Why Sellers Need An Attorney

Sellers sometimes ask us whether or not they need an attorney in order to sell their home.  In Massachusetts, it is standard for buyers to be represented by an attorney and is even mandatory when the buyer is taking out a mortgage.  (Technically, that attorney is representing the bank, but for the most part, the bank and the buyer are both “on the same side”.)  For sellers, there is certainly no law in Massachusetts mandating that they be represented by an attorney.  However, there are definitely seller obligations that are best handled by an experienced real estate attorney.  With such an important asset at stake, sellers would be ill-advised to “go it alone” or to believe that their Realtor can handle whatever comes up.

Below is a list of typical attorney services* that are provided by the attorney representing the seller:

  • Comprehensive review of Seller’s Title and Opinion of Title
  • Review of Offer to Purchase
  • Drafting, negotiation and finalization of Purchase and Sales Agreement
  • Closing Document preparation (deed, trustee certificate, release of homestead)
  • Obtaining seller’s closing documents (6D certificate, payoff statements)
  • Assist in the coordination of the closing and representation at the closing
  • Limited Power of Attorney
  • Attend the Closing & review all closing documents and explain their meaning and significance to the seller

Your Realtor will be involved with most of these steps as well, but does not replace the need for an attorney.  For a cost that is typically in the $800-$1300 range (depending on the attorney), it is well worth the peace of mind of having these important issues handled by a legal professional.

If you are thinking of selling your home, you should engage an attorney as early in the process as possible so that he or she can conduct an initial title search to be sure no unexpected problems arise that could result in a lengthy delay after you find a buyer.  Your Realtor should be able to recommend a good real estate attorney.  If you don’t have one, it would be my privilege to assist you in the sale of your Cape Cod home. Please contact me to get started.

* List of services courtesy of Cape Cod Title and Escrow.

The Sale/List Price Ratio

As of the writing of this Blog post, the average sale/list price ratio for Barnstable County is 94%, meaning that ON AVERAGE, homes are selling for 94% of their list price. This leads both buyers and sellers to believe that a home priced at $500K should sell for $470K. But when it comes to negotiating, whether you are the buyer or the seller, the sale/list price ratio is not a meaningful statistic, and should have little to no influence when considering the likely sale price of a home. Here’s why.

First of all, when we talk about a ratio involving “list price”, we need to know what list price is being used. Is it the ORIGINAL list price, or the MOST RECENT list price (after potentially many reductions). The figure listed above is actually referring to the original list price, meaning that the ratio involving the most recent list price would very likely be a larger percentage (perhaps 96%).

But regardless of whether it is the original or most recent list price, it is still meaningless from a negotiating standpoint, because the number is nothing more than an average of diverse opinions. Some sales could show ratios at 75%, while others could show ratios over 100% (meaning the home sold for MORE than the asking price). The list price is set by the Seller and may or may not have any bearing on market reality. The list price could be ridiculously high, or just a little high, or right on the money, or even BELOW market value. It is entirely up to the Seller to decide the list price of a home. Hopefully the Seller has a good listing agent who has done a thorough analysis of market value, but that doesn’t guarantee the Seller took the Realtor’s advice and it doesn’t guarantee that the advice was sound.

A similar argument could be made regarding the ratio comparing assessed value to sale price, although with certain constraints, that ratio is arguably a little more useful. If you are comparing homes in the same neighborhood that were built around the same time and have received a similar amount of “like” updating, the assessed/sale price ratio could be ONE factor to consider, but by no means the only nor most significant.

The only way to discover the fair market value of a home is through a market analysis of “like” properties either nearby or in similar areas that have recently sold. Homes that are currently on the market are not as useful because those homes have not actually SOLD at those prices. By comparing YOUR home, or the home you are trying to purchase, against these comparative homes (or “comps”), you will obtain the best knowledge regarding the likely selling price of your home or the home you are pursuing.

Whether buying or selling, our team of local, knowledgeable Realtors would be happy to represent you and provide you with a thorough and thoughtful analysis of the value of your home or the home you are hoping to purchase. Please contact us for expert, professional, local advice.

