Reverse Mortgage to help with cash flow in your elder years, only to find yourself kicked out of your home because of a document you didn’t realize you had signed.
The bottom line is to educate yourself about what you are signing. Ask questions. If you don’t understand something, get to the bottom of it and make sure you do understand before you sign. If you are getting a mortgage on a property, you might have to sign a Sole and Separate agreement in order to obtain a loan. But it also might be possible to redo the deed right after the closing. Title companies do this all the time. Make sure you consult with the title company or an attorney about this process. And, if you purchased a home with a spouse or partner, it’s a good idea to know how you currently hold title. If you’re not sure or you have questions, you can have a title company do a title search for around $100. Taking the time to do your homework now could save you a great deal of future trouble!
Our title companies in Grant County, NM are Western New Mexico Title 575-538-2976 and Grant County Title 575-388-1501.
Disclaimer: Legal issues are complicated. The information provided here does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. A real estate broker cannot offer advice about how a person should take title to property. If you have any questions please consult with an attorney.