BUYING:

Contract Signing 

The offer is the general agreement to purchase a property at a certain price. It usually states that the rights of the parties will be set forth in a subsequent contract called a "Purchase & Sale Agreement." An offer is an important document and has been recently held in one Massachusetts case to constitute a contract that is binding on the parties.   An Offer should be reviewed.  Since  the Buyer is making the Offer, a wise Buyer should consult an Attorney who can review the form and set contingencies to protect the Buyer prior to making the Offer.  The Seller should also have an attorney retained upon putting his or her property on the market, so the Seller is ready to accept,  reject, or make a counter offer.

Attorney Review 

Inspections 

Who arranges for the home inspections and what do we do with the results? 

You are responsible for arranging for the home inspections. Often, the realtors will assist you in locating an inspector and scheduling the inspections. Most contracts provide that the inspections must be done within 10-14 days following completion of attorney review. You are responsible for making sure that the inspections are performed and that we receive a copy of the inspection report promptly. You must then contact us to discuss any problems with the inspections so that a letter can be sent to the other attorney regarding all inspection issues within the allotted time frame.

What inspections should be ordered? 

You should order a general structural home inspection, a radon inspection, and a wood boring insect inspection.

Except for the infestation inspection, most lenders do not require inspections. However, most lenders will require an “Infestation Certificate” showing that there is no visible evidence of infestation in the home. You must provide this certificate to the lender before they will clear your file for closing. 

Other inspections that you should consider, are inspections that pertain to asbestos, mold, stucco or overhead electrical wires.

We also strongly suggest that you order an underground oil tank sweep, to determine if there are underground oil tanks on the property. Often, in the contract, the sellers represent that there are no underground oil tanks on the property, when in fact there is a tank that the seller is not aware of.

The inspections are for your protection, not the lender. Remember, once you close, the home is yours, and the Seller does not have responsibility with regard to the condition of the home following the closing. 

Title Search 

Who orders the title search and what is title? 

Our law firm will order the title search and the survey as soon as attorney review is complete. It takes approximately two weeks for the title search to be completed. When title is received, it is reviewed by our office for defects, and then submitted to your lender. Your lender needs to approve the title before they will clear you to close. Once you close, you will have insured title to the property even though the actual title insurance policy will not be issued for many months after the closing.

Title is ordered from an independent title company, and we charge you the amount that is charged to us by the title company. Title insurance is regulated by law, so that the cost of title insurance does not change from company to company. 

Survey 

Who orders the survey and why do we need a survey?

The survey is a like a map that shows the placement of the dwelling relative to the perimeter of the property lines. Our law firm will order the survey together with the title search once attorney review is complete. Almost all lenders require that a survey be drawn and submitted to them for approval, prior to closing. In some cases the lender will accept an existing survey if it is not too old and if the Seller can give an Affidavit saying that there have been no changes to the property since the date of the survey. If an existing survey is available, and you wish to rely upon it, you must let us know so that we do not order a new survey for you.

Appraisal

The appraisal is often confused with the survey of the Property. The appraisal is ordered by the lender and sets forth the market value of the property. Generally the buyer is charged a fee by the lender for the appraisal.  The appraisal is not provided to us in advance, and usually is not available at the closing. Most lenders require that you send them a letter within 90 days after the closing in order to receive a copy of the written appraisal.

Closing Concerns 

What do I need to bring to the closing? 

At the closing you will need to bring a certified check, bank check, or cashier's check. Personal checks cannot be used at the closing. You will be provided with the exact amount of the check as soon as the numbers are available to us.  You may also wire transfer the funds into our attorney trust account. If you would like to wire transfer your funds, please contact our office and we will provide you with wiring instructions. All wires must be placed at least one day prior to closing to ensure receipt on the day of closing.

In addition, you should bring proof of homeowner's insurance (declaration page and one year paid receipt). It is also a good idea to bring a few personal checks in the unlikely event minor adjustments need to made between the parties at closing.

If you are married, bring your spouse, or if you purchased the home with a partner, you must both be present at the closing. Bring a photo identification preferably a Massachusetts License to the Closing.  It is required by Massachusetts Law.

Closing

Who will be at the closing and how long will it take?

The closing will be attended by you and your spouse or partner, and you will be represented by an attorney. Usually a representative of the lender does not attend the closing but sends all documentation by overnight delivery or email. The other party, represented by their attorney, will also be present at the closing. However, it is not unusual for a Seller not to attend in person, but to pre-sign all closing documents and to send an attorney as their legal representative. Often, the realtors will also attend the closing. A closing usually takes approximately 1 to 2 hours.

Where will the closing be held?

It is custom and practice in Massachusetts, and most Contracts provide, that the closing will occur at the office of the Conveyancing Attorney. If you are buying new construction, the closing will most likely occur at the office of the builder's attorney.    