Rest Easy With Up-To-Code Smoke Detectors

When a home is sold in Massachusetts, it is Massachusetts law that the smoke detectors be compliant with current smoke & carbon monoxide detector laws. In general, it is up to the Seller to review their smoke/CO detectors, be sure they are up to code, and have them inspected by the local fire inspector to have them certified as being compliant. The Seller is obligated to present the smoke compliance certificate at the closing.

But what if you’re not buying or selling a home? Are YOUR smoke/CO detectors compliant with today’s law? Replacing the batteries each year is great, but that does not necessarily mean that your detectors are in compliance with today’s laws. For greater peace of mind and to help safeguard your family and guests, you should review your smoke and CO detectors and bring them up to code – especially if your home is more than 10 years old. Massachusetts provides a complete guide to the smoke/CO detector law (for one and two-family homes) that is an essential resource to help you do this, but here are some of the highlights of the law just to give you a brief overview:

As you probably know, there are many different types of smoke detectors. Some are hard-wired with battery backup and some operate strictly on battery. Some use photoelectric technology and some use ionization technology. Some use both. The exact type of smoke detectors you need depends on the year your house was built and or renovated. The Massachusetts guide will tell you EXACTLY what you need.

  • In general, homes built before 1975 and not renovated or modified afterwards can use detectors that are battery-powered. The new battery powered detectors feature 10-year sealed, non-rechargeable, non-replaceable batteries. They do not use 9-volt batteries like the older ones. They must feature photoelectric technology. CO detectors must be present on every level of the home, including habitable portions of the basement and attic.
  • Homes built or substantially renovated between 1975 and August 27, 1997 must be hardwired and interconnected. The technology utilized (photoelectric or ionization) depends on where they are located. In general, photoelectric technology can be used everywhere, whereas ionization technology can be used if the alarm is more than 20 feet from a kitchen or bathroom. CO detectors must be present on every level of the home, including habitable portions of the basement and attic.
  • Homes built or substantially renovated after August 27, 1997 have even stricter requirements, particularly in terms of number of units required. They must be hardwired and interconnected with battery backup. Like the rule above, photoelectric technology can be used everywhere, whereas ionization technology can be used if the alarm is more than 20 feet from a kitchen or bathroom. CO detectors must be present on every level of the home, including habitable portions of the basement and attic.
  • There are two more categories of homes that dictate the smoke/CO detector requirements, and those are for homes built or substantially renovated after January 1, 2008, and those built or substantially renovated after February 4, 2011. The requirements of these homes are even stricter, particularly with respect to where you can use photoelectric, ionization, or both technologies.

The exact number and placement of both the smoke and CO detectors also depends on the age of the house and should be fully understood. For the COMPLETE set of rules that pertain to your home based on its age, please consult the official guide to the Massachusetts Smoke/CO Detector LawThis blog post is not intended to be used as a substitute for the guide. Consult your local fire department if you have questions about any part of the law.They will be more than happy to assist you.

Renegotiating After The Home Inspection

When placing an offer, most Buyers make their offer contingent upon a satisfactory inspection. But what happens when the inspection is NOT satisfactory? There are several options and Buyers should understand the implications of each before choosing one.

First, let’s review the purpose of the home inspection. The home inspection is intended to make the Buyer aware of issues that they — as average consumers — had no way of knowing about or understanding without the inspection. This includes issues that were not clearly visible to the average Buyer and/or whose significance was not readily understood by someone without specialized knowledge. Issues that ARE visible and/or are clearly understood should be taken into consideration by the Buyer when he or she is making the initial offer. These issues will be tougher to renegotiate after the inspection, and rightly so.

If issues have surfaced during the inspection that you did not know about, are serious in nature, will need to be remedied ASAP, and will cost more than one percent of the purchase price, they are good candidates for renegotiating (or withdrawing) your original offer. As the Buyer, here are your typical options after the inspection:

  1. Tell the Seller you are satisfied with the results of the inspection and that you plan to move forward according to the original terms.
  2. Tell the Seller you are unsatisfied with the results of the inspection and would like to renegotiate your offer.
  3. Tell the Seller you are unsatisfied with the results of the inspection and that you do not wish to proceed with the purchase of the home.

