Purchase of Real Estate

  • real estate purchase
    Offer and Acceptance
  • Purchase and Sale Agreement
  • Loan Application and Closing
  • Title Insurance
  • Homeowner Insurance
  • Flood Insurance
  • Business Income Insurance
  • Smoke Detector and Carbon Monoxide Detector Compliance
  • Water, Sewer, Utilities
  • Municipal Lien Certificate and Real Estate Tax Adjustments
  • Plot Plans
  • Holding Title to Real Property
  • Our Legal Fee
  • Recording Fees
  • Declaration of Homestead

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What every buyer/borrower should know about the closing process:
  1. Offer and Acceptance: In most counties in Massachusetts, it is a written document separate from the Purchase and Sale Agreement. The party making the offer (buyer or seller) is the offeror. The party receiving the offer (buyer or seller) is the offeree. The offer and the acceptance must be communicated to be valid and binding. Either party to an offer and acceptance should consult with a practicing real estate lawyer prior to signing such a document. Sometime parties dispense with the formality of such a document and immediately enter into the Purchase and Sale Agreement.
  2. Purchase and Sale Agreement is a contract between a buyer and a seller to purchase a piece of property for some consideration. Consult with a practicing real estate lawyer prior to signing such a document.
    1. Consideration is usually money but could be the exchange of like kind assets, or a promise of some kind as long as its subject is legal.
    2. Deposit includes the amount paid with the offer and the further amount paid at the time of execution of the Purchase and Sale Agreement.
      1. Deposits are customarily held in escrow by the listing Real Estate Broker. In the event that no brokerage is involved, the Attorney representing the Seller will hold the deposit in escrow.
  3. Standards of Practice vary around the Commonwealth. Other than in Western Massachusetts, a lender has its own attorney, the borrower has its own attorney. The borrower pays for the services of both attorneys. In Western Massachusetts, it is standard (but hopefully not for much longer) for the borrower to pay only for bank counsel. In that case, the attorney of your choice is representing you for most of the closing but representing the lender for the purposes of the signing of the note and mortgage. While this way of doing business may save a buyer money, the potential for conflict is great. This author is hopeful that this Western Massachusetts standard of practice will change in the very near future to better protect the interests of the consumer. However, that the consumer will continue to pay for lender's counsel in addition to buyer's counsel will most likely never change.
  4. Title Insurance protects against defects in title:
    1. Lenders require that a buyer purchase on behalf of the Lender an insurance product known as a "Lender Policy" or "Mortgage Policy" of title insurance. This Lender Policy protects the Lender only up to the amount of money borrowed. It does not protect you, the borrower. The protection offered is against title defects.
    2. The "Owner Policy" of title insurance protects your equity, up to the amount of the purchase price, from title defects. Purchasing an Owner Policy of title insurance is highly recommended. This policy covers you as the owner and your family members as long as you or they own the property. The cost is a one-time charge. For many of us, purchasing a home is the largest investment we will ever make. For that reason alone, an Owner Policy of title insurance is the best money you will ever spend in the event that a title issue arises.
    3. There are two types of coverage available. A standard title insurance policy covers the insured up to the moment of recording. An expanded policy covers the insured for contingencies that may occur after the time of recording.
  5. Every Attorney must carry liability insurance a/k/a an E&O policy. An attorney's liability policy will protect you, the client, only in the event that the Attorney actually made a mistake. There could be an issue in another state, such as California or Arizona, affecting the ownership of your property; however, a title examination of your property does not require that we search the records of every other state in the nation to find contingencies that may affect your property. Therefore, an Owner Title Insurance Policy with Expanded Protection is what a new owner should purchase as time of closing.
  6. In MA, an Attorney is needed to certify title to a Buyer and Lender. As such, we are title insurance agents who receive a portion of the premium for that title certification. If a title insurance company is forced to pay a claim, the title insurance company will look to the certifying attorney for recompense.
