Purchase and Sale of Real Estate
- What is “title” or “a title”?
- What does it mean to certify title to property?
- What is Title Insurance?
- Do I need title Insurance?
- How much does title insurance cost?
- What can make a title defective?
- Why do I need my own lawyer when I buy a house?
- What is a purchase and sale agreement?
- What happens during a closing?
- Why do I need my own lawyer when I sell a house?
- If the lender already requires title insurance, won't that protect me?
- What is a Survey or a Plot Plan?
- What is a Municipal Lien Certificate?
- What is flood Insurance?
- If I buy a condominium unit do I need insurance in addition to the Condominium Master Policy?
- What is a Short Sale?
- Should I do a Short Sale?
- If I do a Short Sale, how much will I have to pay to sell my home?
- How do I get started on a Short Sale?
- How will a Short Sale affect my credit?
- What is a homestead?
- What is a Good Faith Estimate or GFE?
- I had a temporary income problem and fell behind in my mortgage. How do I avoid foreclosure?
- What is a Forbearance Agreement?
Landlords and Tenants–Rentals
- I’m a new landlord, should I take a security deposit?
- What can a Landlord deduct from a security deposit?
- What does “reasonable wear and tear” mean for payment of repairs from the security deposit?
- Does a tenant need to hire a lawyer?
- I received a Summary Process complaint, what do I do?
- Am I responsible for any snow removal on the property of my apartment building? It says nothing about snow removal in my lease.
- Can my residential landlord charge for utilities?
Title, also called a “title abstract” is the evidence that you have outright ownership and possession of land. It is possible that someone other than the owner has a legal right to the property. If his or her right can be established, he or she can claim the property outright or make demands on the owner as to its use. Title is generally based on records at the Registry of Deeds and the Registry of Probate for the County where the land is located and may include bankruptcy and tax matters where available. Title may also include records from other sources such as a Registry of Probate in other counties. An attorney renders an opinion of title upon which the buyer relies when buying real estate. Without such an opinion of title, a purchaser can pay the full purchase price and end up with nothing. The rule of “buyer beware” applies to real estate purchases.
Ownership of property is different from ownership of other types of property. Since real estate can’t be held or moved, the ownership of real estate is determined by documents recorded at the Registry of Deeds. In addition, ownership of real estate can be divided into smaller parcels, between several people, and between present rights, and future rights, and tracked by its chain of title at the Registry of Deeds. In order to determine if you are actually buying the real estate you think you are purchasing, the records have to be examined and a lawyer issues an opinion about the nature of the title. Hopefully the lawyer will certify that the seller of the real estate has “good, clear, and marketable record title.” However, the examination title can reveal defects in the chain of title. It is important for a purchaser to establish that the seller of a home has clear title to sell the property before purchasing the property.
Owner's title insurance protects against financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects and risks that would not be disclosed by even the most meticulous search of public records by the Bank Attorney. In addition, title insurance will pay for the legal fees attendant to the defense of your title as insured. Most title insurance will insure against the following problems in the title to real estate:
- Fraud (misrepresentation) in connection with the execution of documents.
- Undue influence (under pressure) on a grantor (seller) or executor (of a will).
- False impersonation by those purporting to owners of the property.
- Incorrect representation of marital status of a grantor (seller).
- In some cases, undisclosed or missing heirs.
- In some cases, Wills not properly probated.
- In some cases, mistaken interpretation of wills and trusts.
- Mental incompetence of grantors.
- Conveyance of a minor.
- In some cases, birth of heirs subsequent to the date of a will.
- In some cases, inadequate surveys.
- In some cases, incorrect legal descriptions.
- Non-delivery of deeds.
- Unsatisfied claims not shown on the record.
- Deeds executed under false powers of attorney.
- In some cases, confusion due to similar or identical names.
- In some cases, dower or courtesy rights of ex-spouses or former owners.
- Incorrect indexing at Registries of Deeds.
- Clerical errors in recording legal documents.
- Delivery of deeds after the death of a grantor.
- Defects in tax records
Owners Title Insurance is not required but it is highly recommended. Real estate may be the largest purchase you make in your life and deserves to be protected. Title insurance is the best protection you can get to against claims that could take away your real estate. If you borrow money secured by a mortgage, lender’s title insurance will probably be required. If you purchase a lender’s policy, the owner’s title insurance policy is sold to you at a discount. In addition, there is no extra charge for an inflation rider which is added to every policy and which will increase coverage as required, up to 50% in addition to present coverage. Title insurance has a one-time Charge (at closing) so you won’t ;have to pay monthly or yearly charges.
