Connecticut Real Estate Attorney Law Blog

For every almost every residential real estate transaction, the seller has to complete and give to the buyer a seller disclosure form.  This form is mandated by Connecticut state law, and asks the seller questions about the property being sold.  It is made part of the buyer's offer to purchase the real estate, and part of the real estate purchase and sale contrct  It is very important that the seller carefully complete the form to provide accurate answers without potentially misleading the potential buyers.  Failure to provide accurate information has lead to litigation against sellers if the buyer purchases the property and after the closing determines that the information provided has been inaccurate.

The State of Connecticut has recently updated the required form to reflect recent changes in Connecticut law governing real estate transactions.  A copy of the current form can be downloaded here.

As always, please feel free to contact me with any questions on this or any other real estate law issue here in Connecticut.

Connecticut has historically been an "attorney" state meaning that attorneys are the ones performing real estate closings.  Once upon a time this was all closings, purchase, sale and refinance.  It is still true for purchase and sale, but for refinance in many cases the attorney has been replaced by a "title company."  This is sometimes the actual title insurance company, i.e. First American or Chicago Title or one of the other national title insurance companies, and it is sometimes a title company that in fact is an "escrow agent" or "title agency" or "settlement agent" from out of state.  In many states, it is very common for title insurance companies or title companies to perform all closings.  As the lending and real estate businesses have become much more national than local, especially with the advent of the internet, many lenders have shifted their borrowers into these title companies rather than attorneys.

Why?  Ostensibly it is cheaper for the consumer, my experience has been that the issue is one of control rather than cost.  By selecting the settlement agent, the lender can move the process along more quickly and make sure that the borrower does not lose interest or get sidetracked before the deal closes.  It has been my personal experience that (at least speaking of my fees)  that attorneys typically charge no more than these title companies.  If I were borrowing $200,000 I would want to know that the loan was closed properly and that if I had questions there is a local, licensed professional to seek out.  Many times with real estate closings the mistakes only come to light years later, and by then who knows where the title company referred by the lender has gone to?

If you want to know how much I will charge for doing a real estate closing in Connecticut, purchase, sale or refinance, you can use the simple form on my website http://www.attybegemann.com/Get_a_Quote.html and I will promptly email you back a personalized quote for your transaction (or ask additional questions if needed).  The quote will include the applicable title insurance premium if the requested information is provided.

Almost every Connecticut real estate closing involves getting an appraisal done on the house being purchased or refinanced.  The appraisal is ordered by the lender, but paid for by the borrower as a closing costs.  A basic understanding fo the appraisal process is very important if you are selling, buying or refinancing a piece of reale state in Connecticut,  The appraisers are licensed by the State of Connecticut and have to pass licensing and continuing education requirements.  However the reality is that appraisals are very subjective, more "art" than "science."  Different appraisers will come out with different appraised values for the same property.  They may use different "comps" or comparable houses they use to determine the value of the subject house, or they may apply different "adjustments" for variations such as lot size, house size, number of rooms, etc.

There is an excellent article in the New York Times that discusses appraisals and variations among them.  Appraisals are often reviewed internally by the lender, who may choose to adjust the results of the appraisal.  More frequently than in the past, the appraisers are not local to the property they are appraising.  Even in a small state like Connecticut, t here are huge variations in property values between adjacent towns or even within towns, between different neighborhoods.

Here is a quote from the article about one person's experience when refinancing. "The first appraisal in February was what he called an “absurdly low number even knowing the impact of the past few years,” so he asked the bank to send out another appraiser. That came in only slightly higher and left him unable to refinance. So he waited until this summer, when the flowers were blooming, and he and his wife walked the appraiser around the property. And that one? “It came in 50 percent higher than the previous ones,” he said. "

Here is a link to the article. 

http://www.nytimes.com/2011/09/17/your-money/decoding-the-wide-variations-in-house-appraisals.html?pagewanted=1&sq=real%20estate%20appraisal&st=cse&scp=1

Overview of the Real Estate Contract Process in the New Haven, Connecticut Area

If you are thinking of buying or selling a home in NEw Haven County, Connecticut, it is important to understand the contract process.

The process starts with the potential buyer of the real estate making a written offer. This offer will contain the relevant terms, such as property address, purchase price, closing date, mortgage amount, date by which to obtain mortgage, inspection terms, the date by which to accept and any other relevant terms or conditions.

