Upcoming Changes in Real Estate Closing Procedures
Closing Disclosure Form & ALTA Best Practices
The real estate mortgage bubble has brought some changes to the real estate arena, but it seems the biggest changes are yet to come. The Consumer Financial Protection Bureau is replacing the long used HUD-1 Settlement Form with the Closing Disclosure form effective August 1, 2015.
The HUD-1 was a 3 page document that outline the closing transaction and was prepared by the Buyers attorney for closing, and was usually approved by the bank the day before or day of the closing. The Closing Disclosure form will be a reported 7 pages, will be prepared by the bank, and delivered to the closing attorney 3 business days before closing.
The result here is that lenders and attorneys need to become involved in the real estate transaction much earlier in the purchase process, and closing dates will be further out from the date of contract signing. Further, if any issues arise that require changes in the Closing Disclosure form, it will be at the lenders discretion whether changes are needed, and if they are, closing will need to be delayed by at least 3 days!
Further, since the new protections are creating more responsibility, and therefore liability, for the lenders, the lenders are requiring closing settlement attorneys to follow stricter guidelines. Many lender will be requiring that attorneys form and execute an ALTA (American Land Trust Association) Best Practices compliance guide, and if they fail to do so, they will not be able to close on loans from that lender.
Real Estate attorneys can no longer rely on “the way it has always been done”. The real estate closing procedures are changing, and attorneys need to adapt with them in order to properly represent their clients. Clients need to understand that the newer protections remove some of the control from the hands of the attorney, but that ultimately those requirements are there to protect the client.
Connecticut Law Creates Liability for Growing Running Bamboo
Do you have bamboo growing on your property? Is there bamboo growing on a property you are looking to purchase?
A new Connecticut law, Public Act 14-100, prohibits owners of real property from growing “running bamboo” (i.e., bamboo in the genus Phyllostachys, including yellow-groove bamboo) within 40 feet of adjacent property or a public right of way. The new bamboo law came into effect on June 6, 2014 and created two forms of liability for property owners growing running bamboo.
The first liability makes the property owners subject to a $100 fine per occurrence with each day of a continuing violation as a separate occurrence. Either The Department of Energy and Environmental Protection, any duly authorized municipal constable, municipal tree warden, zoning enforcement officer, or inland wetlands and watercourses enforcement officer may enforce the 40-foot buffer zone.
Secondly, the law creates a civil liability for running bamboo that grows beyond a person’s property boundaries by considering it a nuisance. Therefore, any person who violates the statute is liable for any damages caused to any neighboring property.
Further, businesses who deal in bamboo must also become aware of this law. Retailers of running bamboo must provide a warning to potential consumers that discloses that running bamboo is a fast growing plant that may spread if not properly contained, and must provide recommendations on how to properly contain running bamboo.
This law creates considerations that must be addressed by current or potential property owners. Owning or buying property with running bamboo can potentially cost the property owner a lot of money. An experienced real estate attorney can help their clients avoid such pitfalls of owning property.
Download the complete act below:
What is a Mortgage Contingency?
Mortgage Contingency in a Real Estate Contract
For the purchase and sale of a property, it is necessary to have a written contract. The contract will contain many terms, but the binding nature of the contract will be dependent on a range of “contingencies” that may or may not be necessary for a particular transaction. The most common contingency is a mortgage contingency. A party to a real estate closing may ask: “What is a Mortgage Contingency?”
Unless the Buyer is paying cash, they will need to get a mortgage to pay for the real estate property. Most parties want to have the contract signed as soon as possible, so the contract is usually signed before a mortgage is acquired. However, the Buyer will not want to be stuck with having to purchase the property if they cannot get a mortgage. Therefore, the contract would contain a mortgage contingency, stating that the Buyer will not be forced to follow through with the purchase if they cannot acquire a suitable mortgage, of a certain amount, by a certain date.
A mortgage contingency is satisfied when the Buyer receives a Mortgage Commitment Letter from their lender. The Mortgage Commitment Letter might contain it’s own contingencies, so it is important to have a real estate attorney review the Mortgage Commitment Letter to make sure it really is a commitment.
If a mortgage cannot be obtained by the specified date, a reasonable extension may be requested. If an acceptable mortgage cannot be attained at all, the contract can be cancelled, but the Buyer may be forced to pay a fee to the Seller or the Seller’s Attorney for the preparation of the contract. it is the responsibility of the Buyer’s attorney to inform the Seller’s attorney of the inability to acquire the financing, or the contract will become binding.
A Mortgage Contingency is a wonderful tool in the hands of a Buyer. It allows them to make sure a property is theirs to buy before they go through the hassle of lining up financing, and allows them to avoid the purchase if they cannot get a mortgage. There are consequences to failing to meet a mortgage contingency, so it is important to act reasonably.
Role of Buyers Attorney in Real Estate Closing
Whether you are looking to buy a home or a business location, you will need the services of a buyers closing attorney. A buyers closing attorney can make sure their client is protected legally and financially. What does a buyers closing attorney do?
A buyers closing attorney helps coordinate the purchase of the property by making sure all laws are followed, his client is getting the property as promised, and by managing the finances. A buyers closing attorney performs the following functions:
- Review the agreement between the buyer and their real estate agent (if hired soon enough);
- Reviews preliminary title report for mortgages, liens, restriction, taxes and ownership;
- Review and negotiate contract of sale with sellers closing attorney;
- Review mortgage commitment issued by the mortgage company;
- Prepare or review the title search;
- Prepare buyers closing documents such as power of attorney;
- Review sellers closing documents;
- Review loan documents;
- Attend closing with, or on behalf of, the client;
- Handle all funds through escrow;
- Provide an accounting of funds to the client; and
- Record all documents at Town Hall.
A sellers closing attorney can relieve the stress of buying a house or business property by making sure the client is protected. Buying a home or business location? Make sure the seller is legally compliant and your liabilities are limited by contact The Law Office of Eugene Glouzgall, LLC to handle your real estate closing matters. We charge flat rate fees on closings, and we offer FREE consultations, so you can make sure we are the right attorney for you.
Whether you are selling or purchasing a home or business location, you will need a real estate attorney to handle your closing. You may ask yourself: How do I pick a real estate attorney?
There are plenty of real estate attorney’s out there, but how do you pick just one? You should consider two things, cost and trust.
The first factor to consider is cost. You should pick a real estate attorney that you can afford. If a real estate attorney is charging above average fees, ask them why they think their representation is worth the extra money. Similarly, if a real estate attorney is charging below average fees, ask them why. In either situation, the answers might surprise you, and either way, it’ll tell you a little more about the attorney and how they handle difficult questions.
The second factor to consider is the level of trust you have in the real estate attorney. After all, this person is going to be handling hundreds of thousands of dollars on your behalf. They will be organizing and coordinating all of the paperwork regarding the sale or purchase of the real estate. They will be drafting the sales and purchase contract in an effort to protect your interests in the sale or purchase. Finally, they will be your primary point of contact for resolving any issues that arise of the sale of purchase. In essence, your real estate attorney will be the glue holding the entire deal together. You need to be able to trust them to be thorough, diligent, with good attention to detail, and most of all, honest.
You need to make sure that your attorney is right for you. That is why The Law Office of Eugene Glouzgal offers free consultations with no obligation to all our clients. Contact us today for a FREE CONSULTATION WITH NO OBLIGATION by email at Glouzgal@CTAttorney.us or by phone at 203-794-6691.