Connecticut Real Estate Attorney Law Blog

Not that this is news to anyone, but rates are amazingly low and staying low!  People who can (equity and good credit) can get amazing rates.  But you still have to pay closing costs.

I have written about this before, but it amazes me that people refinancing try to save a few dollars on their closing costs here in Connecticut and do not use an attorney.  When you compare the charges by a so-called title or escrow company (none of which to my knowledge are based in Connecticut) with what a local attorney (i.e. me!) charges, In many cases I actually charge less than the outfits that send a notary to your house.  I recently had a call from someone who had used an out of state outfit and the person who came to her to close could not answer any questions (since they were a notary and answering the questions would be practicing law).  She closed, was utterly confused by the numbers, and ended up canceling the deal in the rescission period for the refinance.  When I looked over her paperwork, it actually looked OK to me, but by then she was o confused and felt mislead that there was no convincing her.  If she had closed with a (competent) attorney, she would have had the closing figures explained to her.  Ironically, in this case, there as even a "legal fee" charged, for what I do not know!

If you are considering refinancing your Connecticut mortgage, please contact me directly for an easy to understand rate quote.  All loan documents will be explained to you at closing and I will be your one and only point of contact.

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.

While the topic of this blog post is titled "Do I need an Attorney for my Connecticut Mortgage Refinance?"  the better question is not if you NEED an attorney for your mortgage refinance in Connecticut, but SHOULD an attorney do your mortgage refinance closing?  Of course as a CT attorney performing many mortgage refinance closings, you may consider my answer biased, but I say why would you NOT want an attorney to do your closing?

Answers people may give are expense and/or convenience.

Based on my own experience, the answer to both questions is that the attorney is usually no more expensive and just as convenient.  I know in my own practice, my legal fee is very reasonable and is equivalent to that charged by non-attorney closing or escrow companies.

For every refinance someone or some company needs to do the closing.  This includes handling the funds, explaining the terms of your new mortgage, explaining the closing process, paying off your prior mortgage, overseeing the proper execution of the closing documents, recording the new mortgage, verifying the proper release of your prior mortgage, etc.  In Connecticut, refinance closings are currently handled by attorneys and by closing or escrow companies, which typically do not use an attorney to explaining or oversee the process.  As an initial matter, the only person legally able to perform all those functions is an attorney, since a non-attorney cannot legally explain the legal impact of mortgage documents, which is the practice of law.  So by not using an attorney you are losing the benefit of having an explanation fo what you are signing.  The escrow or closing company are also typically chosen by the lender, are unlicensed, and have no legal obligation to the borrower.  And after the closing, who do you ask if there is a question or a problem?  With a local attorney you have a knowledgeable individual, licensed by the State of Connecticut, subject to ethical guidelines, and whose bank accounts are subject to audit by the State of Connecticut.  Escrow and closing companies do not provide any of those protections.

But for many people, it is simply cost and convenience.  So I would urge potential borrowers to find out what the non-attorney is charging, and then find out what an experienced real estate lawyer, naturally such as myself, will charge.  I think you will be not only pleasantly surprised at the competitiveness of the attorney fees but their willingness to work with you and explain the closing process.  In my case, I personally provide all answers and advice, and I am glad to speak to people about the closing process and what to expect.

With the new RESPA guidelines applicable in 2010 and the new Good Faith Estimate forms, shopping for settlement services (closing services) which are now called title related services should be easier.  Rather than facing what is sometimes a variety of different charges, the new GFE is supposed to have all title related services as one charge plus the title insurance.

Along with the GFE the lender may supply you with a name or names of a company who can close your loan.  However, except in limited circumstances where a lender has a closed list, any licensed Connecticut real estate attorney can close the loan.  The new HUD GFE requires a list of provider(s) be given to the borrower, but for settlement services, closing services or title related charges, the borrower can and should still shop around (which the new GFE is designed to encourage!).

If you are considering a refinance, or other closing, in Connecticut, I encourage you to contact me directly for a specific quote on your closing costs and title insurance.

Most foreclosures in Connecticut occur without there being an actual auction.  When there is no equity in the property,  the foreclosure is done by what is known as a strict foreclosure, and there is no auction and the Superior Court (all Connecticut foreclosures are judicial) determines when title vests in the bank (as long as no one redeems).  See my prior blog post summarizing the foreclosure process in Connecticut.