Options 1 and 3 are pretty straightforward. But Option 2 could take on many different forms. You could ask the Seller to address the issues that concern you prior to the sale. You could ask for a reduced sale price so that you can address the issues yourself after the sale. You could stick with the original sale price but ask for a credit at closing so that you can address the issues yourself after the sale. The best option depends upon your particular needs and circumstances, and your Buyer’s Agent can help you decide which course to pursue.

The Seller does not HAVE to agree to any of these options. He or she can tell you there will be no further concessions and take his/her chances that another Buyer will come along. If the home had just hit the market, the chances of the Seller choosing this option are greater than if it had been on the market for 3 months. If the Seller refuses any concessions, you will need to decide whether or not you wish to move forward. Usually, and if the issues are both legitimate and serious, some middle-ground is reached between the Buyer and Seller.

In summary, before you make an offer on a home, be sure you have taken a long, hard look at everything that is visible. Are the windows cloudy? If so, the seals are likely broken. Is there rotted wood on the outside of the home? Factor in some money to have this repaired. Are there fans in the bathrooms? If not, they’re not being properly ventilated. The older the home, the longer you should spend inspecting everything that is visible. This will save both you and the Seller unnecessary sparring after the inspection.

Good luck, and be sure you are working with a good Buyer’s Agent to assist you throughout the process. Please contact me for assistance. It would be my privilege to work with you.

Home Buying 101

Many Cape Cod home buyers haven’t bought a home in a very long time and possibly NEVER in Massachusetts. Others may be first-time home buyers altogether. Below is a list of the basic steps involved in a typical home purchase in Massachusetts. To assist you throughout each of these steps, be sure you are working with a reputable, knowledgeable Buyer’s Agent. Not only does it not cost you anything, but it will save you significant time, frustration, and in many cases, money as well. Please don’t hesitate to contact me for expert, personalized assistance. It would be my privilege to assist you.

 

Obtain a current pre-approval letter or proof-of-funds.

Before you begin actually visiting homes with a Realtor, you should be certain how much home you can afford. There is no point wasting your time looking at homes you cannot afford. If you do not have a pre-approval letter in-hand, you will realistically not be able to make an offer on a home, in which case you are not quite ready to be viewing homes in person. Speak to your lender and ask him/her for a pre-approval letter. If you don’t have a lender, contact me and I will provide you with some trusted contacts.

Shop for homes with your Buyer’s Agent.

A Realtor who is acting as your Buyer’s Agent owes his/her complete fiduciary responsibility to YOU, and therefore can provide you with information and assistance that the agent representing the seller cannot. And best of all, it doesn’t cost you a dime. If your Realtor has a good website with full MLS property search capabilities, you can browse homes initially at your leisure from the comfort of your own home. When you’re truly ready to buy, your Realtor can help you narrow down your choices, set up all of your appointments, and provide you with valuable information about the local market and area.

Find out from your Buyer’s Agent what the home is REALLY worth.

One of the most important services a Buyer’s Agent can provide is information that will help you decide the REAL value of the homes you like. A seller can ask whatever (s)he wants for a home and the Seller’s Agent is obligated to do what the seller requests. But a good Buyer’s Agent knows the market and will provide you with a detailed report showing the actual sale prices of similar properties that have recently sold. This will help you arrive at the best offer price for the home.

Make an offer and negotiate final price & terms.

Once you’ve decided on an offer price, your Realtor (Buyer’s Agent) will prepare all the paperwork, have you sign it, and submit it to the Seller’s Agent, along with a good faith deposit, which is typically $500-$1000. Usually, there is some back and forth that takes place before both parties agree to a final price and terms. Your Buyer’s Agent will assist you throughout this process until you and the seller have come to an agreement (or not). If an agreement is reached, many wheels are suddenly set in motion, as described below. If you could not come to an agreement, you take back your good faith deposit and resume house shopping with your Realtor!

Apply for a mortgage (unless paying cash).

Once your offer is accepted, and assuming you are not paying cash for the home, you should submit a completed application for your mortgage. It will take a while for the bank to collect ALL the information they need from you, and the sooner you begin this process, the better. Plus, the offer you submitted most likely has a date by which you must have applied for your mortgage. Be sure to read all dates very carefully and be sure to comply with each deadline! A good Buyer’s Agent will keep track of all this for you to ensure that you do not inadvertently lose your deposit.

