What to Expect When You're Buying Property Across a State Line

How State Law Shapes Real Estate Transactions

The basic structure of a real estate transaction is the same in every state. The title company conducts a title search and examination, reviewing public records to trace the property’s ownership history and identify any issues that need to be resolved before closing. The title company also issues title insurance, which protects the buyer and lender against hidden title risks. The transaction concludes at the closing, where the parties sign documents, funds are disbursed, and documents are prepared for recording. Federal lending rules also apply to all financed transactions nationwide.

However, differences do exist at the state level. Each state sets its own property law, recording requirements, and closing procedures, so the documents involved and the steps to close a transaction can vary from one state to the next. A title company licensed in a particular state must know and meet all of that state’s requirements. But for buyers and sellers, the process looks and feels largely the same wherever the property is located.

How Real Estate Transactions Change Across State Lines

Most state-level differences involve property taxes, the ways people can hold title, and local closing customs. Some affect the numbers on the settlement statement, while others shape the paperwork or the closing day format. A state-licensed title company works within these rules and accounts for each as the transaction moves toward closing.

Property Taxes

Property taxes are billed at the local level. Depending on where the property is located, a homeowner may receive tax bills from the county, the city, or both. Each state sets its own billing schedule, so when and how often homeowners pay can differ from one state to the next. Jordan Kells, Market President at Bluegrass Land Title in Northern Kentucky, says, "For most homeowners, property taxes are the most noticeable change when they buy in a different state."

• Billing schedule: Some states send one tax bill a year, while others bill in two installments. For example, Kentucky issues its bills each fall, while Ohio bills twice a year, with payments typically due in February and July.
• Tax year: Some states bill for the current year, so a bill received in the fall covers that same year's taxes. Others bill in arrears, so each bill covers the prior year.
• Tax rates: Rates vary by state and municipality, affecting the overall cost of owning a home. For example, Kells notes that Ohio's property tax rates are generally higher than Kentucky's as a share of property value.

At closing, the title company prorates property taxes, dividing the year's taxes between the buyer and seller based on how much of the year each one owns the property. The calculation depends on the state's billing rules and the closing date. 

How Title Is Held

When buyers take title to a property, the deed records the form of ownership they hold. The deed establishes who owns the property, how ownership is shared when there is more than one owner, and what happens to an owner's share when that person dies. Each state decides which forms of ownership it recognizes.

In many states, married couples hold property with survivorship rights, so ownership passes to the surviving spouse when one owner dies. The steps that follow can differ by state. In Ohio, for example, the surviving owner records an affidavit along with the death certificate to update the public record, a step Kentucky does not require.

Some states also allow transfer-on-death deeds, which let owners name the people who will receive the property after they pass. "Some couples choose to name their children when they buy the home, so the property can pass directly to them after both spouses are gone without going through probate,” Kells explains.

Closing Customs and Costs

Many parts of a real estate transaction follow local custom, including who conducts the closing, how the signing takes place, and which party pays certain costs. Some states require an attorney to conduct or oversee the closing, while others permit a title or escrow agent to serve as the closing agent. 

Location also determines whether the buyer and seller sign together. In some areas, both parties sit at the same table for a round-table closing. In others, each party signs separately, sometimes at different times or locations. In West Virginia, for example, buyers and sellers typically close separately.

Custom also influences who pays for what. Responsibility for the owner's title insurance policy, transfer taxes, and other closing costs can shift from one state or market to the next.

The title company manages each of these differences, not the buyer or seller. Where a difference affects money, such as a tax proration or a closing cost paid by one side, it appears on the ALTA Settlement Statement. Buyers and sellers should review the statement carefully before closing and ask their title company about any charge or credit they don't recognize or understand.

Closing Flexibility for Out-of-State Buyers and Sellers

Bluegrass Land Title serves several border markets, including Northern Kentucky and Cincinnati, Louisville and Southern Indiana, and Ashland and West Virginia. In these areas, a property across the state line may be only a short drive away. A buyer who lives in Southern Indiana and purchases a home in Louisville can attend closing in person as easily as a buyer who already lives in Louisville. 

For buyers relocating from farther away, or sellers who have already moved, getting to the closing table takes more planning. Bluegrass Land Title offers several closing options.

• Remote electronic closings: A buyer or seller can sign closing documents electronically using Notarize with a notary over video from anywhere in the world. 
• Mobile notary closings. A mobile notary meets the buyer or seller at a convenient location, oversees the signing, and returns the signed closing package to Bluegrass Land Title. 
• Travel closings. A Bluegrass Land Title representative can travel to a location within one hour of any Bluegrass Land Title office to conduct the closing.

Bluegrass Land Title can also arrange closings outside standard hours, split closings where each party signs at a different office, and separate signings. 

Choosing a Title Company for Out-of-State Transactions

For a transaction that crosses state lines, the title company should be licensed as a title insurance agency in the state where the property is located. A licensed company must meet that state's recording requirements, document standards, and tax rules on every file.

It also helps when the title company has attorneys on staff who are licensed to practice law in that state. A title insurance license and a law license are separate credentials. A title insurance license allows a company to issue title insurance policies, while a law license allows an attorney to resolve legal issues that affect a property's title. Most title examinations turn up only routine items. Occasionally, though, a search reveals something that requires legal work, such as a seller facing bankruptcy. When the title company has an attorney licensed in that state, the issue can be resolved in-house rather than referred to outside counsel.

"Someone buying here from out of state shouldn't feel like they're starting over," Kells explains. "It should feel as smooth as buying their eleventh house back home." Every state has different transaction requirements, but the title company manages those differences so the buyer and seller experience the same process wherever the property is located.

Bluegrass Land Title is licensed in Kentucky, Ohio, Indiana, and West Virginia, with attorneys on staff licensed to practice law in each state. We prepare every file under the laws of the state where the property is located, so buyers and sellers can expect the same experience no matter which side of the state line the property is on.