The Gift of Equity

 

We recently received a question from a client: “Can we gift equity in our home to our child/children?” The short answer is that it depends. Typically, you can gift equity in a home that you own when you sell that home to your child. This is called a “gift of equity.” Most lenders will allow a gift of equity as long as the gift is documented correctly, which means that it must be based on an accurate appraisal and clearly stated in the purchase and sale agreement.

What if you are buying a home that is not owned by a family member and your family wants to give you money to assist in purchasing the home? This is referred to as a “gift of funds.” It is easy to confuse a gift of equity with a gift of funds. It is important for the home buyer to talk to their lender and those that are giving that gift should speak with their CPA to make sure they are not unintentionally making a tax or estate planning mistake. A gift is not a loan. A gift is irrevocable. Once delivered and accepted, the person making the gift has no right to ask that the funds be repaid. This will be certified to the lender that the lender will not seek repayment.

If you have any questions about equity, contact Stiles Law by calling (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

What is the Difference Between Nominee and Assignee?

 

A question came up during our Real Estate class asking, “What is the difference between a nominee and an assignee?” A buyer usually has the right to nominate a nominee to purchase the property. This has no impact on the seller. Common nominees include estate planning revocable trusts, real estate investment trusts, LLCs or corporations. A nominee is ordinarily a related entity to the buyer named in the purchase and sale agreement.

An assignment occurs when the buyer assigns their interest in the purchase and sale agreement to someone else. An assignee is an entirely different person or entity. As a seller, with an assignee, be aware that it may be someone else at the closing. What does that mean? The assignee will “step into the shoes” of the buyer, attend the closing and be bound by the terms of the purchase and sale agreement. The purchase and sale agreement may not permit an assignment without permission of the seller.

Using a nominee can be helpful with estate planning. Buyers who may want to name a nominee should include “or my nominee.” Without this language, a buyer may be forced (depending on the circumstance) to close in your name.

If you have any questions about selling your home or buying a home, contact Stiles Law by calling (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

What Happens if I Get Cold Feet when Buying a Home?

 

Another question came in from one of our viewers this week “What happens if I’m under contract to purchase a home and I simply get cold feet?”

In short: it depends. The answer is determined by Massachusetts law. Hopefully you are not relying on your lender’s attorney who reviewed you purchase and sale agreement as a convenience. You will need your own attorney who can guide and counsel you through this process. You are now potentially in litigation and could forfeit your entire deposit.

Taking a step back, it is important that we recognize how you may have gotten to the point of “cold feet.” Buying a house is a major investment. The market is volatile and with its highs and lows is exciting. Although exciting, it is important that you do not become intoxicated by the whirlwind of buying a house.

Be certain when purchasing a home. Educate yourself as a buyer before beginning such a serious process. Find an attorney that will represent your best interest and not just the bank’s. It will be their goal to lead you to a successful conclusion.

From the seller’s perspective, it is not a good idea to be testing the market without an actual intention to sell. With the market being so active at times, you may think to yourself that you could potentially get a lot for your house. When you are not sure you are ready to move, but put your house on the market anyway, you are wasting everyone’s time, including your real estate professional’s. Ultimately this could lead to being sued by the buyer.

If you have any questions about selling your home, contact Stiles Law by calling (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

What is the MLC?

 

We received another question from a viewer this week asking, “What is the MLC?” MLC is an acronym that is used frequently in real estate law for Municipal Lien Certificate.

While performing due diligence before purchasing a home, buyers should verify that real estate taxes are paid. The MLC is delivered by the city or town and is their way of certifying to the buyer that real estate taxes and other municipal charges against the property are paid.

The MLC will include the location and the current owner, the due date of the tax payments, the annual amount of real estate taxes and other municipal charges, and whether taxes are due quarterly or semi-annually. Most importantly, the MLC will state how much is due to pay all outstanding taxes and charges.

Usually, the closing attorney will order this MLC. The city or town charges a small fee before issuing the certificate. The closing attorney will have the MLC recorded with the registry of deeds. Recording the MLC should prevent a city or town from claiming any taxes not disclosed on the MLC are due against the property.

If you have any questions about selling your home, contact Stiles Law by calling (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Non-Obligor: Are they allowed to be a title holder?

 

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.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Purchasing Real Estate with Cash: Why Haven’t I Received a Tax Bill?

 

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.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.