Selling your home can be an emotional time. Whether it’s your primary residence or a childhood home your parents can’t manage anymore, packing boxes will remind you of cherished memories created by your family over the years in these four walls.
Don’t let emotion cloud your judgement when it comes time for the legal paperwork. It’s important to work with a real estate attorney who has estate planning background so that your family interests are considered across the generations.
Here’s an overview if the responsibilities of the home owner and the real estate attorney.
WHAT YOU DO:
- Present Offer to Purchase to Generations Law Group
The Offer will contain many significant terms such as purchase price, inspection contingency, mortgage contingency, purchase and sale deadline and closing date. These terms will be translated into the Purchase and Sale Agreement which will become the critical and controlling document until closing.
- Gather a list of the people in your “Seller” team with contact information.
Generations Law Group will work with your real estate agent throughout the transaction to ensure that the parties’ communications are properly being documented and reflected in necessary agreements.
- Sign Purchase and Sale Agreement.
See additional information below.
- Obtain a Smoke and Carbon Monoxide Certificate from the local Fire Department
Your real estate agent is likely to do this for you, but since the responsibility is ultimately yours, it’s good to know about.
In most sales transactions, it is a requirement that you present a Certificate of Compliance from your local fire department prior to or at closing. To do this, you should call the fire department no more than one or two weeks prior to the scheduled closing date to have the smoke detectors and CO detectors inspected. It may be that additional or more up to date detectors are needed before the fire department will issue the Certificate of Compliance.
- Obtain Final Readings:
Prior to closing, you will be required to close-out specific accounts with the Town, as well as provide final invoices. It is important to inform your attorney of the specific services your property receives so that these can be identified in the purchase and sale agreement.
Water/Sewer from the Town Offices
A final water and sewer use bill is also required to be presented at or before closing (unless the property is equipped with a septic system and/or a private well). You should contact the Town five to seven days prior to the closing to order a final water reading of your water meter. They will issue a Final Bill which you can either pay or present to be paid at closing. In either situation, the bill must be marked FINAL.
Septic System (if applicable)
The Massachusetts Department of Environmental Protection requires that most septic systems be inspected prior to ensure that the system is in good working order and without damage. More information relative to Title 5 Inspections can be found at: http://www.mass.gov/eea/agencies/massdep/water/wastewater/septic-systems-title-5.html. Generally, it is a good idea to obtain this Certificate prior to initially marketing the property as it is valid for up to 2 years.
If your electric service is provided by a Municipal Light Company, you need to provide a final bill or receipt of payment for all outstanding electrical services as of the date of the closing.
Oil Reading (if applicable)
If the property is heated by oil, generally a Seller will be reimbursed for any oil remaining in the tank at the time of closing. In order to obtain the reimbursement, you should have your oil company provide a reading of your oil tank and provide this, along with a recent oil bill, to the Buyer. Alternatively, you could have the oil company top off the tank and submit the invoice prior to or at closing.
- Sign the Closing Documents
If you do not wish to attend the closing, or simply are not available to do so, Generations Law Group will prepare a limited Power of Attorney which will allow your Generations Law Group attorney to attend the closing on your behalf and sign all necessary closing documents.
- Move out and turn over the keys!
WHAT WE DO:
- Draft Purchase and Sale Agreement with the Buyer’s Attorney.
After the Offer to Purchase has been signed, and the Buyer’s property inspection has taken place, the parties will sign a Purchase and Sale Agreement. This is a heavily negotiated document which contains protections and obligations for both you and the Buyer. Generations Law Group will send out the first draft of the Agreement to the Buyer’s attorney. After review and further edits, if necessary, Generations Law Group will send the agreement to you for review and answer any questions. At the signing of the Purchase and Sale, the Buyer will generally leave a larger deposit which is generally held in escrow by your broker or attorney.
There may be a few contingency clauses within the Offer and Purchase and Sale Agreement. These clauses are a fancy way of saying that the Buyer may withdraw from their obligation to purchase the property if certain conditions are not met. The most ubiquitous Buyer Contingency is the Mortgage Contingency. This gives the buyer the option to cancel the purchase if they cannot obtain a loan from a lender. A strong buyer will often present a “pre-qualification” letter with the Offer to Purchase. Note that this pre-qualification is not a mortgage commitment, which is required in the mortgage contingency clause. A mortgage commitment will be issued to the buyer once their lender has appraised the property, reviewed the title to the property and assessed the Buyer’s credit.
