Real Estate Law
Q. What's an "assumable" mortgage?
A. It's an existing mortgage debt affecting real property which may be transferred from a seller to a purchaser without being called due by the party holding the mortgage. Each successive owner becomes liable for payment of the debt. If the original mortgage document itself contains a "call" provision, the party holding the mortgage need not consent to a purchaser being permitted to assume the mortgage, and may call the debt due if there is a transfer of ownership.
Q. Do I need a lawyer at the time the contract is signed?
A. Since the sale or purchase of real estate is usually the largest, single financial transaction you will enter into in your lifetime, it would be penny wise and pound foolish not to be represented by a lawyer at every stage of the proceeding. That is no less true when the contract is signed because the contract governs the rest of the transaction. Once signed, the contract may not be modified unless all parties consent.
Q. What is a "closing"?
A. It's that part of the transaction where the real estate is transferred from seller to buyer. The buyer receives all the documents necessary to ownership, and the seller receives the balance of the sales price set forth in the contract. The buyer's attorney reviews the deed and other documents to determine whether his client has purchased property which is marketable (i.e., free of liens). The deed is then recorded in the County Clerk's Office to evidence that the buyer has become the "record" owner of the property.
Q. What will my closing costs be?
A. The amount - for sellers and buyers - will vary from state to state, and indeed, within a particular state, between cities and counties. The amount will also vary depending upon the type of the buyer's mortgage financing. But, generally, the seller pays brokerage commissions, legal fees, transfer taxes, and possibly, "points," (each point is 1% of the buyer's mortgage loan). The buyer pays legal fees (including the mortgage lender's attorney), mortgage loan taxes, and "origination" or mortgage loan commitment fees, title insurance premiums (including the cost of the mortgage lender's policy), the cost of a survey, termite inspection fees, and, in some cases, points. The most prudent method to determine closing costs is to secure an estimate from your lawyer before you sign the contract to sell or purchase.
Q. What is title insurance?
A. It is a policy of insurance issued to a buyer, in which the buyer is insured against defects in marketable title to the real estate. It remains in effect for as long as the buyer owns the real estate, but the premium for the coverage is paid only once, at the closing. The amount of the premium depends upon the property's purchase price.
Q. What is "marketable title"?
A. There is no all encompassing definition, but basically it means that a buyer is given the right to occupy the property without interference, and will be able later to sell, transfer, or mortgage it without problems. In short, no "liens."
Q. What is a "variable" rate mortgage?
A. One in which the interest rate does not remain constant for the life of the mortgage. The interest rate will vary depending upon certain stipulated outside factors governing the variable rate. The mortgage borrower should be certain that all governing factors are clearly set forth in the mortgage documents.
Q. What is a pre-payment penalty?
A. It's a monetary penalty to which a mortgage lender is entitled if the borrower pre-pays the mortgage debt before its stipulated maturity date.
Q. Are the services of a real estate broker required to sell or buy a house?
A. They are not required, but their expertise in locating buyers and sellers, assisting in securing mortgage financing, and generally advising and counseling all interested parties, is of inestimable value. Of course, the seller pays a commission for those services, but it's well worth it.
Q. Why do I need a lawyer if the broker, seller, title insurance company, and the mortgage lender are represented by lawyers?
A. To protect your basic interests. Their attorneys are not yours (even though, in the case of the title insurer and the mortgage lender, you may be charged for their legal fees), and although there are some similar interests, no one but your attorney will protect your end, and be certain that you receive exactly what you are legally entitled to receive.