In those cases where there is a public auction, until a November 1, 2009 change in court procedure, the foreclosure sales were only advertised in the newspaper local to the property.  There was no central listing of foreclosure auctions from all the different court houses.  However, for foreclosure judgments entered after November 1, 2009, the foreclosure sale will be advertised both in the local paper and on the Connecticut Judicial Branch web site.  Because the online ads for the foreclosures are being phased in, at this time (11/9/09) there are not that many online foreclosure advertisements listed.  Over the next couple of months, all foreclosures by sale will be listed on the Judicial website.

Hopefully the new advertising procedure, which includes the ability to insert a picture and some descriptive information, will result in more traffic at the foreclosure sales and better auction prices.  Please feel free to contact me with any foreclosure or real estate law related questions in Connecticut.

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!

With mortgage rates at new lows, people all across Connecticut are once again applying for and closing on refinance loans.  Even with the drop in real estate values and the changes in the types of mortgages that are available, many people can and are refinancing.  With rates this low, now is the time to refinance your CT mortgage if you can!  But along with the rate and the other parts of your mortgage approval, a borrower should also consider their closing costs. 

Who does refinance mortgage loan closings in Connecticut?  Do I have to use an Attorney?

Historically in Connecticut, mortgage loans have been closed by a Connecticut real estate attorney.  Connecticut is considered an 'attorney state' meaning that real estate closings are performed by Connecticut licensed attorneys.  However, for better or worse, closings are also increasingly done by title companies.  These closings are usually not done by or under the supervision of an attorney, and are usually performed by a company that the lender chooses, and may even have a financial relationship with.  The actual loan closing is commonly performed by a notary, who is prohibitedfrom actually explaining the loan documents.  While frequently the borrower is told this is a cost saving measure, it has been my experience that the services of an attorney frequently cost no more, and sometimes are even less expensive than paying for a notary and title company to do the closing.  There is really no reason not to insist on having an experienced real estate attorney do your loan closing.

What are the common refinance loan closing costs?

The typical charges include the cost of a title search to verify ownership of the property and what mortgages or liens are on it; a settlement fee or an attorney fee (the charge for actually performing the closing); the title insurance that the new lender requires; FedEx or overnight mail charges; copy costs; rundown or bring to date service; recording service; wire fees; title examination; and title binder.  These are in the 1100 series line in the HUD-1 Closing Statement.  These fees are in addition to whatever the lender charges, such as prepaid interest, escrows, points, etc.  As you can see, the list seems endless!

How do I compare my loan closing costs on a refinance loan?

It can sometimes be difficult to compare different closing costs since not all closing agents, be they attorneys or title companies, charge in the same manner.  Sometimes a low settlement fee will be quoted, but there will be numerous additional charges.  Sometimes the settlement or attorney fee will seem high, but there will not be many other fees.  Bottom line, you have to ask all the fees being charged before you can make an apples to apples comparison.  And do not assume an attorney is going to charge more than a title company.  As a borrower, I would not agree to close without a firm estimate and understanding of the total loan closing costs.

How much are the closing fees?

Unfortunately the fees range greatly.  Title insurance in Connecticut is one thing that you should be able to get a direct quote on, since each company sets its rates in a rate filing with the State of Connecticut Insurance Department and then is required to follow the rate it has filed.  The only discount is for a refinance, and that discount is a 40% reduction in the premium for a refinance of an institutional mortgage within the past ten years, up to the amount of the existing mortgage.  So be sure you are getting the refinance or reissue rate!  As very general estimates, I will provide the following information: a title search can be from $75 to $200, depending on what type of search is required; loan settlement or attorney fee from $450 to $800; title examination $50; rundown and record or bring to date or recording service $50 to $75; FedEx/copies from $8 to 45.  These are just estimates.

Can I get a fee quote?

I willingly provide fee quotes for my services, and I think all providers should do the same.  All I need is some basic information about the closing and I will provide an estimate of the fees required for me to perform the closing.  You may contact me by email at attybegemann@comcast.net and I will provide a prompt and accurate response to your inquiry.  You will receive the services of an experienced, dedicated real estate attorney, and you will have the peace of mind knowing that the loan was properly closed.  I can provide loan closing services throughout Connecticut.

