Houston Home Buyers
The Homestead Law – What is it?Before The Zoller Group, as your Houston real estate experts, define the Homestead law itself, it is important to look at the key elements to what makes up the law. A homestead is defined by the state of Texas as “a place where a family, or a single adult, makes their home or living, including the land and all of the buildings or improvements”. There are two types of homesteads, a residential homestead and a commercial homestead. The two types are described below.
A Residential HomesteadThe residential homestead, which is the most prevalent type of Homestead, is defined as either urban or rural. An urban homestead consists of either a lot or lots of one (1) acre or less, urban homesteads are usually located within a city or town. The rural homestead made up of two hundred (200) acres for a family, or up to one hundred (100) acres for a single adult. Neither the value of the land nor the improvements on it are taken into consideration for the homestead. Rather, it is what is defined as the homestead that serves as the base of the size or acreage of the land involved.
The Purpose of the HomesteadThe Texas Homestead law purpose is threefold:
1. The foundation of the homestead law is to preserve the nucleus of the family foundation for social organization
2. To provide the family a home along with the means of support to recoup monetary losses so the family will not be a burden to the state
3. To retain and promote a sense of freedom and independence which is necessary to the continuation of the American way of life.
Because any statute is subject to the politics of the legislature, the Texas homestead exemption was incorporated in the Texas State Constitution in 1845. The exemption was implemented to put it outside the bounds of the state legislators. With state constitutional protection, the Homestead Exemption has endured time and remained virtually unchanged through today.
Exemption ProvidedUnder the Texas homestead exemption as it existed through 1997, a residence is protected from the forced sale by all creditors of the homeowner, except for:
“The lender who loans the funds for the purchase of the homestead, or provides the refinance money; the tax man, in the form of the State, County, City and School ad valorem taxes that are assessed against the property each year; and the contractor who provides material and/or labor in improving the homestead, and consequently, its value.”
In the latter instance, however, the state statutes require that any home improvement loan, be a valid lien against the homestead, must be in writing, executed by both the husband and the wife, and be filed for record in the real property records of the county where the property is located. And too, the federal supremacy clause in the U.S. Constitution now allows the federal government to force the sale of the homestead for federal liens, such as non-payment of federal income taxes.
On January 2, 1998, the state legislature amended the Texas Constitution to allow the homestead to also include home equity loans and reverse annuity mortgages. Restrictions on home equity loans are numerous, complex and varied. Even more important, the amendment added a provision important to borrowers is the fact that a home equity loan, when added to other existing debt, cannot exceed more than 80% of the appraised value of the homestead. The exemption also stipulates there be no more than one (1) home equity loan at a time, and no more than (1) home equity loan per year against the homestead.
This consumer-friendly change has had a positive impact on the homestead exemption. It means if you are sued and the judge finds in the positive for a recovery judgment against you, you cannot be forced to sell your real estate homestead to satisfy the judgment.
Circumvention of the Homestead ExemptionBecause the homestead exemption is a state constitutional exemption, it cannot be waived. The homestead may be abandoned, but only if another homestead is created, as when one house is sold and another is purchased or leased.
If you are relocating to the greater Houston area, request your FREE complimentary Relocation Package now from your Houston realtor, The Zoller Group!