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The attorney and broker you select will work as a team for you and can be extremely helpful in getting you through the various stages of the home selection process.
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REAL ESTATE CONTRACTS. The first document that a Buyer typically encounters is the Offer to Purchase (the "Offer"). The purpose of the Offer is to let the Seller know you are seriously interested in the property. Once the Offer is accepted by the Seller, the Offer becomes a binding contract. Although most offers provide that a formal Purchase and Sale Agreement is required by a certain date, the Offer itself is an enforceable contract. The early selection and consultation with an attorney, therefore, is extremely important. The Offer becomes the basis for your contract with the Seller and is, therefore, one of the most important documents in the entire process.
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FINANCING. The next step in the process is to arrange for financing, typically in the form of a loan from a recognized lending institution (the "Lender"). Financing options may include a second mortgage. If your attorney is an approved real estate attorney for the Lender, you can request that your attorney also represent the Lender at the closing (the "Closing Attorney"). In most respects, the interests of the Lender and the Buyer coincide and, therefore, the same attorney may represent both parties. Both the Lender and Buyer, for instance, want to be certain that any taxes or liens on the property are paid in full prior to the closing and that the deed is legally sufficient, etc.
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TITLE SEARCH. The Lender will also require that a title examination be completed for the property. In accordance with current standards, an attorney will examine the public records at the appropriate Registry of Deeds with respect to the property for a minimum of fifty years. If the title is found to be marketable, the attorney will certify title to both the Lender and the Buyer. The attorney, however, may discover defects in the title, which need to be resolved prior to closing. Title insurance is critical in addressing these types of defects/hazards.
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TITLE INSURANCE. All Lenders require that you purchase title insurance in an amount equal to the mortgage to protect their interest in the property (the "Lender’s Policy"). Buyers are strongly advised to purchase their own title insurance policy, in an amount equal to the purchase price of the property (the "Owner’s Policy"). Title insurance policies protect Buyers against hazards inherent in real estate titles, which may not be apparent from a title search. The Closing Attorney cannot guarantee against certain defects in the title which are not a matter of public record. Examples of defects not easily detectable from a search of the public records include forged deeds, missing heirs, and mis-indexed liens, etc. A typical title insurance policy, however, will protect against these defects. Furthermore, if a Buyer purchases an Owner’s Policy at the same time as the required Lender’s Policy, the title insurance company will significantly discount the cost of the Buyer’s policy.
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OTHER REQUIREMENTS. In addition to the title work, most Lenders require a plot plan of the property from a certified engineer or surveyor. The primary purpose of the plot plan is to confirm that the dwelling that is being purchased is located on the land that is being sold and that there are no apparent encroachments where a portion of a neighbor’s house is built on your property, or vice versa. The plot plan is also valuable in determining whether the dwelling is located in a federally designated flood plain area. If the dwelling is located in such a flood plain, the Lender will require flood hazard insurance as an additional requirement. The Closing Attorney is also responsible for obtaining a municipal lien certificate for the property, from the town/city where the property is located, in order to determine the status of outstanding real estate taxes, betterments, and water/sewer liens, if any. The lender will also require appropriate homeowners insurance coverage on the property.
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CLOSING DOCUMENTS. At the "closing" of the purchase transaction, the Closing Attorney will provide the Buyer with a HUD-1 Settlement Statement, which serves as a summary or accounting of the financial aspects of the transaction. In addition to the settlement statement, the Closing Attorney will explain many documents, including the promissory note and mortgage, to the Buyer. Once the parties have completed the closing documentation, the Closing Attorney will record the deed, which is the instrument by which the Seller conveys title of the property to the Buyer for the agreed upon sales price.
Your attorney and real estate agent will work with you to ensure a smooth closing by recognizing and dealing with the many items that must be handled before the closing. Most problems can be avoided or solved before the date scheduled for the closing. For most individuals, the purchase of a home is the largest investment they will ever make. Choosing an experienced real estate attorney to handle this process is a major step in protecting that investment.
Information Provided Courtesy of:
Anthony Troiano III, P.C.
One Thompson Square, Suite 303
Charlestown, MA 02129
Telephone: 617-242-4400