This week we are answering another question from a client who asked: “There’s a property up for auction in my neighborhood. I’d like to bid on it — what should I do?”
First you should look at the legal notice that you found in the newspaper.
There are specific requirements on how to bid on the property. You will need a certified check. Often times, these auctions do not actually take place. That is why we always recommend you make the check payable to yourself, so you’ll be able to deposit it back into your account very easily. It will be challenging if you make that check payable to the either the auction company or law firm.
Once you are at the auction, you may wonder what you should be thinking about? You should know the value of the property. Figure out the number you would want to bid. Be disciplined and do not bid higher than that number. Also, be prepared for the worst possible scenario. For example, the septic system fails, and water is running for 5 days and there is mold in the property. Stick to your number. The event itself will be very exciting and you may have a strong desire to win. But don’t get sucked into the auction frenzy. A miscalculation could be extremely detrimental.
What about the occupants that are already there, do I have to evict them? Yes, you do. You are essentially taking the property subject to EVERYTHING. The first mortgage is typically the one that is foreclosing. Which means if notices were delivered correctly, all the junior liens will be wiped out.
What if the occupant that took out the mortgage is still living on the property? Well, this is challenging because title insurance companies will not allow their agents to issue title insurance when the former owner remains in the property. We recommend not purchasing a foreclosure when the occupant remains.
If you cannot purchase title insurance, then you would be defending the foreclosure and that it was all done correctly. Not the best way to start your real estate investment portfolio.
What else should you be thinking about? Think about the fact that there is a strong chance that this auction will not happen or be postponed. This happens for many different reasons, such as the person might file for bankruptcy, or the bank might decide not to foreclose on the property because the occupant remains in the property. Finally, be prepared that the bank may have a large amount of debt due on the property and will want that amount, regardless of what you value the property. If this is the case, they would simply take the property back into their portfolio and try to capture the highest value in the open market by hiring a professional agent.
We invite you to watch our video on buying a bank owned property. There is less risk associated with this type of purchase.
If you want more information on real estate investing at foreclosure contact us at contact Stiles Law at (781) 319-1900.
We received another question from a viewer this week: “I paid off my mortgage, but I received a document in the mail, is this document important?”
Yes, this document is very important. If you paid off your mortgage or somebody else paid off your mortgage through a refinance or a sale, then the document that you receive needs to be recorded with that County’s Registry of Deeds.
When you grant a mortgage to a lender the mortgage gets recorded with the Registry of Deeds. Granting a mortgage places a lien on your property. This lien needs to be released once it is paid in full. These liens can be called mortgage discharges, releases of mortgage, or satisfaction of mortgage. While there are many different names for this document, it will always be notarized and often have a raised seal.
Say for example, you have a home equity line of credit. If you paid this off and your lender sends you one of these documents back they will alert you that the document needs to be recorded or if it is just a duplicate copy.
If you receive the original copy, you should bring it to the Registry of Deeds to have it recorded. You are always welcome to bring it to our office, so we can verify that it is accurate and help you record it.
If you would like more information about releases of mortgage, contact Stiles Law at (781) 319-1900.
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.