A purchaser of property should seek a real estate lawyer counsel as soon as they have identified a piece of property that they are interested in. While a real estate broker might be able to assist you with drafting an Offer to Purchase, it is highly recommended that you ask a real estate lawyer for the answers to any legal questions that you may have.
Offer to Purchase:
An Offer to Purchase details the way in which your purchase transaction will unfold. It details: the date by which you may inspect the property, the date by which you must sign a Purchase and Sale Agreement, the date by which you can cancel the transaction due to your inability to obtain a mortgage, and the date by which the transaction must close. It also confirms the agreed upon purchase price and how much of a deposit you will be putting down at the time of the execution of the Purchase and Sale Agreement. The Offer to Purchase will also outline any other specific items that may be important to your particular purchase (i.e. the Seller will remove carpeting from living area).
Inspection Period:
This is the period of time normally between the time you execute the Offer to Purchase and the time you execute the Purchase and Sale Agreement. During this period, you may hire a professional Inspection Company to inspect the premises. If there is anything about the inspection that you are not satisfied with, you may terminate the Offer to Purchase. If you are satisfied with the inspection or if you and the Seller have negotiated terms that are satisfactory to compensate for the inspection issues, you will then proceed to the Purchase and Sale Agreement.
Purchase and Sale Agreement:
The Purchase and Sale Agreement is the final contract between the Buyer and the Seller. It contains, in detail, all provisions of the transaction and it governs through the time of closing. While we recommend that you retain a real estate attorney from the moment you have located a property that you are interested in, it is very important that you hire a lawyer to represent you during the Purchase and Sale Agreement negotiations.
Mortgage Contingency:
If you are borrowing money from a commercial lender, you should make sure that both the Offer to Purchase and Purchase and Sale Agreement contain a Mortgage Contingency paragraph. The Mortgage Contingency paragraph should detail (a) the date that you will submit a complete mortgage loan application to the lender of your choosing; (b) the amount of the loan you will apply for; and (c) the date by which you should receive a Mortgage Commitment Letter from your lender. A Mortgage Commitment letter is a document from the lender that states that you have been approved for a mortgage loan for “x” amount and the lender will close on the closing date if you satisfy a certain set of conditions. If you do not receive this Mortgage Commitment letter by date detailed in the Mortgage Contingency paragraph, you can terminate the transaction and receive your deposit back from the Seller if you follow the appropriate steps. These appropriate steps will be detailed in the Mortgage Contingency paragraph.
Closing Attorney or Settlement Agent:
The Closing Attorney or Settlement Agent is an lawyer who, in most cases, represents the lender’s interests. The Closing Attorney or Settlement Agent will review the title to the property that you wish to purchase and will verify that any liens on the property are paid off prior to or at the time for Closing. The Closing Attorney or Settlement Agent will prepare all of the closing documentation and will record all the necessary documents at the appropriate Registry of Deeds.
Closing Date:
The Closing Date is the date that you (and your lawyer) and the Seller (and their lawyer) meet with the Closing Attorney or Settlement Agent to execute all necessary documents to transfer the property to your name. Once all necessary documents have been properly signed, the Closing Attorney or Settlement Agent will record certain documents at the Registry of Deeds, most specifically, the Deed, and disburse the proceeds to the Seller. Once the Deed has been recorded at the Registry of Deeds, you will own the property.
Title Insurance:
There are two different types of title insurance – Lender’s Title Insurance and Owner’s Title Insurance. Lender’s Title Insurance is required by all commercial lenders when you mortgage a property to secure a loan they have given to you. Lender’s Title Insurance, in the simplest of terms, tells the lender that the Mortgage recorded by the Closing Attorney or Settlement Agent is the first lien on the property. Lender’s Title Insurance insures that if the lender forecloses on the property because the borrower has failed to pay the loan when due that the lender will receive clean title to the property not subject to any other liens.
Owner’s Title Insurance is not required but is highly recommended by LaFountain & Wollman, P.C. for any person or entity purchasing a property. Owner’s Title Insurance insures to the Buyer that they have clean title to the property. Owner’s Title Insurance protects against defects that may exist in the title when you purchase the property. Owner’s Title Insurance is available for a one-time premium that is well worth the investment.
Attorney PeggyAnn K. Wollman, Esq., Partner, is an agent for First American Title Insurance Company. For more details regarding Title Insurance see www.firstamne.com.