This week we received another question from a viewer: “I have a closing coming up and I am buying a home. What should I expect on the day of closing?”
First, you will have a final walkthrough with your real estate agent on the day of the closing. You want to make sure that the seller has completely moved out. Check to see there is no damage. If there were items that the seller might have promised to take care of, you will have a chance to confirm that the seller actually took care of them.
Next, you will come to our office for the actual closing. The closing is a formal meeting where you sign all the paperwork.This Includes the settlement statement. The settlement statement is the summary of the costs, expenses and adjustments related to the purchase.
If you are financing a home, you will sign something known as a promissory note. This is a written agreement between you and your lender, where the buyer promises to pay the lender. So, the Lender agrees to lend a certain amount of money and the buyer agrees to pay that amount back with interest.
You will then sign a mortgage. The deed from the seller grants the property to you. The buyer grants a mortgage to the lender which grants the lender the right to foreclose in the event the buyer fails to repay the loan. This is said to “secure” the note as it provides the lender with security. The lender is better able to recoup their loan by foreclosing and auctioning the property rather than by simply suing the borrower.
Next, you’ll sign many other documents, that are just as important for both you and your lender. After you sign everything, we will then record those documents with the County’s Registry of Deeds.
Once we’ve ensured that nothing has changed since the title exam was initially done we will record all the documents. Once completed, you then officially own that property!
If you would like more information about a closing, contact Stiles Law at (781) 319-1900.
This week we received another question from a viewer: “I am buying a house and I know I need to get homeowner’s insurance, but why are they collecting so much money for the insurance policy”?
If you are obtaining financing and are granting a mortgage to a lender, that lender will inevitably want you to pay your homeowner’s policy one year in advance. The lender will escrow or impound a certain number of months. At closing, buyers are asked to prepay their insurance for the entire year and to establish an escrow account for future insurance payments. After closing, the lender will collect monthly payments in anticipation of next year’s premium.
Your lender is very concerned about the preservation of their secured asset: your home. For you and their protection, your lender will require that homeowner’s insurance remains in place at all times during the life of the loan. Lenders require prepayment of insurance for the entire year as it means the lender is in control of the next payment for the following year.
In conclusion, do not be concerned, you are not overpaying. You are essentially just paying for that one year in advance and starting your escrow account.
This week we are answering another question from a client who asked: “What do I do if the Seller isn’t completely moved out on the day of closing?”
Most P&S Agreements contain language that covers this situation. The P&S Agreement will usually mention that the Buyer has the right to access the property for inspections, appraisals, measurements, hiring contractors, and a final walk-through. All buyers should have a final walk-through, preferably as close to the time for closing as possible.
At a closing with Stiles Law, very often the first thing that the Buyer is asked at a closing is: “how did the walk-through go?” Most walk-throughs go well. In some cases, the buyer finds that the seller has left a considerable amount of personal property including furniture, trash, and other hard to dispose items.
Sellers: do a good job. Close enough generally isn’t good enough. We suggest to our selling clients that they may want to be completely moved out one day before closing. This means the seller isn’t moving items until the last possible second and it gives the buyer an opportunity to inspect the property.
Buyers: be reasonable. As with the right of access, the P&S Agreement covers the seller’s obligation to clean the property. Unless negotiated otherwise, the seller must leave the property in broom clean condition. Broom clean is not the same as “perfect condition.” Broom clean does not mean “professionally cleaned.” Broom clean means that the property is free of personal property, including trash, and that the property has been swept or vacuumed.
If the Seller does leave the property in less than broom clean condition, what should the buyer do? We always recommend that our buyers take pictures to show to the seller’s attorney and broker. This really is a situation where a picture is worth a thousand words. If there aren’t many items or you feel confident taking on responsibility for removing them, the closing can proceed. Another common option is to sign the closing documents but hold them in escrow until the seller finishes moving their items. In severe situations, the closing can be delayed as the seller hasn’t performed what they are obligated to do under the P&S Agreement. Once the deed is recorded, the buyer owns the house and everything that is inside.
Lastly, a special note for sellers: buyers don’t want your paint. Buyers want to know what color your paint is. If you plan to leave paint, ask the buyer at the time of negotiating the P&S Agreement. If the buyer doesn’t want your paint, bring it to the dump.
If you would like more information about a final walk-through, contact Stiles Law at (781) 319-1900.
This week, we received another question from a viewer: “the appraiser didn’t value our property at the purchase price. What do we do?” In other words, what happens if bank hires an appraiser who determines that the house you are buying is worth less than the agreed upon purchase price?
The first step is always to look at the Purchase and Sale Agreement. Your P&S may identify this as a potential issue and it may offer a solution. If the P&S contains a financing contingency clause it may state that if the appraiser determines the value is less than the purchase price, then the Buyer may terminate the P&S. This provides the Buyer with leverage to negotiate with the seller. Since the Buyer has to terminate, the seller will very often agree to lower the price to allow the transaction to continue.
What happens if the Seller will not negotiate and the Buyer still wants to buy? The Buyer’s next step should be to talk to lender. A low appraisal will result in a change to the loan to value ratio (“LTV”). Without adjusting the loan amount, the ratio between the loan amount and appraised value will be lower. A common solution in this case is for the Buyer to make a larger down payment.
Sellers should remember that the next potential Buyer should receive the same appraisal. Engaging in good faith negotiation is always a good idea.
If you would like more information about low appraisals contact Stiles Law at (781) 319-1900.
In this week’s video, I want to update you on a recent video that covered purchasing a bank-owned property. In our prior video we discussed how to purchase a bank-owned property, things to look for in the P&S, and things to look for in the transaction itself.
There is a recently decided case that came down that is relevant to the process of conducting a foreclosure. Thompson v. JPMorgan Chase Bank, N.A., No. 18-1559, 2019 WL 493164 (1st Cir. Feb. 8, 2019). In short, lenders and servicers were not using the precise language of the default provision in the mortgage when notifying borrowers of their impending foreclosure. The United States First Circuit Court of Appeals ruled that Massachusetts law required “strict compliance” when a lender exercises its right to foreclose. Id. citing Pinti v. Emigrant Mortg. Co., 472 Mass. 226 (2015). So what does that mean for the buyer or subsequent owner of a foreclosed property?
If you are buying a bank-owned property, before spending any money, confirm with the bank if they are compliant with Thompson v. JP Morgan Chase. Your attorney and title insurance underwriter will review the notices that were sent against the default provision contained in the mortgage. If the notice is not identical, the foreclosure may be deemed invalid. If the lender has complied with the requirements of Thompson, then the transaction will proceed as an ordinary bank-owned purchase.
What if you bought a bank-owned property? If you purchased an owner’s title policy, you are protected. Further, once three years have passed since the date of the foreclosure auction, the former owner’s claim for improper notice is barred.