  7. Homeowner insurance protects against property and casualty loss, such as storms and theft. It also protects against liability for such instances as slips and falls, slander, defamation of character, and false imprisonment (as long as you have a personal injury endorsement)
  8. Flood Insurance maps have changed in the past few years. Your seller may be unaware that the property being sold is now in a flood zone. If the property you are interested in buying is on or near water, investigate the necessity of flood insurance and its cost prior to making an offer.
  9. Business Income Insurance may be a purchase you want to make if you are buying a multi-family dwelling. In fact, a Lender may require such insurance. This type of insurance covers loss of rental income due to covered causes.
  10. If you are buying a condominium, read the condominium documents prior to making an offer. You may find that the rules and regulations do not allow animals, or outdoor grilling, or require that you may not install laundry facilities within your own unit and must use the designated community laundry facilities, etc.
  11. The costs associated with a Municipal Lien Certificate vary from town to town with the Commonwealth. ($25 to $50+ per property). This document will list tax amounts for the current fiscal year and the previous two fiscal years. It will indicate whether the tax has been paid or is outstanding. If betterments or assessments exist, the amounts and reason therefore will be listed on the document as well. Outstanding water/sewer charges will be shown. In some communities, electric light is also a municipal lien.
  12. Holding Title to Real Property - what are your options and what do those options mean for you?
    1. Tenancy by the Entirety is an option available only to owners married to one another. It is greater than Joint Tenancy in that spouses who hold title as Tenants by the Entirety are deemed to both own all of the whole of the property.
      1. Upon the death of one of the spouses, the surviving spouse owns all of the property individually.
    2. Joint Tenancy with Rights of Survivorship is available for two or more owners whether or not they are married at all or unmarried.
      1. Upon the death of one of the joint owners, the remaining joint owners immediately own the share of the deceased joint owner.
    3. Tenants in Common is available for two or more owners whether they are spouses, married or single. In this type of tenancy, rights of survivorship do not exist.
      1. Upon the death of one of the Tenants in Common, that deceased owner's share belongs to that deceased owner's heirs (who may or may not be the surviving Tenants in Common).
  13. Plot Plan ($125 to $250+) is a picture of the boundaries of the parcel you are purchasing. It has been called a tape measure survey. This plot plan will show if any buildings or other structures are within or without the appropriate boundaries.
  14. The attorney handling the closing for you will:
    1. Order the Municipal Lien Certificate on your behalf
    2. Order the Plot Plan on your behalf
    3. Certify title to you and your lender for a period of 50 years prior to the date of recording of your transaction. See our fee schedule.
  15. Recording Fees are standard in Massachusetts almost without exception.
    1. Excise Tax paid by seller to the Commonwealth of Massachusetts is $4.56 per thousand of contract price. The exception is Barnstable County where the excise tax is $6.12 per thousand of contract price.
    2. Municipal Lien Certificate $65
    3. Deed of Conveyance $125
    4. Mortgage Deed $175
    5. Declaration of Homestead $35
    6. All other Documents $75
  16. Massachusetts Homesteads protect homeowners from having the primary residence sold out from under them by creditors. For example, if a homeowner is sued and a judgment issues against the homeowner, the holder of the judgment can place a lien on your real estate. However, that creditor cannot force the sale of the real estate. That creditor will however be paid eventually either when the homeowner decides to sell or the estate of the homeowner decides to sell. A homestead does not protect the homeowner from tax bills (federal/state/local), Probate Court Orders for child support or spousal support, or mortgages.
    1. Automatic Homestead: Every owner of his/her principal residence has the benefit of $125,000 coverage.
    2. Written Declaration of Homestead: Every owner of his/her principal residence has the benefit of $500,000 coverage.
  17. Common Sense Commentary: If you would not let a dentist perform surgery on your arm, you should not be represented in a real estate transaction by a lawyer who does not concentrate his or her practice in real estate regardless of whether that lawyer is a friend or relative.

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Contact Attorney Mary K. Eaton
meaton@maryeatonlaw.com
413.567.4440