Other contingencies may include a condition that the Buyer is able to obtain a Title Insurance Policy or a contingency that the property must appraise for equal to or higher than the agreed upon purchase price. The contingencies will vary from deal to deal, but from a Seller point of view, the fewer of these conditions, the better for you.
- Clean up title
The Buyer’s attorney will perform a full title examination of your property. A title search is the process of examining the history of a property with relevant documents to determine if the person selling the property has the right to sell it, and that the buyer will obtain full rights to the property. If a title issue arises, for example, an error in the public record, forgery, or an unknown lien or a previously undiscovered lien, Generations Law Group will review the complication and work with you to resolve the matter. Sometimes the hurdle may be a quick and easy fix, other times it may necessitate more complex steps, such as Court filings and appearances. If you purchased a Title Insurance Policy at the time of buying the property, your Title Insurer will also work with you to clear any title defect in a timely manner.
Within the context of most Purchase and Sales Agreement, there is a built-in thirty day extension period beyond the agreed upon closing date in which the Seller has to cure any of these title issues. It’s important to note is that this 30 day extension is for curing title issues only, and does not give a Seller 30 additional days to move out.
CLOSING DISCLOSURE STATEMENT
At least three days prior to the closing, the bank attorney (often also the Buyer’s attorney) will draft a form which details all the fees and costs associated with the sale. This is called the Closing Disclosure Statement, or “CD.” Some common deductions are the real estate broker fees, legal fees, state transfer taxes, your mortgage payoff amount and pro-rations between you and the Buyer. The closing disclosure statement will specifically itemize these amounts and deduct them from the agreed upon sales price to calculate your net proceeds amount. Generations Law Group will review the CD with you to determine accuracy as well as answer any specific questions you may have.
- Seller Documents
The deed is the legal document that transfers interest and ownership from one person to another. In Massachusetts, the deed must not only be signed by the Seller, but also be recorded at the appropriate Registry of Deeds to become effective. Generations Law Group will draft the deed and obtain approval by the Buyer’s attorney. You must sign the deed and have you signature notarized. All staff and attorneys at Generations Law Group are Notary Publics.
The deed is different than the title. The title is the legal way of saying you own a right to something, while the deed is the actually the document that transfers your ownership interest to another.
NOTE: If your property is owned in Trust, or by a Corporation, additional documents in addition to the deed may be required pursuant to proper conveyance practices. It is best to provide Generations Law Group with all relevant paperwork at the outset of your engagement.
Power of Attorney
If you do not wish to attend the closing, or simply are not available to do so, Generations Law Group will prepare a limited Power of Attorney which will allow your GLG attorney to attend the closing on your behalf and sign all necessary closing documents.
- The Closing
Both the Offer to Purchase and the Purchase and Sale Agreement will indicate a date in which the closing is to take place. Usually this occurs at either the appropriate Registry of Deeds, or alternatively the office of the bank or buyer’s attorney. At the closing, there are specific seller documents which are, in most circumstances, required to be signed. They include documents such as: a Title or Mechanic’s Lien Affidavit, which certifies that you are unaware of any adverse liens or encumbrances, Carbon Monoxide and Smoke Detector Certifications stating that all are in compliance, 1099 Tax Forms which you will need for income tax reporting purposes, Compliance Agreements stating that you agree to correct any errors in the closing up to a certain period of time, and others, depending on the closing attorney’s requirements.
Disbursement of Proceeds
Because the actual transfer of ownership does not occur until after the deed is recorded, your proceeds cannot be released to you until the deed is “on record.” This usually occurs immediately following the closing, depending on the time of the closing. If it is later in the day, it may not be until the next morning that the deed is put on record and your proceeds are released.
The sale of your property may or may not trigger a taxable event. Under the current Federal laws, the first $500,000 for married couples, and the first $250,000 for singles, in gain from the sale of a principal residence is exempt from the capital gains tax. You can only use this exemption once every two years, and it applies to principle residences only.
You should consult with your accountant prior to selling as there may be some tax reducing options, such as a 1031 Exchange.