The one-time premium is directly related to the value of your home so there won’t be additional premiums every year. 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 own the property. If you purchase the property with a mortgage from a bank, the bank will require a lenders policy of title insurance to protect their interest. If you also purchase an owner’s title insurance policy at the same time, you will receive a substantial discount for the owner’s policy due to the simultaneous issue of the two policies.
A defective title is title to real estate that lacks some of the elements necessary to transfer good title. Even if a deed looks good on its face, the title can still be defective. There are more problems that make a title defective that can be discovered by a title search. In addition, there could be many more problems that remain undisclosed after even the most meticulous search of public records. These hidden “defects” are dangerous indeed because you may not learn of them for many months or years. They could force you to spend substantial sums on a legal defense, and still result in the loss of your property. It is not uncommon for title defects to surface when you are selling your property and the potential buyer conducts a title search.
Unless you are able to examine the title to real estate, you will need a lawyer to examine the title for you. If you are purchasing the property with a mortgage, the bank will probably require that a lawyer examine the title for the bank. This lawyer will also certify title to a residential purchaser. However, the bank lawyer’s role is limited and you may need your own lawyer to represent you in the process. Your lawyer can help you avoid some common problems with a home purchase or sale by drafting or review of an offer to purchase. Your lawyer will help you with the drafting or review of purchase and sale agreement, negotiations relating to the purchase and sale agreement, and computation of adjustments. Your lawyer will attend the closing and supervising the purchase. The lawyer will assist you with any last minute problems that arise including decisions on the final inspection and last minute title problems. In addition, your own lawyer can advise you throughout the process on all matters including financing, inspections, and repair issues,
A purchase and sale agreement is a document between the buyer and seller that states the terms and conditions under which the property is sold. It is executed after the offer to purchase is accepted and addresses in detail all issues and potential issues between buyer and seller. The negotiations for the purchase and sale agreement usually start with a standard form that is then altered to meet the specific requirements of the parties.
There are many issues that may need to be addressed in the purchase agreement; below are some common examples:
What happens if a buyer has an professional inspect the property and discovers conditions that need repairs, termites, asbestos, radon or lead-based paint?
What are the legal consequences if the closing does not take place and what happens to the down payment? This question raises related questions: Who will hold the down payment? Is the closing appropriately conditioned upon the buyer obtaining financing? Are there other conditions that will allow the buyer to cancel the agreement?
Is there municipal water and sewer? Is there a private septic system that needs inspection or repairs?
Will Seller have any obligations to Buyer after the delivery of the deed? If so, how will these be enforced?
If the property has been altered or there has been an addition to the property, was it done lawfully?
If the buyer has plans to change the property, may what is planned for the property be done lawfully?
The purpose of the closing is to exchange monies and papers for transfer of ownership of the property. The balance of the purchase price and other adjustments is given to an escrow agent (usually the bank attorney). The executed deed is given to the escrow agent. A closing statement which indicates the debits and credits to the buyer and seller and adjustments with other entities such as the bank, Registry of Deeds, etc. is finalized and executed by the parties. The mortgage and related documents are signed and delivered to the escrow agent. Other disclosure and government forms are executed as well. The escrow agent then does a final title run down and records the deed, mortgage, and other documents at the Registry of Deeds and distributes the money and all other documents. If the final run down shows a title problem, the agent does not record the documents or distribute the money.
Your lawyer can help you avoid some common problems with a home sale by drafting or review of an offer to purchase. Your lawyer will help you with the drafting or review of purchase and sale agreement, negotiations relating to the purchase and sale agreement, and computation of adjustments. Your lawyer will draft the deed for you to convey the property. If there are title issues, your lawyer will determine how to resolve the matters. Your lawyer will attend the closing and supervising the sale. The lawyer will assist you with any last minute problems that arise including decisions on the final inspection and last minute title problems. If you need a power of attorney, your attorney will draft the document.
While a Lender’s Policy could protect you, it may not. The larger the title problem, the more likely that you will need your own policy. There are two types of Title Insurance—a Lender’s Policy and an Owner’s Policy. Your lender likely will require that you purchase a Lender’s Policy. This policy only insures that the lender has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it. If there is a large title problem, the insurance company can pay money to the lender while you lose your home. An Owner’s Policy is designed to protect your interest in your home. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner’s title policy covers the full cost of any legal defense of your title. The cost of legal defense is an important protection. While you may have good title to your property, you may be sued in a frivolous lawsuit and face a choice of paying for legal defense or losing a portion or all of your property. Title insurance will pay for the cost of legal defense including frivolous lawsuits.
This is a survey of the land to be mortgaged in order to determine that is was not in violation of zoning when constructed and that no buildings or improvements encroach upon the property or over its lot lines. This work is performed by a registered land surveyor and is reviewed by the closing attorney. In a Condominium transaction a survey is usually not required.
