For financing or re-financing mortgage
rates, see Lenders List
I. General Comment
The purchase or sale of a home is
often the single greatest financial transaction undertaken by a person or a
couple. A mistake at this time can undo a life time of effort. The complexities
and technicalities involved in buying or selling your home require the services
of an attorney who represents you.
II. The Purchase & Sale Agreement
You should engage an attorney
before you sign the Offer to Purchase, because, in certain circumstances, an
Offer to Purchase may be a binding contract between the Buyer and Seller. You
should absolutely consult with your attorney before entering into a Purchase
& Sale Agreement, which is a binding contract between the parties (it
defines the respective rights and duties of each).
There is no "standard
form" Purchase & Sale Agreement which can be used in all transactions.
There are, in fact, dozens of so-called "standard form" P&S's,
each containing phrases which may be adverse to one or the other party. There
are pre-printed forms which usually contain one or more of the following:
A. Seller's guarantee to pay a broker's commission, even though
the Buyer fails to perform and there is no sale.
B. Seller's obligation to pay "his/her share of points,
mortgage origination, or discount fee", which can amount to thousands of
dollars.
C. Seller's obligation to vacate the house completely, prior to
passing papers.
Some of these provisions may be
necessary in certain situations. The only way you can be fully protected is to
have your attorney examine any Offer to Purchase and Purchase & Sale
Agreement, or any other relevant instrument, before you sign it. Keep in mind
that it is extremely difficult (or impossible) for a lawyer to protect his/her
client when the client has already bargained away his/her rights in a poorly
drawn or disadvantageous agreement.
III. Examination of Title
After the Purchase & Sale
Agreement has been signed, and financing arranged, a full examination of the
title must be undertaken, covering at least 50 years, usually performed by the
attorney for the buyer's lender. Some problems that may be uncovered which may
affect the title are:
A. Outstanding mortgage(s) of record;
B. Taxes;
C. Mechanics liens;
D. Debts of decedents;
E. Estate taxes;
F. Restrictions on use;
G. Bankruptcy;
H. State and federal laws;
I. Foreclosures;
J. Divorces;
K. Attachments and judgments;
L. Rights of others to use the premises;
M. Difficulty in getting mortgage discharges.
Under most circumstances, the
cost of correcting title defects is the Seller's obligation. The Seller may not
hear of alleged defects until immediately prior to the closing, and in those
circumstances, a Seller is well-served by having previously retained counsel who
is familiar with the transaction, and who is available to immediately address
the correction of title defects. The buyer should consult with an Attorney to
discuss the potential liabilities created by the defect.
IV. Role of Attorneys
Legal counsel is indispensable to
an orderly real estate sale. The practices of banks and mortgage companies have
changed substantially over the past few years. The attorney for the lender
represents only the lender, and significant new demands on the lender's counsel
have decreased the time and attention the bank attorney can volunteer to
resolving concerns of both the buyer and seller. It is not uncommon for a bank
attorney to completely disengage himself/herself from any dispute which may
arise between buyer and seller. Additionally, with increasing frequency,
closings are being performed by non-attorney "closing agents". In
those circumstances, unless the buyer or seller are represented by counsel,
there may be no attorney present at closing.
Here is a summary of some of the
responsibilities a seller or buyer can share with his/her attorney:
1. Review and/or preparation of the Offer to Purchase and the
Purchase & Sale Agreement, and negotiation of the terms of the agreements;
2. Advice regarding who should hold the deposit, and regarding
reasonable terms of the buyer's mortgage commitment;
3. Correction of title defects;
4. Drafting a new deed (a seller is obligated to prepare and
bring a new deed to the closing);
5. Estimation of closing costs;
6. Special arrangements to correct title defects, or special
arrangements regarding escrows;
7. Protecting the seller in the event of a breach of the
Purchase & Sale Agreement by the buyer.
V. Passing Papers and Settlement Costs
The closing must follow the
provisions of the Purchase & Sale Agreement. Keep in mind that unwritten or
unsigned agreements between the buyer and the seller not included within the
Purchase & Sale Agreement are probably unenforceable. The bank attorney will
prepare a Settlement Sheet, reflecting the various expenses of the closing in
accordance with the terms of the Purchase & Sale Agreement. The seller's
normal expenses include:
A. Attorneys fees, including negotiations, drafting documents,
correction of title defects, removal of liens and preparation of a new deed;
B. Massachusetts tax transfer stamps ($4.56/thousand);
C. Recording costs and nominal costs of obtaining instruments
necessary to clear title; and
D. Real estate broker's commission.
VI Title Examinations, Title Insurance and Closing Documents
For detailed information
regarding the closing process and title insurance, visit www.alta.com
and visit www.homepath.com. (Both sites
are independently maintained and the opinions expressed therein may not
represent the opinions of Balas, Alphen & Santos, P.C.)
VII. Power of Attorney
In certain circumstances, it is
preferable that the seller not attend the real estate closing, so that the
seller can attend to business, family or moving matters while the seller's
attorney attends the closing. With some advance notice, your attorney can
prepare the deed, a Limited Power of Attorney, and Seller's Disclosure form for
your review and execution, prior to the closing. Your attorney will leave the
closing with your proceeds check and hold it in escrow at his/her office until
the deed is recorded at the Registry of Deeds. Once the deed is recorded, you
can pick up the proceeds check at your attorney's office, without the need to
travel to the office of the lender or the lender's attorney.
VIII. Summary
It is important that you be
represented by the attorney of your choice before you begin the selling process.
Attorneys fees representing a seller or buyer in a typical residential real
estate transaction are surprisingly affordable.
