Thursday, June 26, 2014
If this is your first home purchase, or perhaps you haven’t purchased a new home in a while, the process may seem confusing. We hope that our office can make the entire purchase process easy and enjoyable for you. There are a few things to remember.
First, understand that the lender’s closing attorney (and this includes our office if we are representing your new lender) represents the interests of the lender. Therefore, it is not the responsibility of the lender’s counsel to advise you on your rights and obligations regarding your new home purchase. Because of this we highly recommend that you retain your own attorney to represent your interests in this process. Our office can represent you, even if we are handling the closing for your new lender, for a reasonable fee and give you the comfort you need to proceed confidently toward the purchase of your new home. Some of the services we provide when representing buyers are:
- Negotiation and preparation of the purchase and sale agreement to protect your interests and concerns.
- Resolve issues which may arise during the pendency of your purchase and assist you if you are selling real estate to purchase your new home.
- Explain the mortgage process and assist you in understanding just what the lender’s commitment letter says.
- Assist in the coordination of the closing and represent you at the closing, review all closing documents and explain their meaning and significance to you.
- Answer questions you might have and resolve disputes that may arise at any time during the closing process.
Please call our office to discuss how we can represent you and what are fees are for this service. We look forward to hearing from you.
The following information is a brief introduction to several issues you will encounter in the home-buying process.
Please feel free to contact our office with any questions that you may have.
Buying a new home is one of life’s most gratifying experiences. As you approach the big day of closing, however, all the details can be overwhelming. You might easily overlook the single most important step in the entire process – purchasing an Owners Title Insurance Policy.
1. What Is A Title?
A title is the legal evidence that a person has ownership and possession of land. Since it is possible that someone other than the owner has the legal right to the property, the premium coverage offered by an Owner’s Title Insurance Policy is a MUST for the added peace of mind.
There can be a number of problems that remain undisclosed even after the most careful search of public records. These hidden “defects” are very dangerous. Sometimes these defects are not discovered for months or years after you purchase your home. You could be forced to spend substantial sums on a legal defense to protect your rights. With an Owner’s Title Insurance policy you are protected.
2. Two Types of Title Insurance
Your lender will require that you purchase a Lender’s Policy. This policy only insures that they (the lender) have a valid, enforceable lien on the property. It does not protect you! The Owner’s Title Insurance policy, on the other hand, is designed to protect your equity.
3. How Much Does Title Insurance Cost?
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property. Please contact our office for a quote. The Owner’s Policy provides complete protection from these and a host of other hidden defects:
- Creditor Claim
- Undisclosed Heirs
- Mistakes In Recording
- Incorrect Legal Description
- Forged Deeds
- Errors In Tax Records
In addition to all of the coverage provided in the traditional owner’s policy, some policies offer expanded coverage. Now you can also insure against:
- Zoning Violations
- Subdivision Law Violations
- Improvements That Encroach Into An Easement
- Unmarketability Of Your Title
These expanded policies provide more coverage than ever before. Now you can have the peace of mind that your title is protected in many additional ways. Purchasing an Owner’s Policy when you close on your home provides you with lasting protection and coverage.
Holding Title to Real Estate
The three most common ways two or more persons may hold title to real estate are:
- Tenants in Common
- Joint Tenants
- Tenants by the Entirety
Who Has Control and Management of the Property?
- When title is held as Tenants in Common or Joint Tenants, the rents, control, management and possession of the property is in the owner equally, in the absence of an agreement to the contrary, but the individuals can divest themselves of their individual share in the property without the joining in of the others.
- Under the provisions of G.L. c. 209, § 1, when title is held as Tenants by the Entirety (which is limited to husband and wife) rents, control, management and possession of property are in the owners equally.
What Happens Upon the Death of One of the Owners?
- When title is held as Tenants in Common, it is necessary to probate the estate of the deceased before the real estate may be sold or mortgaged. There is no right of survivorship.
- When the title is held as Joint Tenants or as Tenants by the Entirety, the title automatically succeeds to the surviving title holder or title holders without the necessity to probate the estate of the deceased before the real estate may be sold or mortgaged.
- In any case of death of an owner of real estate, whether Tenants in Common, Joint Tenants or Tenants by the Entirety, it is necessary to procure a release of the estate tax or taxes which automatically – by statute – become a lien on the property.
Please note: This information is intended only to give a brief description of the three common ways of holding title and is not provide for the purpose of advising you how to take title. If further information is desired about creditors’ rights against the title, advantages and disadvantages with respect to estate planning and other practicalities, you should consult with an attorney for further advice.
The Purchase And Sale Agreement
The Purchase and Sale Agreement (“P&S”) is the governing contract between the Buyer and the Seller regarding the proposed property to purchase. Most Buyers submit an initial offer to a Seller, which spells out the terms of the contract. The P&S supersedes the offer, and can be thought of as the “long form” contract.
At first blush, the purchase and sale agreement, like most legal documents, can be difficult to read and comprehend. The best way to understand it is to divide the document into several sections.
First, like all contracts, the purchase and sale agreement sets out the terms of the deal. These terms primarily are taken from the offer. This includes the names of the parties, the legal description of the property (taken from the current deed), the purchase price, the mortgage commitment date, the closing date, any Seller credits, and any agreed upon fixtures that will remain with the property or be taken by the Seller.
Title and Deed
Second, the purchase and sale agreement deals with the title to the property and the deed. It lays out the framework for a conveyance (a real estate transfer) in Massachusetts. The agreement spells out that the Seller conveys the deed to the Buyer in return for consideration, then the deed is recorded and the Buyer becomes the owner of the property. However, in Massachusetts, once the deed is recorded at the proper Registry of Deeds, then any title issues “run with the land.” Thus, the new owner becomes responsible for any outstanding encumbrances or liens that were not properly discharged. In order to protect the Buyer, the purchase and sale agreement provides that the Seller must convey “good, clear and marketable” title. Acting as the buyer’s or lender’s counsel, or both, TitleHub attorneys will review the title exam and work with the Seller’s attorney to clear any title issues, so that the buyer will receive a certification of title and an owner’s title insurance policy.
Third, the purchase and sale agreement lays out the responsibilities of the Seller. This includes maintaining insurance and upkeep on the property until closing, obtaining a smoke and carbon monoxide certificate at closing, paying the broker’s commission, obtaining a 6(d) certificate for a condominium, and requiring that the taxes be paid by Seller up until the closing date (through an adjustment to the HUD Settlement Statement). The agreement also provides that the Seller’s agent (either the realtor or the attorney) holds the buyer’s deposit in an escrow account.
Anything But “Standard”
There is a note of caution about the standard form Massachusetts purchase and sale agreement. We like to say that it is anything but “standard.” The standard form provides several hidden advantages to a Seller. Thus, buyers must have an experienced attorney revise the agreement and flag those built in deficiencies. For example, if a Buyer were to default prior to closing, the standard form document provides no cap on the damages; a skilled attorney will know to cap the damages at the deposit. The same is true if a buyer loses his rate lock if there is a delay of the closing; a skilled attorney would use language to protect the buyer in this situation.
An experienced attorney will produce a Rider to the purchase and sale agreement that will have language that protects a Buyer’s deposit and provides an aggressive layer of due diligence. For example, if the Buyer is purchasing a condominium, the Rider should have the Seller make representations that the association is not contemplating any special assessments, there are no pending lawsuits against the association, and the budget is in good order. Other issues include seller repairs, septic system/Title V compliance, radon gas, UFFI insulation, lead paint, and buyers’ access to the property while it is under agreement.