Conduct your inspections.

Next, you must immediately schedule your home inspection and any other inspections you requested (such as termite, lead paint, radon, etc.) A buyer typically has about 2 weeks to complete these inspections from the acceptance of the offer. If you are happy with the results of the inspection, you continue with the process. If you are not, you typically can either back out of the deal and get your deposit back, or you can try to renegotiate with the seller to address any inspection issues that concern you. For example, if you learned the roof is at the end of its life and you had no way of knowing this prior to the inspection, you may want to negotiate a lower price to reflect the condition of the roof.

Execute a Purchase & Sale Agreement.

If you are proceeding with the sale after all inspections are complete, you will typically then sign a Purchase & Sale Agreement (aka P&S). This is a longer and more detailed contract than the initial offer form that spells out all of the terms of the sale. It is typically prepared by the seller’s attorney and you should have your own attorney review it and make any necessary changes on your behalf. Your Buyer’s Agent can assist you with selecting a reputable Cape Cod real estate attorney if you do not already have one. A buyer typically makes a second and much larger deposit at this time. This deposit is completely negotiable but is typically at least 5% of the sale price. 10% is more common. ALL deposits are typically and completely refunded if the buyer is unable to obtain a mortgage according to the terms of the P&S.

Bank conducts appraisal.

If you are applying for a mortgage, the bank will conduct an appraisal to be sure they agree with you regarding the value of the home. Since they are loaning you the money to buy it, they want to be sure it is a sound investment for them to make. This is actually very good for you, since it helps to reassure you that you are not overpaying for the home. In some cases, it might reveal that you are getting a very good deal — at least in the bank’s eyes.

Wait for final loan commitment.

It typically takes 4-6 weeks to receive your loan commitment from the moment you submit a completed application. During this time, you should stay in touch with your lender and be sure you are providing them everything they requested in the most timely manner possible. This will help you get your commitment as soon as possible. The seller will be very anxious for you to receive your commitment so that (s)he can be sure the sale is going through.

Confirm passing Title V and Smoke inspections with Seller.

While you are waiting on your mortgage commitment and planning paint colors for your new home, the Seller will be busy ensuring that the septic system passes Massachusetts Title V regulations and that the smoke and carbon monoxide detectors are up to code. Both of these are typically required in order for the home to be sold. Your Realtor can provide you with more information about each of these.

Obtain homeowner’s insurance (& flood insurance, if required/desired).

At least 2 weeks before the scheduled closing, you should contact an insurance company to obtain a homeowner’s policy for your new home. You will not be allowed to close on your mortgage without it. If the property is in a flood zone, flood insurance may also be required. Insurance on the Cape can be tricky, so I recommend you contact John Curley at Dowling and O’Neil, one of the Cape’s premier property and casualty insurance agencies. He can be reached via email at jcurley@doins.com or by phone at (508) 957-4235.

Close on your new home!

By the time your actual closing date arrives, nearly everything has already been done, except for final mortgage signatures, final payment, and transfer of the deed! The closing attorney (also called the bank’s attorney and sometimes, yet erroneously, called the buyer’s attorney) will contact you a couple of days before the closing to let you know exactly what funds you — the buyer — need to bring to the closing. The closing typically takes place either at the Barnstable Registry of Deeds or in the closing attorney’s office. But this differs from closing to closing. The buyer leaves the closing table with the keys to the home and the seller leaves with a big fat check!

And VOILA — a new Cape Cod Homeowner is born! I, for one, have never been so happy and have never looked back.

Author’s Disclaimer: This post is intended to provide a general overview of the home buying process. However every transaction can have its own special situations or circumstances and might not be covered in this post. This post is intended for educational use only. The author does not accept responsibility for any misinterpretation or misapplication of the information contained in this post. The publishing of this material does not constitute the practice of law nor does it attempt to provide legal advice concerning any specific factual situation. FOR ADVICE ON SPECIFIC LEGAL PROBLEMS CONSULT LEGAL COUNSEL.