Here is a link to a page on my web site that provides more information about mortgage refinances in Connecticut and the role of the real estate attorney.

There has been much discussion about recent changes in FHA approvals for condos.  By way of background, when an FHA loan is made for a condo unit, the complex must be 'approved' by HUD before the FHA loan can be made.  In the past (or more accurately until November) this could be done by a formal approval by HUD itself or by a 'spot approval' whereby the lender would review certain aspects of the condo complex for the purposes of making that one loan.  HUD has now abolished the spot approval, and generally made the pprocess more complex, while at the same time loosening some of the requirements.  See the blog post below as well as the links in this post for a good explanation of the changes and their potential impact.  In addition to the blog post below, here is a link to a blog from a Massachusetts attorney that also explains the changes.  The National Association of Realtors and other organizations have requested modifications to the changes, so this may still be a work in progress.  Personally, I am not quite as pessimistic as to the effect of these changes.  Some of them will make the approval process easier in substance, although the paperwork required is more significant.  Plus once a complex is approved using this new process, it will not need to be reviewed again (unlike the spot process which was loan specific).  I will keep an eye on this issue to see what happens as November 2 approaches.

Here is a blog post from an experienced FHA lender in Connecticut that explains the recent delay in the changes and provides a good explanation of what we can expect.

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. 

Overview of Basic Mortgage Foreclosure Process in Connecticut

 I thought it would be useful to give a basic foreclosure overview for a CT mortgage foreclosure.  Connecticut has some unusual foreclosure provisions that make it different from many states.  It is especially important for anyone considering a short sale to have a basic understanding of the foreclosure process as they proceed through the short sale process.

• Connecticut Foreclosures are Judicial With extremely limited exceptions all foreclosures in CT require suing the borrower and the court entering a judgment of foreclosure.  There are really no non-judicial foreclosures in CT such as there are in some states, where the lender can perform the foreclosure without court supervision.  There are no 'trustee sales' either since Deeds of Trust are not used in Connecticut.
•  Foreclosure sales are the exception rather than the norm.  Even though the process is judicial, in the vast majority of foreclosure cases in CT there is NO auction!  Connecticut follows a procedure called 'strict foreclosure' in cases where there is no or little equity in the property after the debt of the foreclosing lender is considered.  In a strict foreclosure the judge assigns a 'law day' (which is usually 30 - 60 days after the court enters judgment).  On that day the plaintiff lender will become the owner of the property unless the owner or a second lien holder pays to the plaintiff the amount of its debt.  There is no auction or opportunity for third parties to bid on the property.
• How Foreclosure Sales Work in CT.  The court will only order a foreclosure by sale with an auction if it appears that the borrower has equity in the property.  If a foreclosure by sale is ordered, the court appoints what is called a "Committee," which is actually one lawyer, to over see the sale process and hold the auction.  The auction will be held at the property being foreclosed on the date ordered by the court.  There are no 'courthouse steps' auctions in Connecticut.
• Lenders in Connecticut can Obtain a Deficiency Judgment.  If the results of the auction do not pay the lender in full, or if a strict foreclosure was ordered, the plaintiff lender can seek a deficiency judgment against the borrower(s).  A deficiency judgment is a money judgment against the borrowers for the amount remaining due the lender after the foreclosure.  If there was a strict foreclosure, the deficiency will be the difference between the value of the property as determined by the court (based on an appraisal) and the amount of the debt.  If there was a foreclosure by sale, the deficiency is the difference between what the plaintiff obtained from the auction and the amount of the debt.  In either case, the deficiency judgment can be obtained by the plaintiff by it making a motion after the foreclosure itself is completed (within the period required by law).
• Protections for Owners.  Connecticut is one of the few states requiring that lenders submit their foreclosures to a court supervised mediation process, although this is only applicable to foreclosures on principal residences.  The mediation process occurs after the lender has commenced suit.  The foreclosing lender is required to give notice of the mediation program when it commences the foreclosure suit, and the borrower can make a request that a court appointed mediator meet with the lender and the borrower to see if a resolution of the foreclosure can be worked out.  The borrower must request the mediation, it is not automatic.
• Timing.  Depending on how aggressively the lender pursues the foreclosure and if the owner opposes it or seeks mediation, the process takes about 90 to 120 days from commencement of the suit to the lender owning the property in a strict foreclosure; a foreclosure by sale takes about 30 days longer.

