Buying and selling a house in Fairfield County, CT can involve a lot of legal issues. We asked an expert, Jeremy Vishno, of the Vishno Law Firm (www.vishnolawfirm.com) in Fairfield and New Haven CT about some frequently asked questions regarding both buying and selling a home:
Why is it important to use an attorney for a real estate purchase?
An attorney is the only protection you will have during this process, to explain and to enforce your rights. A real estate agent’s job is to bring parties together and put the pieces in place to move toward a closing, providing guidance along the way. Only the attorneys can assure that those pieces are ultimately in the proper form, protecting each side. A purchase or sale of real estate is typically the single biggest transaction in someone’s life. The documents are not straight forward, and neither are the rules. Moreover, every lender will require that an attorney handle the transaction for the purchaser, representing both the purchaser and the lender (A buyer can hire a personal attorney in addition to the bank’s representation, but will have to pay for both. In other states the buyer is often required to pay for separate lawyers-1 for the bank, 1 for personal representation. Connecticut’s custom is for one attorney to represent both-As lender counsel to ensure the documentation is done properly and funds handled securely; as buyer counsel to ensure the contract is enforced, and that the buyer gets what is expected under the contract).
What are the charges I should expect from the lawyer’s office?
- Legal fee (covers attorney, paralegal and administrative staff charges) based on complexity of the transaction and needs of the client.
- The Title Search usually passes through an outside searching entity with a charge typically around $175-$350 if municipal records searches are indicated. The Title Insurance cost is set by statute and based upon price of property and loan amount. This is a onetime charge at the beginning of each loan, though reduced for a refinance if there was an original policy in place.
- Courier, wire or other charges transactional or documentation charges incurred for the transaction
What happens to my deposit if there is a problem with: the inspection, my financing, my job, my health?
If the contract calls for a refund for failure of a contingency, and the contingency is not met in time, on proper/timely request, the money is returned, with the exception of a document preparation fee to the selling attorney (if stated in the contract). The biggest catastrophe is where the time for canceling the deal passes and the buyer loses his/her job and cannot close. The deposit is fully at risk, but there are certain circumstances where part could be retrieved: the seller may have an obligation to attempt to sell the property to “mitigate” (reduce) the damage from the lost sale. If the new sale generates close to the same net return to the seller, the buyer may be entitled to a return of deposit funds
Is the binder I signed with my broker binding?
In Fairfield County, the standard and custom is that the binder does the following: stops the seller from agreeing to a better deal, unless the buyer does not move toward contract as called for in the binder; obligates the buyer to take good faith steps to move to a contract. A binder is almost entirely unenforceable by either party, unless bad faith can be shown, which is very difficult and costly to prove. The formal contract drafted by the seller’s attorney, once signed by both parties, with deposit paid/collected, is the only truly binding document, and its terms dictate the path the transaction must follow, absent a written agreement to change it.
Explain the process of acquiring Title Insurance? Why is it important?
Every lender requires Title insurance. It is regulated by state statute, and priced according to the purchase price and loan amount. It is required by every lender to protect their mortgage security position on the land records, and critical to insure the owner’s interest as well. The buyer’s attorney must file documents on the land records. The mortgage filing with the Town Clerk is the method by which the world knows that a lender has a security interest in the property so that on sale, they get paid first. Even though a title search will be performed to review the land records for the property, not every problem can be found in that process, including big ones. Title insurance insures that there are no historical problems with the security interest the lender has on the property. Likewise, Title Insurance insures that the owner of the property has protection of the equity after the mortgage loan is accounted for. It does not protect against a drop in the value of the property. It does include potential future claims that are not historical in nature. Issues that can arise that are not immediately apparent from a title search are: claims by neighbors regarding boundary lines, encroachments of buildings/out-buildings or pavement, rights in and to water supplies, rivers, ponds or drainage, easements and sharing agreements on private roads and beaches, to name just a few. If there is ever a claim against the status of, ownership of, title to or rights in the property, the title insurance company provides a defense, or even payment if the case is lost.
What should a buyer bring to a closing? A seller?
Each transaction is different because each lender has differing requirements for their loans. Some must haves, however:
Buyer:
- Driver’s License or other form of Official Photo I.D. and Checkbook
- A written list of questions for your attorney or for the seller (where are keys, garage door openers, alarm codes, warranties/manuals, service contracts)
- All documentation you have from the transaction (best to start a folder right from the outset)
Seller:
- As a courtesy, all keys, codes, brochures, pamphlets, warranties, manuals, service contract and service provider contact information is a good way to pass along good karma.
- Documentation of any repairs that were required from the inspection or by agreement, which should always be by a licensed and insured contractor, rather than Uncle Joe or a neighbor.
How can a seller protect themselves from a buyers backing out of a sale in between contracts and closing?
A buyer can back out of a sale if there is a failure of a contingency that was included in the contract (inspection was unsatisfactory/financing fell through/seller failed to do what was required under the contract terms). This is also a breach of the sales contract. The most important things a seller can do to protect themselves
1) Work with a highly ethical and competent team of real estate professionals, starting with the Real Estate Agent, and very closely followed by an Experienced Real Estate Attorney.
2) Once your team is in place, and an offer has been made, only accept an offer from a bona fide, well qualified buyer, holding a “Pre-qualification” letter signed by a legitimate lender. Or, if the buyer is paying cash, the seller should require a statement from a financial institution showing adequate funds for the deal.
3) Finally, the seller must comply with all aspects of the contract. In most cases, the following are mandatory:
- Allow access to bank appraisers and inspectors
- Provide written documentation that agreed upon repairs or services were performed
- Have the property ready for sale on time, or penalties are typically assessed starting five (5) days after the contract closing date. “Ready for sale” means :
- Have everything out of the house, garage, basement and out-buildings that was not specifically purchased
- Have the house itself “broom clean” which means not professionally cleaned, but neat, tidy and swept out
- Have all keys, codes etc at the closing table, or delivered prior to the buyer taking title
If the buyer does have to back out, and it is not for a protected reason (failure of a contingency), the seller’s remedy is to keep the security deposit. The amount of the deposit is almost certainly enough to cover the actual losses incurred by the seller where a deal falls through, and it is the limit of the recovery a seller can make for backing out.
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