What about the Deposit?  

Commonly, the Buyer will post a deposit of $1,000.00 upon signing the Contract and the balance of 10% of the Purchase Price will be posted by the buyer within 10 to 14 days following completion of attorney review. Many Contracts are drafted with variations involving the amount of the deposit and the timing of the deposit. The deposit is typically held by the realtor (usually the selling realtor), the Seller's attorney, or the Buyer's attorney. Also, due to today’s low interest rates, the deposits are not usually kept in interest bearing accounts, unless the realtor places the deposit in an interest bearing account and the necessary tax forms have been signed by the parties. It is convention in New Jersey that if the funds are placed in an interest bearing account, that the interest be split equally between the Buyer and Seller.  

Do I need to obtain a Certificate of Occupancy?  

You need to check with the municipality in which your home is located. Some municipalities require that the Seller obtain a Certificate of Occupancy prior to closing and some do not. Some municipalities have unique requirements. All municipalities require that the Seller obtain a Certificate of Occupancy in the case of new construction. You do not want to wait until the last minute to obtain a Certificate of Occupancy, because the municipality may require that you make certain repairs to the home before the Certificate of Occupancy is issued. This will probably require a re-inspection, and may take time. You cannot close without a Certificate of Occupancy, if it is required by the municipality.

While conducting the inspection for the Certificate of Occupancy, the inspector may discover that you have performed improvements to the home without having obtained the necessary permits or approvals. You may at that juncture be required to apply for permits and approvals. This could be time consuming and expensive.  

Title and Survey?  

The Buyer’s attorney will order the title search and the survey, and the Buyer will pay for those. However, you should try to provide us with a copy of the title policy and survey you obtained when you purchased your home. We will in turn provide the Buyer's attorney with copies of the title and survey. This will speed up the title search, and will also help in resolving certain title problems that might arise. If you have a recent survey, the Buyer may try to avoid the cost of a new survey and may request that you sign a Survey Affidavit. That is an Affidavit that states that there have been no exterior changes to the dwelling or to the property. If your survey is not current, the Buyer may not be able to use it, depending upon the requirements of the chosen lender.

Will we close on the closing date set forth in the Contract?         

The closing date in the Contract is a target date only. There is no guaranty that your closing will occur on the exact date set forth in the Contract. Likewise, the exact time of the closing is usually established a day or two before the closing.

In all cases, the Seller must move out before the closing and the home must be delivered to the Buyer, broom clean and free of all possessions. If you have not moved out by the closing, you run the risk that the closing will be delayed. We strongly suggest that you move out of the home the day before the closing even if it means that your household goods must be stored on a truck overnight.

We also suggest that you make an appointment with our office prior to the closing, to pre-sign all of the closing documents. We will then be able to attend the closing on your behalf without inconveniencing you. You can then either pick up the closing proceeds or we can send them to you. Of course, you will need to be available by telephone in the event that questions arise during the closing.

What do I do with the utilities?  

The utilities should be switched to the Buyer's name as of the closing. The realtor can assist or guide you in this process. Do not turn off the utilities completely, because the Buyer has the right to test the water and electricity at the walk-through inspection and if services have been turned off, this will not be possible and will delay the closing.

I prepaid the real estate taxes and/or sewer charges. What do I do?  

When the tax and sewer searches are obtained, the Buyer's attorney will see that you either pre-paid for these items ( in which case the credit will likely be in your favor), or that you did not pay for the current period (in which case the credit will probably be in favor of the Buyer). We suggest that if payments are made for real estate taxes and/or sewer, they be made well in advance of the closing. Do not make any payments within a 3 week period prior to closing, but do make sure that all payments are made in a timely manner to avoid the imposition of interest or late penalties. If you make payments shortly prior to closing, you run the risk that they will not be posted in a timely manner, and that you will not receive the appropriate credit.

Since closing is coming up, should I pay the mortgage?  

With regard to the payment of your current mortgage the general rule is as follows (assuming that your current mortgage imposes a penalty if the payment is not received by the 15^th of the month):  

a. If you close prior to the 12^th of the month, you do not need to make your monthly mortgage payment.  

b. If you close after the 12^th of the month, you must make your monthly mortgage payment if you wish to avoid the imposition of a late fee.

You need to watch this because if the closing is delayed and you have not paid the mortgage payment that is due, you, not the buyer, will be responsible for late penalties.   

What happens with my existing mortgage?  

The Buyer's attorney will obtain a pay-off statement indicating the amount due on your current mortgage as of the closing date. The appropriate sum will be deducted from the closing proceeds and a check in an amount sufficient to pay off the mortgage will be sent by overnight delivery directly to your lender. The Buyer’s attorney will likely charge you a nominal fee for overnight delivery and a small fee for filing a discharge of that mortgage.

