For all mortgage applicants after October 3, 2015, the Closing Disclosure form will answer many common questions and give protection as to essential terms. This five page document must be given to borrowers at least three days prior to closing. By comparing the Closing Disclosure to the Loan Estimate received by applicants when they applied for the mortgage, they can note any changes and avoid last minute surprises in a roomful of people at the closing.
In a purchase transaction I handled last year, the new survey showed that the house being purchased was more than two feet onto the neighbor’s property. As a condition of proceeding with the closing, I required the seller to obtain a written easement from the neighbor permitting the encroachment to remain, running with the land. Practitioners can provide opposing counsel with an easement template, either from their forms file or from the title company. The easement in final form should be reviewed by buyer’s counsel and the title company, and then executed and recorded in the county clerk’s office. The recorded easement will then be incorporated into the owners title insurance policy.
Sometimes the boundaries depicted on the survey of a recent home purchaser conflict with the location of property lines shown on a neighbor’s survey. That may lead to a dispute, which may then develop into a title insurance claim. In resolving an overlap dispute, the parties may agree to a compromise boundary line by written agreement or certificate, which would then be recorded in the county clerk’s office. In some cases, the parties may agree on a third party neutral surveyor to confirm the questioned boundary line, and to plot the compromise line on a survey which is then attached to the agreement before recording. Any such boundary line agreement must take into consideration whether the compromise line creates any encroachments. In that event, the boundary line agreement must provide for the grant of an easement for the encroachment. Counsel should also be concerned whether a boundary line adjustment creates a zoning violation or requires any municipal approval. Typically the surveyor will work with counsel (conferring with the municipality) to determine that.
If the parties cannot agree, then one may file an action in the Superior Court requesting the appointment of three commissioners (one of whom must be a licensed surveyor), to determine location of the disputed boundary. The boundary line commissioners are entitled to enter upon the properties, depose witnesses, and conduct needed investigation. The commission shall then file a report with the court within the time prescribed by the court. Any party who disagrees with the report may apply to the court to have the dispute tried by the court, with or without a jury. The court determines the compensation of the commissioners and decides whether one or both of the parties shall pay.
In order to reduce expense, the parties may agree to have the judge appoint a surveyor as a neutral expert to determine the boundary location and file a report, in lieu of a full boundary line commission.
The findings of the report must be memorialized in some way, such as by way of a court order which can then be recorded in the county clerk’s office.
A year after you close title to your new home, a process server delivers a foreclosure complaint to your door. You notice that your name is listed as a defendant as well as the name of your seller. You see that the plaintiff holds a mortgage on your home that is in default but you do not recognize that lender as anyone that you have done business with. You know that you are up to date with your mortgage payments.
After an anxious phone call to the plaintiff’s attorney, you learn that the settlement agent for your home purchase is alleged to have failed to pay off your seller’s mortgage. Your next phone call should be to your title insurance agent. S/he will advise you to submit a claim by way of letter to your title insurer reporting your receipt of these papers and to enclose a copy of the summons and complaint.
If you purchased your home with mortgage financing, your lender would require you to have a lenders title insurance policy as a condition of the loan. Typically, you would also purchase an owners policy as well for a small additional premium.
If you did purchase an owners title insurance policy, then the title insurer is obligated to handle the claim. That will usually involve assigning counsel to represent you in the foreclosure, and to resolve the claim, in some cases by paying money to satisfy your seller’s open mortgage.
There are many reasons why your seller’s mortgage may not have been satisfied at time of closing. For example, it is possible that the settlement agent (your real estate attorney or the title agent) did not remit the money but rather absconded with it or in rare cases still has it in his escrow account. In such cases, you certainly have the option of filing a police report, but you do in all cases have every right to rely upon your title insurer to resolve this for you.
Alternatively, the open mortgage may have been a home equity line of credit that the seller failed to close out at the time of closing. In such an instance, even though the lender received payment in full on the mortgage, it may have assumed that because the loan was not closed out by the provision of a signed authorization by the seller, the seller intended to retain the line of credit. And it is possible that although the seller sold his home, he continued to take advances from the line of credit, and then defaulted on paying those advances back, leading to the foreclosure. Such cases are very fact sensitive, and depending upon the facts, the court may determine that the mortgage must be discharged. If not, it may be up to your title insurer to pay off the seller’s mortgage, and then to seek reimbursement from the seller, the settlement agent or other responsible party.
It is critical for homebuyers to purchase title insurance and to have an experienced and dedicated attorney to close title, for their protection. Our firm has handled title litigation for many years and provides a free initial consultation for homeowners with title issues. Call us today.
New Jersey law requires that the seller of a home obtain a smoke detector and carbon monoxide detector inspection and certificate (sometimes called a “fire certificate”). This is initiated by completing a form at the office of the town, city or township where the property is located and paying a fee. An appointment is then scheduled and the municipal inspector checks the home to see that all required detectors are present and in working order. If that is the case, his office will then issue the certificate, which should be delivered to the buyer at closing. Typically, buyers will refuse to close title without the certificate. The seller is liable for a fine to the municipality for closing without the certificate. There is a limited exception for condominium and townhouse developments where the smoke detection system is for the entire building, but that exception needs to be verified with the municipality.
