Mississippi is one of only a handful of states that does not require that the sales price be shown on the deed of conveyance. It’s time to change the law.
One of the requirements of a valid deed is a recital of consideration. That does not mean that the sales price of the real estate must be shown on the deed, only that “consideration” was given. Consideration is defined as anything of value. In real estate transactions between a buyer and seller, it is almost always money. A homeowner checking his or deed will most likely find that it begins with the phrase, “For and in consideration of ten dollars ($10.00), and other good and valuable consideration…”
This phrase is a way of meeting the legal requirements of a deed, but without disclosing the actual sales price. After all, many would argue, it is nobody’s business except the buyer and seller as to what was paid for the property. That is certainly a valid point. But there are other ramification to not having a sales price disclosure law in Mississippi.
If one reads the real estate section in the newspaper in Memphis or Denver or most other cities in the United States, there is a section that contains real property transactions. Usually included is the name of the seller and buyer, the address of the property and the sales price. But just because most other states do it is not the only reason Mississippi should require sales price disclosure. There are several other reasons that come to mind.
Disclosure of the sale price means that buyers and sellers of real estate are informed. They know what property has been selling for in their area. An informed market is better for consumers, who in this case are both buyers and sellers. An imperfect market, where sales prices are known only to a few, results in extra profits by those who deal in the market more often.
How would you like to have a stock market where the sales prices of stocks were not made public? The participants who were active in the market and had inside knowledge would make more money. Those who did not have information would be at greatest risk. In other words, disclosure of the sales price in a market levels the playing field among all buyers and sellers.
Real estate appraisals would greatly improve. Pity the poor real estate appraiser who has an appraisal assignment in an area of Mississippi that does not have a multiple listing service. He or she must attempt to contact the buyer or seller in recent transactions and plead for information about the sale and purchase. The appraiser hopes that the owner is telling the truth. Interestingly, sales price disclosure would be more beneficial to rural areas of Mississippi where such information is hardest to come by.
Property valuations would be more accurate and more equitable. Currently, many tax assessors ask buyers to complete a form about the sale of property when homestead exemption is applied for. Most buyers comply, but not all real estate transactions are homestead property. It would be interesting to take a street and examine the tax valuations of the properties.
This writer has seen cases where one house was valued at approximately $100,000, yet a similar house a few doors down was valued at $74,000. What’s the difference? The answer is that the higher-assessed house sold more recently and the tax assessor had more current information on which to make the assessment and appraisal. Many Mississippi residents would be shocked at the difference in property taxes that are paid by owners who have similarly valued properties. Yes it is true that the constitution requires reassessment of property at least once every four years. But in this market, real estate prices are rising at a faster rate than ever. Being four years behind in valuations is costing Mississippi counties and municipalities a loss in tax revenue.
Once upon a time in Mississippi there was a sort of disclosure. Tax stamps equal to at least the price of the property were required to be affixed to the deed. In order to avoid disclosure, many buyers simply bought a few more tax stamps than necessary. That way no one could tell the real sales price.
Those are just three reasons that it’s time to consider this issue. As the new Legislature begins its work in January, perhaps someone will introduce a bill and at least hold hearings to get the facts on this issue. It is one that deserves to be addressed.
Phil Hardwick’s column appears regularly in the Mississippi Business Journal. His e-mail address is email@example.com.