LEGAL STEPS TO BUYING YOUR NEW HOME
The process of buying a new home can be confusing and frustrating, but it does not have to be. There are steps you can take to minimize any problems that might encounter.
A good start is to read up on the subject, take a course in your community, ask real estate brokers, or just check out resources online. You could also get books at your local library on buying a home, and obtaining a mortgage or informational brochures from prospective lenders. All these sources can give you a general idea of what to expect. The more information you have, the better you will understand what is going on, who is responsible to do what, when it must be done and why.
THE OFFER TO PURCHASE
Once you find a house or property you want to buy, very often the legal process starts with a written offer from you to the owners to purchase the property. This offer should contain some but not necessarily all the important terms and details about the sale, the financing, inspection contingency and what you are willing to commit to in order to buy the property.
A complete offer should contain the following:
1. The names and addresses of the buyers and sellers,
2. The location of the property and if available the address of the property, and if known, the title reference where the deed to the property is recorded. (Including this last bit of information eliminates any potential confusion about the property you are offering to purchase.)
3. The amount you are willing to pay for the property and the amount of money you are putting down as a deposit of earnest money.
4. When the closing will take place.
5. What are the conditions which must be fulfilled prior to the sale, i.e. financing, inspections, engineering, repairs, certifications, etc.
If you have a verbal understanding with the seller about a specific term or condition of the sale, it must be included in the written offer. If it is not included in the written offer and agreement, it will not be enforceable.
SHOULD I CONSULT WITH AN ATTORNEY REGARDING THE PURCHASE OF REAL ESTATE?
Buying a home is probably the single most important and substantial investment you will ever make in your entire life, having a professional who has been through the procedure before and knows what is required will greatly assist in making the procedure a standard business transaction rather than a nightmare. When you plan to buy a house, or even land only, consulting an attorney prior to signing anything helps you to avoid or minimize problems before, during and after the transaction.
You might be trying to save a few dollars by not contacting an attorney because you think you know what you are doing, but unless you really do know, you may later regret it when the situation doesn't turn out as you had anticipated.
You want to buy the house or property, not problems or a lawsuit!
THE PURCHASE AND SALE AGREEMENT
Both an offer to purchase and a purchase and sale agreement (P & S) are legal contracts, no matter what the Real Estate Brokers tell you. Before you sign either one, it is a good idea to consult with an experienced real estate attorney. He or she can explain what your rights and obligations are under these legally enforceable agreements to you. With proper advice, you can avoid potential problems and putting your hard earned deposit money at risk of loss.
In Massachusetts, and many other states, for a contract or any terms or agreements involving real estate to be enforceable in Court or otherwise, THE AGREEMENT MUST BE IN WRITING AND SIGNED BY THE PARTY RESPONSIBLE TO PERFORM. Don't be naive or foolish and rely on verbal promises. Get it in writing!
One of an attorney's most important duty in representing a buyer is to examine the records in the Registry of Deeds where the records for property are kept. This is known as the "title search." He or she will check these records to determine the market-ability of the property without problems, to make sure that any and all liens are released or cleared and if there are any still outstanding, that they are paid off at the time of the sale to you. (You do not want to buy a law-suit or a problem requiring further legal resolution when you purchase property.) Knowing about problems in advance gives you and your attorney the opportunity to make the seller resolve the problem PRIOR TO SALE.
In the title search, the attorney makes certain of the following:
Does the Seller actually own the property, and may he or she properly sell it? Are there other owners who are required parties to the transaction? Are there any mortgages, judgments, attachments or liens that must be paid to "clear" the title? Are there any documents, permits or forms such as releases of liens for estates or taxes that are required prior to the sale to clear the title of a problem? Will there be a delay in obtaining the required forms or paperwork? Will this postpone the closing? Should an escrow amount be set aside to take care of the problem if it is not resolved by a set deadline? Are there any restrictions on use, covenants related to conservation areas, easements or rights which may limit or interfere with your intended use of the property? Are there unpaid taxes or water and sewer charges or other assessments for improvements such as sidewalks or sewer ? Are there encroachments (structures, fences or walls) that go beyond the lot lines of the property or is someone elseís structure or fence within the property lines? The attorney certifies that the title is clear by providing a certificate of title to the lender and the buyer. This certificate will spell out any exceptions to the clarity of the title. In some circumstances a title may not be totally clear, but the exception may not interfere with the intended use of the property. For example, a utility easement over a corner of the property, while considered an exception on the title certificate might not necessarily interfere with the use of the property as a dwelling. Knowing about such matters in advance can make all the difference in the world.
The most common set of standards used by attorneys to resolve legal problems about the title to property in Massachusetts is a set of rules known as the Real Estate Bar Association (REBA) Conveyancers' Standards. These give acceptable standards, ways and requirements to resolve many common issues which arise in the purchase and sale of property.