Should you receive a notice from your lender after the closing indicating that your loan is overdue or not paid off, please contact our office immediately. 

What happens to my line of credit?

If you have a home equity line of credit that is secured by the home that you are selling, that line needs to be closed. If there is any money due on the loan that will have to be paid off at closing like any other mortgage. Once a contract of sale is signed, you should not make any draws against this line of credit, and certainly do not make any draws after the closing.

FOR SALE BY OWNER (FSBO):

What is a For Sale By Owner Transaction?  

A For Sale By Owner Transaction or “FSBO” as they often referred to, is when a Seller sells their home without the benefit of a realtor. The Seller will advertise the deal themselves and negotiate the terms of the deal directly with the Buyer.

What are the Pros and Cons of a FSBO?  

The “Pro” to the Seller is that that the Seller does not pay a realtors commission. The “Con” is that all of the work normally done by the realtor now must be done by the Seller. For example, the home must be shown by the Seller and the deal must be negotiated directly between the parties. Also, the Seller must provide access for all inspections of the Property, must be available at the walk through inspection and must take complete responsibility for obtaining all municipal certificates. Often a realtor will perform all or some of these functions in a non-FSBO transaction. From the Buyers perspective it simply means that the Buyer is dealing directly with the Seller during the negotiation process and the scheduling of all inspections is done directly with the Seller.

Is a realtor ever involved in a FSBO?  

Sometimes, a realtor will show a home that is a FSBO to one of their clients and a deal is struck. In that case, it is advisable that the Seller negotiate with that realtor before the home is shown, so that the realtor’s commission is negotiated up front.

What is the role of the attorney in a FSBO?

The attorney prepares and negotiates the Contract after the basic terms of the deal have been established. The attorney also makes sure that the contract gets executed and follows up with respect to collecting and tracking the deposits. However, the attorney does not check the credit or the assets of the Buyer. The attorneys then negotiate inspection items and proceed with the legal work as in any other transaction.

How does the Contract get executed in a FSBO?  

There is no one way of doing that, and there are lots of right ways. Often the Contracts are circulated through the attorneys to the parties, and eventually the Buyer and Seller each receive a fully executed Contract. Less often, the parties themselves have a sit-down, and sign the Contract all together and then give the signed contracts to the attorneys.

The Pitfalls of a FSBO.

Sellers often forget or don’t know to obtain a smoke/carbon monoxide detector certificate prior to closing. Since there is no realtor, there is no one to remind the Seller to obtain this certificate. You cannot close without the Certificate, plain and simple. There is no way around it. So if you are the Seller, please make sure that you obtain the Certificate and if you are the Buyer please make sure that you follow up with the Seller to make sure that the Seller has obtained the certificate. Our Firm will of course follow up with the other attorney. The same goes for the Certificate required pursuant to the Private Well Act.

Every once in awhile FSBO deals fall apart due to the appraisal. If the home is sold for above its value, and it does not “appraise out” a Buyer may not be able to get a mortgage. This is more likely to happen in a FSBO deal, than in a non-FSBO deal.

Who is at the Walk-through and Closing?  

Usually, the Buyers and Sellers are at the walk-through inspection together. The attorneys do not attend the walk-through inspection. The Buyers must attend the closing, but often the Sellers pre-sign the closing documents and only their attorney attends the closing

REFINANCING:

What is a refinance transaction?

During a refinance transaction, the borrower, the current owner  of the Property, obtains a new mortgage, and the old mortgages are paid off and discharged of record. Usually this is done because the owner, now the borrower, has obtained a more favorable interest rate or better terms. Sometimes, people refinance in order to take the equity out of their home.

What does the attorney do for the borrower in a refinance transaction?  

The attorney will review the loan commitment, order the title search, and prepare the transaction for closing. The attorney will also submit a complete closing package to the new lender, complying with all of the lender's title requirements, prepare the closing statement, and conduct the closing. In addition, the attorney will order a new survey if required and asked to do so by the borrower. After the closing, the attorney will record all necessary documents and pay off existing mortgages as applicable.  

Why do I need to obtain a new title search and title insurance for a refinance transaction?

This is a very commonly asked question. Each time that you refinance, or put a new mortgage on the property, it is considered a separate event. If there is a new lender, or simply a new loan, that new loan must be insured. In addition, a new title search must be obtained to make sure that there have been no intervening liens or title defects since the time that you purchased or last refinanced the Property.

What is the cost of title insurance for a refinance transaction?

For a refinance transaction, a new lender's title insurance policy must be issued, not a new owner's policy. As such, the cost of the title insurance should be less then when you purchased. The cost of title insurance is regulated by law, and in the case of a refinance will be based on the amount of the new loan.  

It has been our experience that the costs for title search and insurance set forth on the Good Faith Estimate provided to you by the lender, are most often incorrect and are lower than the actual fees. 

