LEGALLY SPEAKING by Cassandra Savoy OP/ED
For Part 1, please see the July 23-29 2020 edition of “Local Talk”
Your lender will require a termite inspection. The bank will not lend money secured by a house riddled with termites. The reason a termite inspection is so important is that termites eat the wood foundation of the house. You could be walking across the floor and received a serious injury when the floor collapses because everything supporting the floor has been eaten by a million fat termites!
So, you have completed all of the required inspections. What next? You will receive a multipage “Home Inspection Report.” You must read the report carefully. Then, pass a copy of the report along to your attorney. Remember, the attorney has not seen the house and your job is to point out your concerns. Only those deficiencies affecting health and safety issues will likely be address. In other words, Seller is not going to repaint the family room because you don’t like the shade of green. Color is not a health or safety issue.
Assuming that you are not buying a “handyman special,” municipal code violations are per se health and safety issues. Usually Sellers will need to make these repairs in order to obtain the “Certificate of Occupancy” or “Certificate of Habitability” required by the municipality.
Other health and safety issues might include things like leaks, or an obsolete electrical panel, or rarely used toilets that do not flush. The average life of a roof is twenty-five years, if the roof on the house that you are purchasing is close to its useful life, you will want to think about whether you can afford to replace the roof shortly after the purchase, but an aged roof does not require seller to replace. Regardless of the age of the roof, if it is not leaking, Seller is not required to replace the roof.
Buyer Beware! Remember even when the washer and dryer are being sold with the house, you want to make sure they are operable. If the washer or dryer is broken when you move in, you will have the hassle of A) having them removed and B) having them properly disposed of, and that could cost you a couple hundred dollars at a time when money is tight. Built-ins are another story. If the property has a built-it dishwasher, it ought to be operable.
There are several ways Seller can address the cost of repairs. The best method will depend on what the issue is. With your assistance, your attorney will negotiate this for you. For example, sometimes Buyer or Seller gets estimates. Then, they agree on the cost of the repairs and who will make them. Sometimes, Seller reduces the price of the house by the agreed to amount of the repairs. Sometimes, Seller identifies a repair person and gets them done.
Buyer Beware! Seller is trying to maximize his profit and wants to spend as little as possible to make repairs when he won’t have to live with the result. If, for example, there is an electrical issue, you want to make sure that Seller uses a licensed electrician and not an uncle who worked for an electrician before he retired ten years ago, or the jack-of-all trades guy who lives across the street who “knows” how to make repairs of all kinds. Make sure that if permits by the municipality are required, that Seller obtains the permits.
This presents another Buyer beware moment. Don’t be so anxious to cut corners at this stage that you don’t get everything done right. Buying your first house will likely take you longer than buying your second. Slow, steady, work with a competent professional.
Finally, at last . . . the bank sends you an unconditional commitment. Yippee!! The bank is really going to lend you the money to purchase your first house. You are ready to pack up the apartment and move into the house at last!!
At this point, your attorney will order title work. The bank will require that a title company trace the ownership of the property back at least sixty years. The bank wants to make sure that no one can lay claim to the property, other than the bank, for any reason. It wants to make sure that Seller and prior owners have no liens, mortgages, judgements attached to the property you are about own. The bank wants to ensure that when you assume ownership, the property will be all yours . . . (and theirs!)
Let me tell you what I mean. I can’t tell you how many times a homeowner needs a new roof or a new kitchen. They get a contractor who provides financing secured by the property by way of a second mortgage. The contractor/lender records the second mortgage at the Hall of Records. After the homeowner makes every payment, the contractor neglects to discharge the mortgage at the Hall of Records. Ten years later, the homeowner attempts to sell his house only to discover a “cloud” on his title. That loan of so long ago is back to haunt him. When the homeowner tries to reach the contractor/lender, he learns that the business no longer exists, and he has to hire a lawyer to look for a responsible person who can release the lien. If no responsible person can be found, the homeowner must ask the court to release the mortgage. We are talking big bucks to clear a title!
If this were to happen to your Seller, it would be Seller’s job to clear the “cloud” which hovers over your dream house. Your lawyer will make sure that you have no clouds or encumbrances on your title, and you will also get title insurance. You will get title insurance which says to the world, if the title company missed a lien, judgement, or mortgage that clouds your property, the title company will do what it takes to clear title.
Another Buyer Beware moment! Whatever you do, keep up with the title policy. Title companies store policies by number. If you discover a title problem twenty years after the purchase when you are about to sell your house, you can’t call the title agency who sold you the title insurance and say: “My name is First Time Homebuyer. I live at 232 Main Street, Newark, NJ. I am about to sell, and there is a lien that pre-dates my purchase. Can you fix it?” The answer is, “No!” You need to know who wrote the policy and what the policy number is. DO NOT MISPLACE THE TITLE POLICY AFTER THE CLOSING.
On or shortly before the closing date, you will make sure that you get credits where credits are due. For example, property taxes are apportioned between Buyer and Seller. Seller pays from the day the quarter started until the day of the closing. Buyer pays from the next day until the end of the quarter. If Seller has agreed to give you a credit for repairs, your attorney will ensure that you get it. Your attorney will make sure that the numbers are correct and tell you how much to bring to the table in the form of a certified check or a bank check. You will get your keys and be off to your new adventure.
After the closing, your attorney will send you the recorded Deed and a copy of your title policy. Make multiple copies of both documents. Make a digital copy.
Remember, purchasing a house is probably the most important purchase of your life. Not only is the house where you will live, but this is your investment in your future. Purchasing a house is too important to go about it alone and willy-nilly!