In the New Haven County area, including Hamden, North Haven, Cheshire, Wallingford, Woodbridge, Orange, West Haven, Branford and other area towns, the buyer's offer is typically made using a contract form, often supplied by the real estate agent. Acceptance of the offer results in a fully binding contract. Many real estate agents use a form of contract provided by the New Haven Board of Realtors and the local Bar Association. This contract form contains all the ‘boilerplate' provisions, and the terms specific to the transaction must be added to the form. The property condition disclosure report is also included. Although the contract form does not usually contain an automatic attorney review contingency, it is a good idea to have an attorney review the contract before you sign it. Since the contract forms used in different areas and even by different brokers have different provisions, you should always have an attorney review the terms and provisions before you sign it. Remember, when you are making an offer on a contract form, and that offer is accepted, it is a binding contract and the rights and obligations of the parties will be determined by the terms contained in that contract.  More information is available on my website, Connecticut real estate attorney information.

There are certain important provisions that must be included in the contract. These include the address of the property, the names and signatures of the buyer and seller, the purchase price, deposit and closing date. These are the basic terms needed to make a binding agreement. In addition, for the protection of the buyer there must be a mortgage contingency provision which would include the amount and terms of the mortgage and the date by which the mortgage must be obtained. The buyer should also have an inspection contingency provision, which allows the buyer to have a building inspection on the premises by a certain date. There should also be a listing of any personal property included with the sale, such as appliances, draperies, etc. In addition, any special provision, such as an agreement that the seller pay part of the buyer's closing costs, would need to be included. Anything not included will not be a part of the binding contract. You should work with your real estate agent in putting the contract together, in consultation with your attorney.  I have written more information about real estate contract contingency provisions.

After the contract is signed, the buyer will perform inspections on the property. If the inspections are acceptable, the buyer will then work with the mortgage lender to get the mortgage loan approved. At this time, your attorney will obtain a title search of the property and prepare for the closing. The buyer will also need to purchase homeowner's insurance for the new home. During the entire process a buyer should keep in close contact with their real estate agent.

If you are selling or buying a property through a ‘short sale,' which is when the seller owes more on the house then they will be selling it for, it is especially important to consult an attorney before a binding purchase and sale agreement is executed. You should work with your attorney and real estate agent to address any problems that come up during the home purchasing process.

Please note that this is not legal advice. Please contact your attorney for legal advice.

According to this report http://www.dsnews.com/articles/freddie-mac-releases-new-guidelines-for-refinancing-and-underwriting-2011-01-19 Freddie Mac is issuing new underwriting guidelines for loans that close after May 1, 2011 that will among other things eliminate the "streamlined refinance" which allowed existing Freddie Mac borrowers to refinance up to 95% LTV and to roll in closing costs.  I am not sure how much this program was used, but it was one of the few out there that made sense to me.  Freddie Mac already owned a loan on a house that was in the vicinity of the same LTV or even higher, why not allow their current borrower to be able to take advantage of the lower rates?  I may be missing something here, but why not let an existing borrower refinance to a lower rate?  This is one of the many things that mystify me about lenders - you already have a paying borrower at a higher rate, why not let the borrower refinance?  The borrower will get the benefit of a lower payment, which can only increase the chances that the loan will continue to perform. 

It seems to me that if your loan is owned by Freddie Mac now is the time to refinance so you can still go up to 95% LTV.  If any mortgage brokers or loan officers know anything more about this I would appreciate their comments.

Title insurance is one of those things that many people purchase and very few understand.  The extent of most people's knowledge, even those who are involved in the real estate closing process, is frequently very limited and sometimes outright wrong!  I thought I would try to give a brief overview of title insurance.  I have practiced real estate law for many years, including working for lenders and for title insurance companies.  My experience has entirely been in Connecticut real estate law, but much of this blog post will equally apply to other states.

The basic concept of title insurance is that it insures an interest in real property.  To keep it simple, I will discuss loan (lender's or mortgagee) policies and owner's policies.

