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.

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.

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.

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!

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):

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

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.