We received another question from a viewer: “We are getting ready to purchase a new home (my partner and I), but I’m the only one that is going to be obligated on the financing portion of the deal– can we add my partner to title?”
When we say “title,” we are referring to the person named as an owner on the deed. When a property is conveyed to you by the seller, they are granting their interest to you as the new owners.
When two or more people are purchasing a property, one or more of them may not be financially obligated to repay the loan. A person who is an owner but does not have an obligation to repay the loan is sometimes referred to as a “non-obligor” or “non-borrower.”
One easy solution would be to have the additional name(s) added to the deed after closing. Be careful because the mortgage that borrowers sign includes a covenant stating that the buyer won’t transfer the property without the lender’s permission. Adding a partner to title after closing may be deemed such a transfer resulting in default.
If you know you are going to transfer the property, then you want to notify your lender well in advance of closing.
The lender will likely agree to allow your partner to be a co-owner. Usually, the lender’s only requirement is that the non-obligor owner must sign the mortgage and a few ancillary documents at closing. If the borrower does not repay the loan, the lender will foreclose. The right to foreclose must also be granted by the non-obligor; otherwise, the non-obligor may have the right to claim that the lender cannot foreclose their interest.
In conclusion, you can be a title holder and not be obligated to the loan.
If you have any questions about a Non-Obligor Title holder contact us by calling (781) 319-1900.
We received another question from a viewer this week: “I just purchased a property with cash and I haven’t received a tax bill. What should I do?”
Since you purchased a property with cash, you do not have a lender or servicer helping you manage the payments for taxes and insurance, so you do not have an escrow account. Therefore, it is your responsibility to make sure that these items are paid when they come due.
Most municipalities will not invoice the new owner for sometimes up to 6 months or even one full year. Don’t forget to pay your tax bill! We will make sure at the time of closing the taxes are adjusted as of the day of closing and we will remind you if your town collects quarterly or semi-annually.
When you do receive the tax bill in the mail, they will most likely remain in the former owner’s name for some time. Make sure to contact your town’s tax collector to inform them that you are the new owner. This sometimes expedites bills being issued in your name.
If you have any questions about Tax Bills contact us by calling (781) 319-1900.
This week we received another question from a viewer: “I have the ability to purchase a real estate property with cash. What should I be thinking about?”
When deciding to pay cash or obtain financing, always get professional advice from your financial advisor, loan professionals, and CPA. Back in the day, occasionally people would just hand over a check for a deed without completing any due diligence. We do not recommend doing this. When we represent clients that are paying for a property without seeking a loan, we would do everything we would normally do and treat the transaction as if a lender was involved. Our due diligence includes:
Conducting a title exam;
Obtaining a municipal lien certificate;
and Ordering a plot plan.
Every buyer should determine whether the seller owns the property and that all liens will be released. Buyers should verify that there are no outstanding taxes. If there is an outstanding real estate tax obligation, the buyer should require the Seller to pay the outstanding taxes and adjust as of the date of closing. Finally, we obtain a plot plan to verify that the structures do not encroach onto a neighboring lot and that structures on neighboring lots do not encroach onto the lot that the Buyer is purchasing.
In sum, Stiles Law will apply the same level of due diligence as would be required in a financed transaction.
An often overlooked detail in a cash transaction are ongoing responsibilities for real estate taxes and insurance. Buyers should remember to pay all real estate tax bills, even if they are not yet in the Buyer’s name, and to always maintain homeowner’s insurance.
If you want more information on Cash Transactions, please contact us at contact Stiles Law at (781) 319-1900 or stiles-law.com.
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.