In New Jersey, when a new home is constructed, the municipality will inspect and issue a certificate of occupancy, evidencing that the home is complete and that the buyer may move in. In addition, municipalities have the option of requiring a home seller to apply for a certificate of occupancy or compliance on the resale of an existing home. In such cases, the seller must fill out a form, pay a fee and give the municipal inspector access to the property. Some towns are more stringent than others, but if the inspector finds a building violation, the seller must correct it and arrange for a re-inspection before the municipality will issue the certificate. Again, the seller can be fined for closing without the certificate. This process is also helpful to the buyer in that any improvements to the home which were constructed without required permits are redflagged. In some cases, the buyer and seller can agree that the buyer will take responsibility for correcting the violations within a limited period of time after closing and will sign an agreement to that effect which is given to the municipality so that a temporary certificate of occupancy or compliance can be issued.
An experienced real estate attorney will see to it that these certificates are produced on or before closing so that the transaction can be smoothly closed.
Since October 2015, American homebuyers have learned about TRID (the TILA RESPA Integrated Disclosures), a sweeping revision in the way that mortgage lenders make and close loans with their customers. First, the”Loan Estimate” replaces the old initial Truth-in-Lending disclosure & Good Faith Estimate for most closed-end mortgage loans. What’s more, the “Closing Disclosure” replaces the final Truth-in-Lending disclosure and HUD-1 Settlement Statement for most closed-end mortgage loans.
What Types Of Loans Are NOT Affected By TRID? Home Equity Lines of Credit (HELOCs), reverse mortgages and mortgages secured by a mobile home or dwelling not attached to real property.
What Are The Primary Changes Since the Adoption of TRID?
1. Application Definition – the application is considered received and the clock starts ticking for disclosure delivery when the following six items are received: Name, income, Social Security number, property address, estimated value of the property, and mortgage loan amount sought
2. Timing is Everything- Loan Estimate must be provided: No later than three business days after receiving the application and no later than seven business day before consummation
Closing Disclosure must be received by borrowers no later than three business days before consummation
3. Revisions and corrections “waiting period” requirements: A revised Loan Estimate must be received by the borrower(s) no later than four business days prior to consummation
4. A revised Closing Disclosure must be received by borrower(s) no later than three business days before consummation if the following occurs: APR becomes inaccurate, loan product changes or prepayment penalty is added.
TRID does provide greater transparency in the loan process, which is always a plus. However, the new requirements can and do cause delays in scheduling of closings and settlements. An experienced real estate attorney can help you navigate these changes.
Traditionally, a home buyer has obtained a property survey when purchasing a home. This is a drawing of the house on the lot prepared by a licensed surveyor which shows various measurements such as the distance of the house from the surrounding property lines. It will also show for instance if a neighbor’s fence is on the home buyer’s property. However, these days, mortgage lenders in many cases do not require their borrowers to obtain surveys. So the home buyer may say, “Why bother? Let me save that cost”.
The danger of that kind of decision is amply illustrated by the following real life scenario. Recently, after obtaining and reviewing a property survey for a home buying client, I discovered that the house he was buying, extended 12 inches over the property line onto the neighbor’s property. This had at least two potential consequences for my client. First, the neighbor could sue my client in the future to force him to remove the part of the house that was over the line. Secondly, even if he was not required to remove the encroachment, this problem would be a big stumbling block if my client ever decided to sell the house, because prospective buyers would have the same concern about the forced removal of the encroachment.
In this case, I required the seller to obtain an easement from the neighbor, permitting the encroachment. The easement was provided at no cost to the buyer and was recorded in the county clerk’s office so that any future buyer would see that the problem was handled and resolved. In this way, the buyer could go to closing with peace of mind. He would have never known of this problem if we had not obtained the property survey for him. It is important for home buyers and sellers to rely upon the expertise and guidance of their attorneys in these matters.
In a prior blog post, we discussed the Conley v. Guerrero decision, in which Judge Coleman held that an attorney review letter was validly and effectively sent, by fax and email, although the contract in the transaction and the New Jersey Supreme Court decision in New Jersey State Bar Association v. New Jersey Association of Realtor Boards required the letter to be sent by certified mail, telegram or personal delivery.
The Appellate Division recently upheld Judge Coleman’s position in a published opinion. It noted that the purpose of the method of delivery requirement for attorney review notices was to protect the realtors, and that in the Conley case, no realtor complained about the notice. Further, the court noted that the notice sent by the seller’s attorney was received by the buyer’s attorney, and substantially complied with the requirements. It noted that to hold otherwise would result in a forfeiture of the seller’s right to disapprove the contract of sale.
However, the Appellate Division rejected the suggestion that it update the notice requirement in New Jersey State Bar Association v. New Jersey Association of Realtor Boards to permit attorney review notices to be sent by email and facsimile. That will await another day, hopefully soon.
The New Jersey Appellate Division recently reversed a trial court decision dismissing claims against realtors for failure to disclose the deaths of two children in an elevator accident in a private home sold through those realtors. The listing agent was shown to have actual knowledge of the accident and had actually conferred with Coldwell Banker which advised that it was unnecessary to disclose it to the purchasers. It should be noted that Coldwell Banker requires sellers to complete and provide a sellers disclosure statement to all home buyers, which could have included the accident information. The selling agent claimed that he did not know about the accident until after the closing, but the court found that the purchasers were entitled to proceed with their case to attempt to prove otherwise. Although New Jersey regulations do not require a realtor to disclose social conditions or psychological impairments, the court found that the elevator accident presented the issue of whether the elevator was defective, which is information that the realtors were obligated to disclose. The court also found that the fact that the purchasers removed the elevator during the litigation did not warrant the dismissal of the lawsuit against the realtors, although that would prevent the realtors from proving that the elevator was safe. It considered that the non-disclosure of the occurrence of the accident itself was a basis for the realtors’ potential liability. The case will return to the trial court for further proceedings.