On a recent visit, my mother asked me what proof she had of ownership of these two pieces of property. I asked her if she had the sales documents or a deed or title for either of the properties, and she said she does not have those. She does not remember the name of the escrow or real estate companies.
Both of my parents were very meticulous about these sort of things, so I find it hard to believe that they do not have these documents, but she says she does not know where they are if she has them.
How would one go about getting duplicate copies or some other proof at this point? If she sells either property, she would need the original purchase price for capital gains. As I am her executor, I would also need to know this upon her passing. Can you give me any direction on this?
Answer: Don't be too concerned about the fact that your mother does not have copies of her deeds to the two properties. Property ownership is a matter of public record.
All you have to do is go to the county records office for the county in which the houses are located and do a title search and your mother should appear as the legal owner.
If you don't want to do the search yourself, contact a local title insurance company to do a title search and property profile for you. This should be done for a nominal charge of about $100 to $150, and you may even be able to have a helpful real estate agent get you one for free. The property profile will show the legal owner of the property and any liens against the property. Since your parents paid cash for the properties, there should be no liens.
If your mother wants copies of the deeds to her properties for her personal records, the title insurance company can print them out for her.
Your mother does not need to purchase title insurance on the property unless she wants to sell it or get a mortgage refinance. All title insurance does is assure the people buying the home, or the bank refinancing the home, that your mother is the legal owner of the property and that there are no liens or encumbrances against the property that affect her equity.
So establishing legal ownership of the properties is pretty easy.
Establishing the "cash basis" for determining potential capital gains owed on the properties may be a little more difficult if your mother has no records of the purchase price that she paid for each house.
Keep in mind that your mother could have a capital gain of up to $250,000 on the sale of the properties and pay no capital gains tax. She would only be taxed on the amount of capital gain in excess of the $250,000 exclusion. So if the two houses in question are moderately priced, this may be a moot point.
My first suggestion for determining the price she paid for the properties would normally be to contact the escrow company that handled the purchase transactions because they would have copies of the settlement statements.
But you say your mother can't remember the name of the escrow company, so that's not an option.
I'm not sure how it works in the state of Arizona, but here in Washington many counties record the sale price of a home each time it is sold as part of the property tax records on the property.
So you might try contacting the property tax department in the county where the houses are located and see if they have records of the price paid for the houses.
Again, a helpful real estate agent may be able to provide this information for you as well.
But knowing how much your parents paid for the properties won't necessarily be the end of the search because you need to know if your parents rolled over profits from the sale of a previous home and/or rental property into the houses they bought in 1996. So it can get complicated. If your mother has her income tax records from 1996, that may help.
If and when your mother passes, you would inherit all of the property at a "stepped up" cost basis, which means you would get them at their current market value with no taxable gain. You would only pay tax on any capital gains that you earn if and when you sell the properties for more than their value at the time you inherited them.
Steve Tytler is a licensed real estate broker and owner of Best Mortgage. You can email him at email@example.com.