A Municipal Lien Certificate is a document that is prepared by the tax collector in the city or town where the property lies. This document shows all municipal charges including outstanding tax and municipal utility liens. This is used by the closing attorney to adjust taxes and other municipal charges as shown on the settlement statement. Once recorded, this provides some protection against a mistake by the City or Town.
Homeowner’s insurance generally does not insure against damage from floods. Flood insurance is available to insure against this particular loss. The insurance is private but federally subsidized and must be purchased several months before there is a loss. Flood insurance is required by most lenders in areas that are designated by the federal government as potential flood areas.
Insurance for your individual condominium unit may be required by your lender and you should purchase this even if not required by your lender. The master insurance policy insures the condominium against liability claims and against loss of the structure. It does not insure you against liability claims, the interior of your unit, or your contents. A separate condo unit insurance policy will cover all of these areas. The following examples are all covered by a unit policy but not the master policy,
- A person slips and falls and sues the condo association and every owner. The master policy will not protect you.
- A fire destroys the condo building including your unit. The master policy won’t cover the interior of your unit (the flooring, the interior walls, possibly the windows and doors, and the appliances).
- The contents of your unit are not covered by the master policy.
Condominium unit insurance typically cost less than a comparable homeowners policy.
A Short Sale is the sale of real estate when sales price is less then the value of the existing loans on the property. The result is that the sale proceeds do not fully pay off the existing liens and the creditors or lenders accept a discounted payoff to fully satisfy the debts. In some cases, the creditors or lenders will reserve the right to sue the former owner to collect the unpaid balance of the debt. In other cases, the lender will waive all rights to sue for the deficiency caused by the failure to pay the entire mortgage from the proceeds of the sale.
This depends on several factors. A short sale should be considered when you are unable to pay your mortgage, you are facing foreclosure, and you can sell the house in an arms length transaction for less than the mortgage amount. The logic for the mortgage lender is that they will have more money from a short sale than from a foreclosure. You will be better off as your credit rating won’t suffer like it will from a foreclosure or a bankruptcy.
Most of the time, Seller will pay nothing to sell the property. The concept is that the Seller lost his equity and essentially walks away from the property. The sale must be approved by the lender including the concept that the Seller won't pay any money to sell the property. All commissions, title and closing fees, are paid by the lender as part of the Short Sale approval. It is even possible for the lender to agree to pay repair expenses as part of the Short Sale approval. However, in some cases, the Seller will have to pay some expenses such as water and sewer bills. The bank is willing to pay these bills because it is financially better for the bank than the alternative of a foreclosure with the potential that the bank will own a vacant house.
You need to have contact information for all mortgages and liens on the property. You will need the names of holders of the liens, addresses, telephone numbers, and account numbers. You should try to determine how much is owed for each mortgage or lien. You should contact a real estate broker who is experienced in short sales and an experienced attorney. You need to figure out what is a reasonable sale price and how this relates to the total of all liens. The real estate broker and attorney should be able to review your situation and give opinions of the likelihood of success with short sales. Short sales don't occur merely because the homeowner wants to do a short sale. They happen because the economics of the property in relation to the liens and the reasons for sale cause the lenders to approve the short sale.
A short sale is likely to hurt your credit. This is particularly true as there may be a period of time when you miss your mortgage payments. However, it will be far better for your credit than allowing the property to be foreclosed. Foreclosure is probably the most damaging event your credit status can encounter. If you have to chose between foreclosure or short sale, the short sale will be better for your credit.
A declaration of homestead is a statutory exemption protecting a principal residence against the rights of creditors. A homestead must be claimed by recording a declaration at the Registry of Deeds. Such a declaration will give $500,000.00 protection against creditors who otherwise could seek to take your home to satisfy your debts. Every person who lives in a house they own has an automatic homestead for $125,000.00 dollars. There is no reason that every homeowner doesn't take advantage of the homestead law and file a declaration of homestead for $500,000.00. There are four different types of homestead declarations. A lawyer should advise about choosing homesteads and creating a homestead. Every person who lives in the house that they own should declare a homestead.
When you apply for a mortgage to buy residential property, the lender is required to give you a “Good Faith Estimate” (also known as GFE) of the closing costs and expenses. This must be given to a consumer within three days of the application. A GFE allows a borrower to compare the real costs of mortgages among quotes from different lenders. All lenders must use this standardized form to explain the costs of the loan. The GFE covers every expense associated with a home loan including bank fees, title insurance, recording fees, taxes and other charges.