You can save money on title insurance if you provide our office with a copy of the title policy that was issued to you when you purchased the Property. If the title company is provided with this “back title”, and the policy is less than ten years old, they are permitted to charge you less for the updated title insurance/searches. We encourage you to provide us with a copy of your existing title insurance policy so that you can avail yourself of this reduced rate.

Do I need a survey for a refinance transaction?  

The answer to this question depends on your lender. Most lenders will accept your current survey depending upon its age and provided that you can sign a “Survey Affidavit of No Change.” You must check with your lender to see what their survey requirements are. You will be able to sign a “Survey Affidavit of No Change” if you have not made any changes to the property or the structures since the date of your most recent survey. Of course, you will need to provide our office and the lender with a copy of your survey. It is our policy not to order new surveys for a refinance transaction unless the client specifically requests us to do so. 

What about the homeowners/hazard insurance?  

Check your mortgage loan commitment. The commitment will likely specify that you need to obtain insurance, insuring the new lender and the new loan amount. Most lenders will not permit you to close unless you have provided them with a declaration page from the insurance policy together with a receipt evidencing that you have paid for the policy for one year in advance.

In most cases, these insurance items must be submitted to the lender, before they will even permit us to set a closing date. You must refer to your loan commitment for the exact language that your lender requires. Most lenders are very precise with this requirement. It is advisable to send us copies of all insurance information that you provide to your lender.

Is there an actual closing for a refinance?

Yes, the closing will occur at our office. The procedure is essentially identical to a purchase transaction, except that there is no Seller. You will need to be present, together with your spouse or partner, if applicable. One of the attorneys of the Firm will review and explain all of the documents to you and will conduct the closing.  

Do I need to bring money to the closing?  

That depends. If you are “cashing out” you may actually be getting money from the closing. If money is due to you from the closing, the money will be available to you on the third business day following the closing. This is because there is a Right of Rescission in most refinance transactions.  

If you are not cashing out, you will likely need to bring a check to the closing. The check will have to be a Bank Check or a Cashiers Check. If you need to bring a check to the closing, the actual amount will be provided to you a day before the closing by one of the Firm’s real estate paralegals. Personal checks can not be used at closing.

What happens after the closing?  

Following the closing, this office will attend to all of the post-closing aspects of the transaction. Within a few weeks after the closing, you will be provided with all of the relevant documents from the closing. You can expect to receive a statement or coupon book from your new lender so that you can begin paying on your new loan. If you don’t receive either, please contact your lender directly. Many lenders allow you to have the monthly payments deducted automatically from your bank account. Check with the lender if you are interested in that feature.

NEW CONSTRUCTION:

What will the closing date be for my new home?  

That is the sixty million dollar question! All new construction contracts provide for a closing date, but those closing dates are merely target dates. It is our experience that new construction transactions hardly ever close on time, and in fact close many weeks or months after the proposed closing date. It is important to keep yourself apprised of the status of the construction so that you will not be surprised by a closing date that is far off from the target date. Our Firm will calendar the target date, but it is your responsibility to keep us updated with regard to the status of the construction.  

We learn about the closing date from a variety of sources. Sometimes, the builder’s attorney will contact us, and sometimes our clients will call us first and ask us to confirm a closing date. Either method is appropriate. If you believe that your closing date is approaching, please give us as much notice as possible, because we will have to coordinate the closing with your lender and will need to update the applicable title and judgment searches, if necessary.  

Certificate of Occupancy?  

When you purchase new construction, you cannot close unless and until the builder obtains, and provides us with a copy of, the Certificate of Occupancy. Many times, a closing date is set, all of the parties prepare and are ready for the closing, and at the last minute we are told that there is a problem with the Certificate of Occupancy. In that case, the closing must be postponed until the Certificate of Occupancy is issued. You cannot close unless and until the Certificate of Occupancy is issued. Therefore, it is sometimes advisable not to set the closing date until issuance of the Certificate of Occupancy is confirmed. 

What happens if there are some items in the home that are not complete or that haven’t been installed yet?

It is typical with new construction that the Certificate of Occupancy will be issued even though there is some minor work to be done, certain appliances to install, or outside grading or paving to complete. Prior to closing, the builder will do a walk-through inspection with you and the parties will prepare a “Punch-list”. It will provide that the builder will do certain work or install certain items within a specified period after the closing. Larger builders provide for multiple post-closing punch lists.  

Most contracts provide that the builder will not permit the Buyer to hold an escrow for the items set forth on the punch list. For this reason, it is critical that you are comfortable with the builder’s reputation, because usually, no money is held post-closing to secure the builder's obligation, and your only recourse will be to sue based on non-completion of punch list items.

Will the builder let me occupy the property or store my belongings prior to the closing?

Most builders do not permit this.