When should I call a lawyer?
If you are thinking about buying or selling a home – call a lawyer first! Many clients wait to call an attorney, thinking it is either not necessary or that they will incur additional costs by calling a lawyer early in the process. At Willinger, Willinger & Bucci, P.C., we review all typical transactional documents at no additional cost as a part of the closing fee.
For example, both sellers and buyers are often asked to sign brokers’ agreements before commencing a sale or purchase transaction, and perhaps a “binder” or realtor’s contract once a property is identified for purchase. Reviewing these documents with an attorney will help insure you are fully advised of the contents of these agreements before you sign.
What is the difference between a “binder” and a “contract”?
Generally, a binder is a brief document that outlines the basic business terms of an agreement to buy and sell property, like the price, closing date and contingencies. The agreement is then finalized through the execution of formal contracts. Usually a binder is presented to the seller with a small deposit – typically 1% of the offered purchase price. But beware! Depending on the language used in the document, a binder can be unenforceable or as enforceable as a formal contract.
A contract is a fully enforceable agreement between the parties containing all the terms and conditions of the sale and purchase. In some Connecticut counties, realtors use a “broker’s” pre-printed contract. In other counties (Fairfield County, for example) realtors may (or may not, so beware) use a “binder,” and the Seller’s attorney prepares formal contracts.
What are “contingencies” and “contingency” dates?
Simply, contingencies are events that must happen in order for the purchase and sale to be completed. Generally, if a contingency is not “met,” that is, if the “event” that needs to happen does not happen, one of the parties has the opportunity to cancel the transaction.
Most residential contracts provide for an inspection contingency, a mortgage contingency and a title contingency. An inspection contingency generally gives the buyer the right to have the home inspected, and in some instances cancel the contract if the condition of the home is not satisfactory. If the buyer requires a mortgage to purchase the property, a mortgage contingency will give the buyer the right to terminate the contract if the buyer is unable to obtain the mortgage financing. A title contingency provides that the Buyer does not have to buy the house unless Seller can deliver “marketable title,” that is, clean and clear of all liens and encumbrances. The Buyer’s attorney determines whether title to the property is “marketable” after the examination of title is complete.
A contingency will have a “contingency date” associated with it; that is, a date by which the condition must be met. Contingency dates are important, as generally, unless the person gives notice that they have not met the condition, the contract continues as if the contingency had been met. This means that unless appropriate notice is given to the seller when a buyer’s condition is not met, the buyer can no longer use the failure of the contingency as an excuse to cancel the contract. The Buyer might then be forced to either close the transaction or lose any deposit. Willinger, Willinger & Bucci, P.C. monitors all contingency dates associated with your transaction together with you, to insure your rights are protected.
What happens if a problem turns up in the home inspection?
Often inspections will turn up problems with a home. Examples might be a non-functioning garage door opener, the presence of termites or other defects in the house structure or its mechanical systems. Contracts sometimes give a buyer the right to terminate the contract if there are unsatisfactory inspection items. In that case, provided the buyer gives notice of the defective items before the inspection contingency date, the buyer can terminate the contract or, more likely, negotiate with the Seller to bear the expense of some or all of the repairs required.
How long will my closing take?
A home purchase closing with a mortgage generally takes about an hour, provided there are no unusual circumstances. For sellers, who have fewer documents to sign, a half-hour is typical. In fact, under certain circumstances, Sellers can pre-sign their documents, avoiding the need to attend the closing.
What will my closing cost?
The costs of a transaction vary for buyers and sellers. In both cases attorney’s fees are generally only small percentages of the closing costs. For most sellers, conveyance taxes payable on the transaction comprise the largest portion of Sellers’ costs. For Buyers using a mortgage loan to purchase their homes, bank fees (which should be disclosed by the mortgage lender to the Buyer early in the loan process, via a “Good Faith Estimate” of closing costs), title insurance and escrows can be the greatest part of the Buyer’s costs. At Willinger, Willinger & Bucci, P.C., we will always advise you, at the time we are retained and in writing, of our attorneys’ fees for the transaction.
My bank is requiring me to pay an “escrow” every month with my mortgage payment. Why? What is it for?
To make sure they are protected, mortgage lenders want to know that homeowners’ real estate taxes and hazard (fire) insurance are promptly paid. Most residential mortgage lenders insure these payments are made by requiring the borrower to include in their monthly payment an amount to pay taxes and insurance, which is put into a separate escrow account. The lender then pays the bills for real estate taxes and insurance as they become due. Generally, the amount added to the monthly payment equals 1/12th of the annual amount due, spreading the payments out for the borrower equally over the year. Depending on when the next tax payment is due, though, your lender might need to collect extra money at closing to have enough in your escrow account to make that payment.
What are conveyance taxes?
In Connecticut, taxes are imposed on the transfer of real property from one owner to another. There are two types of conveyance taxes in Connecticut – one payable to the town where the property is located, and one payable to the state. Both are percentages of the purchase price. Currently, the tax rate for municipalities range from 0.25% or 0.5%, depending on location. The state taxes for residential property is figured at 0.75% if the purchase price is under $800,000, and 1% if over.
Customarily, the Seller pays these taxes, and checks for the payment are delivered to the Buyer’s attorney at closing, together with the appropriate tax filing forms.
What is a Quit Claim Deed? How is it different from a Warranty Deed?
When a Seller gives a Buyer a Warranty Deed, the Seller is “warranting” that the Seller is the owner of the property, and that no one has any interests in the property other than as disclosed in the deed and/or agreed upon by contract. If, after closing, the Buyer discovers an unreleased lien or another party claiming an interest in the property, the Buyer could bring an action against the Seller based upon a breach of the warranty of title.
A quit claim deed has no warranty of title. The Seller is only purporting to convey to the Buyer whatever interest the Seller may have in the property. There is no guaranty that the property is not encumbered or liened, or that the seller has any marketable interest at all. That is one reason title insurance is so important.
What is title insurance? Why do I need to buy it?
In plain terms, title insurance insures that you own your home, free of any claim, lien or encumbrance except those noted on the policy at the time it is issued. If this information is incorrect and a claim against your ownership is made, the title insurance company pays the costs of attorney’s fees to defend you against this claim and, if the claim is found to be valid, the title company will either pay the claim (up to the amount of the policy) or undertake to correct the defect in title, at their expense. Lenders will require you to purchase a “Loan Policy” which protects their interest in the property, but this policy does not protect you. An Owner’s Policy is generally purchased for the Buyer. Rates for title insurance policies are set by the State of Connecticut and are based upon the purchase price of the home. In Connecticut, attorneys act as agents for title insurance companies, and we will arrange for the issuance of your title policy.