UPDATE:  The CT legislature has recently passed legislation expanding the voluntary Foreclosure Mediation program which provides for court supervised mediation between borrowers and lenders and made it mandatory.  The details of this program are still being put in place, but it will provide the opportunity for all homeowners to have court mediation to try to allow a reinstatement or mortgage modification.  As far as I know, it is the only program of its type in the country.

Please be advised that this is a basic summary of the Connecticut foreclosure process and is no substitute for consulting with an attorney for legal advice.  Due to its brevity, this summary does not include specific time frames or specific requirements for a foreclosure.  It is simply an overview.  Please consult an attorney for further information, and this blog posting does not constitute and is not a substitute for legal advice.

Please feel free to contact me for further information.

Paul H. Begemann, Esq.
http://www.attybegemann.com

Most of the great State of Connecticut uses broker form contracts when an offer to purchase residential real estate is made.  The majority of Fairfield County uses a binder form followed up by an attorney drafted contract.  I have prepared a summary of real estate transactions in Connecticut for further reading on that topic.  In either case, the selection of the proper contingencies and the drafting of those contingencies is essential.  When the broker is preparing the contract, it is generally considered "OK" (i.e. not the practice of law) to include either standard form contingencies or simple contingencies added to the form contract.  Of course, as a real estate attorney, I would always suggest that an experienced real estate attorney review any proposed contract prior to signature by their client (or add an attorney review contingency!).  Contingency provisions on residential real estate contracts are some of the most important elements of the contract and are especially important for the protections that they provide for the buyer.  Plus, contingencies can be drafted to cover almost any situation.

Ther purpose of this blog post is to give an introduction to the proper use of contingencies in real estate contracts, and then in future posts I will discuss some specific issues relating to some common contingency provisions used in real estate contracts in Connecticut (most of which are generally applicable in other areas also).

In general terms a contingency describes an event that must happen for the contract to be binding.  We are all familiar with the mortgage contingency or the inspection contingency.  So for instance a buyer will add a contingency (or check the appropriate box on the form contract) that states in general terms that they have lets say thirty days to obtain a mortgage approval in an amount no less that $150,000 at a rate of no ore than 6%; or that they have seven business days to obtain a satisfactory home inspection, to use the two most common contingencies we all deal with on a daily basis.  So what does adding the contingency mean?  Basically in these instances, while the buyer has signed a contract to purchase a piece of real estate, her contractual duty to fully perform the contract is contingent upon certain events occurring, in this example a mortgage approval and a satisfactory inspection.  Contingencies can be drafted to cover other events as well, protecting either the seller or the buyer.

Sounds simple so far, correct?  As in most issues dealing with real estate and especially real estate law, the devil is in the details.  The proper contingency provision should contain clear provisions that not only state what the contingency is, but what the obligations of both parties are and the consequences of failing to meet the contingency provision.  So for instance in our mortgage contingency example, does the contingency require that the buyer diligently pursue their application?  What happens if they are simply not approved by the deadline, but are not denied?  What happens if the deadline passes and the buyer is not approved, but also has not requested an extension?  What happens if they obtain an approval, but it is verbal or it contains numerous conditions?  For the inspection, what if the seller does not provide access?  Or the buyers' report states items "should" be repaired or have reached the limit of their useful life?  Or if the buyer simply says the premises are unacceptable without giving the seller the opportunity to make repairs or adjust the sale price?  Or if the time to inspect passes?  Most or all of these questions can and should be addressed in the properly drafted contingency provision.

Most broker form contracts, even in an area such as New Haven that has a Board of Realtors approved standard form contract, are different.  So for instance, the agency form contract for the party making the offer may differ from the form contract being used by the listing agent.  Thus it is essential that the agent first know their own contract and hopefully be comfortable with it, and second be able to spot what is different about the 'other' broker's contract and then be able to point that out to their client.  This of course is where the real estate attorney should also come into the picture.

Hopefully that provides an introduction to the use of contingencies.  I will continue bloggin on this topic in the future with a discussion of some particular common (and not so common) contingency provisions.

For more information feel free to contact me directly through my website or email me at attybegemann@comcast.net.