Connecticut Real Estate Attorney Law Blog

HUD announced today January 15, 2010 that it is temporarily relaxing its 90 day seasoning rule which currently prohibits FHA loans for properties owned by the seller for less than 90 days.  See the HUD press release for more details.

According to the press release, "The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities."

The new rule will take effect February 1, 2010 and will be in place for one year.  To try to avoid the use of the FHA financing for flipping HUD is putting certain restrictions in place.  The new policy will only apply to sales meeting the following guidelines (from the HUD link above):

There is more detail on the HUD site which contains the specific requirements applicable.

This change may be of major assistance to borrowers who want to but recently foreclosed property but cannot purchase directly from the bank.  It will also benefit  real estate investors (and some "flippers") since it allows FHA financing where it has been previously prohibited.  A resale can be for up to 20% more than the prior sale within the 90 day period.  If it is over 20% more, certain requirements must be met, including things such as verifying that improvements have been made in the property.

This rule change or waiver should be of major interest to real estate agents marketing foreclosed property.

As I discussed in a prior blog post, fee based short sale negotiators or mortgage modification companies need a license to do business in Connecticut as of October 1, 2009.  In addition to a license, the new law also limits the fees that can be charged and requires a written agreement with the borrower, among other requirements.

The State Department of Banking (DOB) has now issued the required forms as well as provided further information on the licensing process.  The DOB has updated their web site to provide some guidance on who must be licensed, as well as providing links to the licensing forms.  The exemptions from licensing are listed, which include a CT licensed attorney, a lender, a CT licensed debt adjuster, and non-profit institutions.  The application fee is $1,600.00.  A number of forms must be filed and a bond must be obtained to apply for a license.

In addition, the DOB has issued a schedule of the maximum feesthat can be charged for performing short sale or mortgage modification services.  The maximum fee for a short sale or loan modification is $500.00, which can only be charged after the successful completion of the activities listed in the required written contract with the borrower.

Had a nice leisurely Sunday today, and since Columbus day is holiday here in CT, we get another Sunday tomorrow!

We did two enjoyable activities in town today.  First I had a nice nature walk with my two younger children (10 year old twins) on same land of the Hamden Land Conservation Trust (http://www.hlct.org) that they have helped to protect from development.  It was informative and beautiful.  We had some great views from the ridge line we were on, only wish I had some pictures to share!  The fall foliage is starting and it was such a clear day, and we met some nice folks from town.

Then we went to our local Hamden orchard and farm store, Hindinger Farm (http://wwww.hindingersfarm.com) and again enjoyed the beautiful fall day,  the great views and the excellent local apples (we bought a bag of McIntosh and a bag of Fortune, not familiar with those but they taste similar to a Delicious or at least have some Delicious in them).  This farm has been in the Hindinger family for generations and is now protected from development under the state farmland preservation program.

Later my daughter went to a farm in nearby Cheshire with one of her friends do some apple picking of her own.

All in all a great day, and a reminder of why I like living here so much!

The Connecticut legislature has recently passed legislation that was effective October 1, 2009 which will for the first time explicitly regulate people and companies that (for a fee) assist consumers in negotiating their mortgage debt, including fee assisting with short sale negotiations.  The legislation is Senate Bill 950.

This legislation applies to all in state and out of state companies and individuals who charge a fee for negotiating someone's debt.  The new law prohibits advance fees, and requires licensing and bonding for those who want to engage in this type of activity.

What this means is that if a fee is charged to a consumer in the course of settling or negotiating a debt, that activity is now regulated by the state and a license to perform it is required.  The license will be obtained from the State Department of Banking.  Attorneys admitted to practice law in Connecticut are exempt from the new law (attorneys NOT admitted in CT do not appear to come within this exemption).

So lets say you are a Realtor and have a short sale listing, and you help the owner negotiate with their bank.  Do these activities come within this new legislation?  I must say I do not know the answer to that question.  The statute is written very broadly and does not provide a specific exception for Realtors.  The argument the Realtor would make is that they are not expecting a "fee, commission or other valuable consideration" from the act of the debt negotiating, but rather from the sale of the property for which they have a separate commission agreement,and the short sale negotiations are ancillary to that.

So if you are a Realtor and have a separate business doing fee-based debt negotiation or the like, you will  have to be licensed and your contracts and activities will be regulated.  If you are a Realtor and doing short sales but do not charge extra for the service, I would get a legal opinion or advice from an attorney to verify that such activities are OK.

