Read the latest newsletter from Berkshire Hathaway HomeServices Rocky Mountain Realtors in Colorado Springs. BHHSRMR keeps you updated on market stats, Downtown news and events, plus helpful homebuyer and home seller tips. In this edition, you’ll find an invite to our Downtown Holiday Party, plus understanding your home warranty.
First Time Homebuyer
When two or more people take title together to real estate in Colorado, they will have to decide what form of co-ownership to take: joint tenancy or tenancy in common. It is important to understand the difference between the two types of co-ownership, especially as it relates to how ownership can be severed by one of the owners and what happens to the property if an owner becomes deceased.
Tenancy in Common
Tenancy in common is presumed in Colorado law, unless joint tenancy is expressly stated in the deed.
When two or more people (natural persons) or entities (corporations, partnerships, LLCs, or trusts, for example) take title to real property as tenants in common, each co-owner has an undivided interest in the property. This interest is “freely alienable,” meaning it can be transferred by sale, gift, will, or inheritance.
In practice, this means that each co-owner has the “non-exclusive right to possession of the entire property.” At the same time, each co-owner also has the right to mortgage, sell, or otherwise transfer his own interest in the property without the consent of the other owners.
There can be any number of tenants in common. Their interests do not have to be equal but do have to add up to 100%.
Severance of tenancy in common:
Upon the death of a co-owner, the deceased co-owner’s interest will pass to his or her heirs, based on that person’s will or the state’s law of intestate succession. The probate requirements must be met, including the appointment of a personal representative and the recording of the personal representative’s deed conveying the interest of the deceased co-owner.
If a co-owner is an entity (a corporation, partnership, trust, LLC, etc.) and the entity terminates, the entity’s interest must be conveyed by a suitable deed executed by representatives of the entity in accordance with the state’s laws for that type of entity.
Joint tenancy can only be created if expressly stated in the deed.
To create a co-ownership in joint tenancy, the instrument conveying the property must state that the property is conveyed to the grantees in joint tenancy or as joint tenants. This can be done using the phrase “as joint tenants with right of survivorship” or “in joint tenancy with right of survivorship,” or by using the abbreviation “JTWROS,” which stands for either of the two phrases.
The number of joint tenants is not limited to two persons. There can be any number of joint tenants. Prior to 2008, joint tenants had to hold equal interests in the property; after the passage of HB 1248, effective April 25, 2008, the interests of joint tenants no longer have to be equal but must still add up to 100%.
Joint tenancy can only be created between natural persons (no entities) for the obvious reason that the joint tenancy is terminated upon death of one of the joint tenants.
Severance of a Joint Tenancy
As in a tenancy in common, each joint tenant also has the right to mortgage, sell, or otherwise transfer his own interest in the property without the consent of other joint tenants. Doing so, however, may result in the severance of the joint tenancy.
On the death of any one of the joint tenants, the remaining joint tenants will continue to own the whole property including the interest of the deceased joint tenant. There is no need for probate or any deed conveying the interest of the deceased joint tenant to the remaining joint tenants. The interest of the deceased joint tenant does not pass to the heirs. (A death certificate and supplementary affidavit must be recorded in the county where the property is situated.) The remaining joint tenants will acquire the interest of the deceased joint tenant free of all liens that may have attached to the interest of the deceased joint tenant.
A joint tenancy between two persons will be severed if one of the joint tenants conveys his interest to a third party. The remaining owner and the new owner will hold the property as tenants in common.
When property is held in joint tenancy by three or more joint tenants, a conveyance by one of them will destroy the joint tenancy only as to the grantor’s interest. The other remaining joint tenants will continue to hold property in joint tenancy between themselves, while the grantee holds his interest as a tenant in common with them.
If one of the joint tenants encumbers his interest, the joint tenancy continues. If the mortgage or deed of trust is foreclosed, or a judgment creditor forecloses on the judgment against one of the joint tenants, the grantee under a Public Trustee’s Deed or Sheriff’s Deed will acquire that interest as a tenant in common with the remaining joint tenants. The filing of a petition of bankruptcy by any joint tenant, however, will not automatically sever the joint tenancy.
For joint tenants who are married, the granting of a decree of divorce will automatically terminate the joint tenancy, and the former spouses will hold the property instead as tenants in common.
If one of the joint tenants in murdered by another joint tenant, the perpetrator cannot acquire the interest of the deceased joint tenant.
Although types of ownership can be changed post-closing, it’s easiest if you know what type of ownership you’d like to take prior to your real estate agent writing the contract. Consult a lawyer or ask your agent for more information.
Are These Mortgage Interest Rates Low?
Mortgage interest rates are at historic lows, despite the slight climb in 2018. Although we’ve seen rates increase a bit over the past year, this chart is a reminder of how spoiled homebuyers have been, especially over the last few years. In the last quarter of 2018, we’ve seen rates gradually increase 2 to 3 tenths of a point each month. Even with the rates increasing more than 1 point during calendar year of 2018, be thankful that you are not paying the 18% or more that buyers were burdened with around the early 1980’s.
Is It Better To Wait Until Rates Go Down Again?
Also, it’s important to look at the trend for the last five years. Although there are some ups and downs, rates are gradually increasing. It’s a great time to talk to your favorite real estate agent about purchasing a home. Whether you are a Springs transferred military buyer considering using your VA benefits or a first-time buyer looking to get a conventional 30-year or 15-year loan, the past 5 years have shown us overall that the more time that passes, the more you will pay for the loan. Right now, people who were thinking of buying a home 5 years ago are kicking themselves for not taking advantage of those low rates. Thankfully, they still have the option of homeownership with the advantage of securing some of the lowest interest rates over the last 45 years.
What If Interest Rates Go Back Up?
Talk to your agent and mortgage broker about locking in your rate so you secure the lowest possible mortgage interest rate without fear of it increasing during your contract period. We know this stuff can be confusing, but that’s why we’re here: to provide direction, advice and even professional hand holding for your next real estate transaction.
These enticing rates along with home sales slowing in the last quarter provide the perfect recipe for buying a home, condo, or townhome.
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