This question assumes that you fell behind and now have the ability to be current but you can't make up the missing payment(s) at present. Under these circumstances, you are likely to have the bank demanding that you become current or face foreclosure. Depending on the reason you fell behind and your current ability to pay, you may be able to enter into a forbearance agreement with the bank or a loan modification. You may also consider refinancing the loan which will replace the existing mortgage with a new mortgage. This may also lower your monthly payments.
A Forbearance Agreement is a written agreement between a borrower and a mortgage company in which the parties agree to forbear from foreclosing on the borrower's home during the term of the agreement. This means the borrower keeps their home and continues to live there. The agreement will include two primary elements: 1) The borrower's promise to remain current on the mortgage going forward and 2) some plan for making up the delinquent interest and other charges. It usually requires additional payments to the mortgage company. Sometimes the parties can agree that the delinquent amount could be added to the loan to be paid later. If the borrower breaches the agreement by failing to make all payments on time, then the foreclosure will start again.
A security deposit is a great way to protect the property against damage from a tenant. However, the Massachusetts security deposit law is very technical and has severe penalties if the landlord does not comply with these technical requirements. Since the penalties include three times the security deposit and attorney fees, it is worth the effort to comply with the law. If you do not understand the law, you should consult an attorney to learn the requirements before you accept a security deposit.
A landlord is permitted to deduct certain items from a security deposit provided the deposit was taken properly at the creation of the tenancy and has been maintained properly. In addition, the landlord must document all deductions by sending a letter within thirty days after the termination of the tenancy. The letter must be sworn under the pains and penalties of perjury, must have a list of deductions, and must have written evidence to support all deductions (bills or estimates). The landlord may deduct for:
- Unpaid rent or water bills;
- Unpaid tax escalation amounts; and
- Amounts necessary to repair damages to the property, reasonable wear and tear excepted.
A landlord must strictly comply with the requirements of this law the landlord must return the entire security deposit within the thirty day period. If the landlord fails to take every step required under the law and fails to return the money within thirty days, the tenant may be entitled to treble damages and attorneys fees for any litigation to compel the return of the security deposit. If you do not understand the law, you should consult an attorney to learn the requirements before you deduct money from a security deposit.
Reasonable wear and tear refers to deterioration of the premises caused by the normal and reasonable use of the property. Just because something is broken that does not mean that the tenant is responsible for the repair because items can break with normal use. The following are examples that illustrate the difference:
- Damage to rugs or curtains from age or sun is reasonable wear and tear. Cigarette burns or large stains are not.
- Minor nicks or holes in the walls are reasonable and incidental to normal use. Large holes are not.
If your landlord serves you with a termination notice that you intend to fight, hiring a lawyer can increase your chance of success. A lawyer can present effective strategies that you may not know about or understand. A lawyer may be able to present your claims better than you can and may be able to negotiate where you can not. The following are some of the claims that a lawyer may present in a more effective manner:
- Your landlord is evicting you without proper court procedures
- Your landlord has locked you out or your apartment or terminated your utilities
- Your landlord won't make necessary repairs
- You've been injured or made ill
- Your landlord charges makes you pay utilities or repairs that you did not agree to pay at the beginning of the tenancy
- Your property has been damaged
You should immediately contact a lawyer. There are very short time limits for you to respond. If you miss the time to respond, you will lose your case and be evicted. If you are going to proceed without a lawyer, make sure your answer and other documents are received by the Court and the landlord or his attorney no later than the Monday after the entry day.
Under the state sanitary code, unless there is a written letting agreement that specifies that the tenant must remove snow and ice, the landlord must maintain all means of egress in a safe condition free of snow and ice.
A residential landlord can charge for utilities under certain conditions as follows:
- Heat and electricity (electricity, gas, and oil). A landlord can charge these to the tenant or have the tenant pay them directly if there is a written letting agreement (commonly called a lease) in which the parties agree that the tenant will pay any or all of these charges. In addition, the utilities must be separately metered to the tenant.
- Water and sewer. A landlord can charge these to the tenant but must take more steps. Like heat and electricity, there must be a written letting agreement. In addition, the landlord must install water conserving fixtures, must have a licensed plumber certify as to the installation of these fixtures and have the certification filed and accepted by the town or city Board of Health. In addition, the water and sewer must be separately metered so that the tenant is charged only for the water used. If the landlord fails to comply with all of these requirements, then the landlord must pay these charges.
- Telephone, cable tv, and internet. These utilities are not necessary for a habitable home and the landlord has no obligation to provide these. If the tenant wants these utilities, then the tenant must pay for them.
This memorandum is for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. The answers given above are based on Massachusetts law and practice and should not be considered as applicable to any other state. This web site should not be considered a substitute for proper, individualized advice from an attorney.
Copyright (c) 2011 Alan J. Pransky, Esq.