I have the text of the relevant portion of the proposed statute if anyone is interested in reading it in detail.   Just contact me and I will email it to you.  It is also available on the web site for the CT legislature,

If you are interested in becoming licensed under this new law, or want further information about its applicability, please contact me.

What is the real estate contract purchase and sale agreement, for purchasing or selling residential real estate in Connecticut?  What will my Connecticut real estate attorney do?  What will my Connecticut real estate agent do?  If you are thinking of buying or selling a home in CT, it is important to understand the basic process. 

Please note that the following is not legal advice but is designed as information.  Please contact your attorney for legal advice.  If you wish to contact me to discuss a particular situation or to retain me for your CT real estate closing, please go to my website at http://www.attybegemann.com or email me at attybegemann@comcast.net.  Most of my closings I do for a fixed fee, discussed and disclosed prior to you retaining me as your attorney.  Please contact me for further details.

Make (or accept) an offer on residential real estate - Connecticut overview.

The potential buyer of a piece of residential real estate in CT will make 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, date by which to accept and any other relevant terms or conditions. Depending on where the property is located, the offer may be made in the form of a 'binder' or on a full purchase and sale agreement. In Fairfield County, the binder is usually used, while most of the rest of the state goes directly to contract.

Make (or accept) an offer on a binder form (Fairfield County, Connecticut).

Typically in Fairfield County offers are made on a binder. Although the exact form of the binder differs by area and by real estate agent, typically the binder is a one page form that contains the basic terms of the transaction. This includes purchase price, deposits, property address, personal property included with the sale, mortgage amount and date, inspection provisions and signatures of the parties. Typically one percent of the purchase price is paid at the time of the offer. The seller may accept or make a counter-offer. If an agreement is reached, the executed binder is forwarded to the seller's attorney for a full contract to be drafted for execution by the parties. Although the binder is completed with the expectation that a full contract will later be signed, in certain circumstances the binder can be enforced as a contract. The property condition disclosure report is also included. You should consult an attorney before signing a binder.

Make (or accept) an offer on a contract form (New Haven and Hartford Counties and most of CT).

Most areas of Connecticut go 'straight to contract,' which means that the buyer's offer is made on a contract form, and acceptance of the offer results in a fully binding contract. Most areas have an 'official' contract approved by the local Board of Realtors and the local Bar Association (see example at link below), or a form used by a particular agency. The contract form contains all the 'boilerplate' provisions, and the terms specific to the transaction must be added to the form and agreed to by the buyer and seller. 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 it is binding (before you sign it). Since the contract forms used in different areas and even by different brokers have differing 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 (most of the state) once that offer is accepted, it is a binding contract and the rights and obligations of the parties will be deterimed by that acontract.

Include important provisions in the contract or binder.

Whether the offer is made on a binder or a contract form, there are certain important terms that must be included. 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. You can review my post here on the use of contingencies.  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.

Forward a copy of the contract to your lender and attorney.

Your lender will need a copy of the fully executed contract as part of the underwriting process for your loan. You should also consult the lender if you make any subsequent changes to the contract, such as credits for repair items, as these may affect the underwriting of your loan. If you have not done so already, you will need to send a copy of the contract to your closing attorney.

 Coordinate the closing with your attorney and real estate agent.

If you are the buyer, your attorney and your lender should be in contact once you have loan approval. If you do not receive loan approval by the date in your mortgage contingency, your attorney will need to ask for an extension. The lender will need certain information from the attorney regarding the title to the property. The buyer's attorney will order and review the title search and prepare the title insurance commitment for the lender. As the closing date approaches, the attorneys will prepare the closing adjustments, working with the other attorney and the lender, and will coordinate the closing date. The buyer's attorney will prepare the title insurance. A walk through is done the day of closing with the real estate agent to be sure the house is empty and in agreed condition.

What if it is a short sale or there are other issues?

If you are selling or buying a property through a 'short sale' 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. Please feel free to ask me or your real estate attorney for advice on any issues. Most attorneys, such as myself, offer a free initial consultation and are happy to quote a fee for representing you on your real estate matter.

QUESTIONS?  COMMENTS?  NEED MORE INFORMATION? Please contact me at attybegemann@comcast.net or view my website at http://www.attybegemann.com.  I practice real estate law from my main office in Hamden and satellite office in Fairfield.