A loan policy or lender's policy insures the lender of a real estate mortgage.  The policy identifies the mortgage which is being insured and states the name of the insured party, which is the lender (all part of Schedule A of the policy) and also states what items are excluded (called the exceptions) from coverage under the policy (which are stated on Schedule B of the policy).  The policy in general terms insures that the mortgage is a valid lien on the real property identified in the policy subject only to those items stated as exceptions on Schedule B.  The loan policy is almost always required by the lender whenever a mortgage loan is closed.  It is paid for by the borrower as a closing cost.  The policy premium is discounted when the loan is a refinance.  The policy is issued in the amount of the insured loan.  Title policies are supposed to reflect a concept of risk avoidance or risk elimination, by performing a title search, paying off prior liens, properly recording the new mortgage, etc.  If all of these items are done properly, the need for the title insurance is in theory very low.  The policy will also provide coverage against mistakes in the title search, mistakes in indexing, forgeries in the chain of title, and other hidden risks that even a proper title search will not uncover.  Remember, the loan policy provides coverage to the lender, not the owner!

An owner's title policy is similar to the lender's.  It too has a schedule A in which it identifies the insured (the purchaser) and a schedule B that lists exceptions (taxes, easements, covenants, other items of record).  It also provides similar protection against forgeries, errors in the indexing, improperly paid off prior liens or mortgages, probate issues, etc.  The biggest difference is that the owner is the insured and not the lender, so the title insurance company will owe its coverage obligations to the owner.  The policy is issued in the amount of the purchase price and usually has an inflation increase rider so the coverage amount increased annually.

Why should you buy an owner's policy of title insurance when you purchase a property?  Well for one thing in Connecticut the additional premium due for an owner's policy when you are already purchasing a loan policy is small.  In a $200,000 purchase with a $160,000 loan for instance, the loan policy would be approximately $565.00.   The owner's policy would be an additional $225.00.  This is a one time charge at the time of closing and provides protections as long as, and even beyond, the time you own the property.  So for a relatively small additional expense, you are purchasing a substantial amount of coverage.  More importantly, it provides coverage against risks that can't really be eliminated, even by a diligent title search and having a competent attorney represent you at the closing.  The best protection provided by the policy is one of defense of your title.  If you are notified of a defect in the title (such as an unreleased mortgage) or there is a challenge to your title (a prior owner alleges the deed was forged) the title insurance company has an obligation to clear the title of the defect and to provide you with a legal defense of your title, which means that they are responsible for hiring an attorney to defend YOUR interest in the title.

Consider the recent panic over the robosigning and related foreclosure issues.  I am sure that anyone who purchased a foreclosed property and purchased an owner's policy of title insurance was glad they had that protection!

If you have specific questions concerning title insurance in Connecticut, or how title insurance ispart of the closing process and closing costs in Connecticut, I would be happy to try to answer them.

Very interesting wrinkle on short sales with IRS liens that an attorney who handles a lot of short sales  in Florida has blogged about.  For those in Connecticut doing short sales on real estate closings here, these same rules SHOULD apply (aleays hard to tell with the IRS) and the IRS liens thus should not be an obstacle to getting a short sale done. 

This is a very interesting and informative post about the new FHA minimum credit scores going into effect very shortly.  It also discusses the special effect that this will have here in Connecticut, with our own CHFA loan programs.  The FICO scores seem to always be getting more important.  I hope that congress requires that they be made more easily available, like the annual free credit report.

HUD recently announced a new refinance program for underwater borrowers.  They would be able to obtain, with their existing lender's cooperation, a refinance into an FHA loan.  You must be current and owner-occupied and owe more than the house is worth.  The existing lender must agree to reduce the principal by at least 10% (hence the name short refinance) and the resulting LTV must be no more than 97.75%.  Obviously the loan will have mortgage insurance and you must meet the FHA underwriting guidelines.  If you have a second, the new first and the existing second (subordinated to the new loan) must be no more than 115% of the appraised value.  There is a very good FAQ here.  There is also information on the HUD website.

This program seems like a good but as with most of the foreclosure "rescue" programs limited.  It may fill a gap in the existing programs.  Unfortunately at this time Fannie and Freddie do not appear to be participating, but they also have some similar programs.  This new FHA loan does give the underwater borrower with a lender who is willing to work with the new program an opportunity to avoid eventual foreclosure or short sale. 

The Hamden Chamber of Commerce together with the Town is sponsoring a restaurant week in Hamden, September 20 to 26, 2010.  Hamden, CT has a great mix of restaurants, casual to fine dining, from pizza to the latest international exotic trend and everything in between!  And the participating restaurants are offering some great deals for restaurant week, lunch and dinner, "prixe fixe" so check it out!

Here is the web site dedicated to the event, which will have full information, menu links, etc.

Enjoy!