TYPES OF DEEDS
In Massachusetts, a quitclaim deed is an acceptable and customary way to transfer title to real estate. A quitclaim deed contains a guarantee or covenant that makes the seller responsible for problems, liens or claims which attached to the property only while the seller was the owner of the property. This seller's collective responsibility is known as the Quitclaim Covenants.
A warranty deed was more commonly used in the past in Massachusetts. A warranty deed contains more guarantees and obligations on the part of the seller. That type of deed makes the seller responsible for all problems, claims, liens or encumbrances on the property before the seller owned the property as well as while the seller owned the property. The sellerís guarantees under this type of deed are known as Warranty Covenants.
DIFFERENT TYPES OF PROPERTY OWNERSHIP IN MASSACHUSETTS
TENANCY BY THE ENTIRETY
In Massachusetts only a husband and wife may own property jointly as tenants by the entirety. The property passes to the survivor at the death of the first spouse and in Massachusetts a special protection against attaching creditors is given to the parties as well.
JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP
Any two or more people may own property as joint tenants. The property passes to the surviving owner(s) at the death of one of the owners.
TENANCY IN COMMON
Any two or more people may own property as tenants in common. The property passes to the heirs of an owner who dies, not to the surviving owners.
Usually, your attorney will be responsible for obtaining, preparing and checking all required documents necessary for the transfer of title (the deed) and any related documents, financing (the promissory note, which you may know as an I.O.U., the mortgage) and settlement statement (an accounting for all money received and paid out) as part of the closing.
Each lender (bank or mortgage company) has its own terms and conditions which must be met. Some common requirements are a municipal lien certificate, a plot plan (mortgage survey), and title insurance for the benefit of the lender (Lenderís title policy). These will all be obtained at the buyer's expense. The items provide different aspects of guarantee that the property is a good investment for the lender. The cost of these items is given in detail in the H.U.D. (Housing and Urban Development) RESPA Settlement Statement. The HUD Settlement statement sets out in detail all the charges and expenses and payments made for both the Buyer and Seller as part of the sale transaction. Both parties sign this statement at the closing.
Title insurance is a one time expense that provides certain insurance coverage for title problems. Most lenders require purchase of a Lender's Title Policy to protect their interest and investment in the property. An Owner's Title Policy is available at an additional premium paid by the Buyer, although it is a one time expense and provides coverage for title defects as long as the Buyer owns the property.
The attorney for the Buyerís lender will handle the final transfer of title papers, recording of the deed, mortgage and all releases and the transfer of money to pay the sellers, all lien holders, taxes and outstanding charges related to the property. All these charges and expenses are listed on the HUD Settlement Statement.
Prior to the time of the closing, figures will be agreed upon to make calculate the figures to show the full transaction between the parties. Figures are included for payment of the purchase price, adjustments for taxes, fuel oil, rent (if applicable) loan charges, prepaid interest, brokersí commissions, credits and payments to the buyer for payments made or loan proceeds, etc. All the details of the financial adjustments, payments are contained on the H.U.D. RESPA settlement statement.
Your attorney can explain the documents and figures. If you don't understand something, ask questions until you do.
AFTER THE CLOSING
After the closing to sign the deed, mortgage and loan paperwork and exchange all money, the attorney's job is not yet complete. The deed and mortgage and all lien releases must be recorded at the appropriate Registry of Deeds. All outstanding mortgages or liens must be paid as part of the entire transaction. Sometimes even if liens or claims against the property are paid on the day of the sale, it takes up to a few weeks before the mortgage discharges are issued by the lending banks or mortgage companies. It is the attorney's responsibility to follow up and make sure these items are issued and recorded.
SELECTING AN ATTORNEY
An attorney's responsibility includes: reviewing the offer, the purchase contract, contract preparation, preparation of closing documents and closing figures, the title examination and certification, presiding over the closing and recording the deed and mortgage.
In this day of specialization many attorneys have their own areas of expertise. It is important that you select an attorney who is customarily engaged in real estate practice and who is capable of efficiently and competently handling your transaction.
Attorney's fees are based upon the various services provided and the time required to complete the work.
WHEN THE BANK SELECTS THE ATTORNEY FOR YOU (CLOSED LISTS)
Some banks and mortgage companies have what is known as a "closed list" policy. What this means to you as a borrower is that the lender tells you who you can hire to do the closing and you pay the legal fees. The banks get away with this under the auspices of the Golden Rule: They who have the gold make the rules. There is a list of attorneys who are "approved" attorneys to do real estate closings for the lender. If you want to hire an independent attorney to look out for your interests alone, this will cost you more out-of-pocket legal fees.
Some lenders may even have you sign a paper acknowledging that the attorney handling the closing is the lender's attorney even though they require you to pay the legal fees as a condition of the loan.
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