2017 NJSBA ANNUAL MEETING Real Estate Transactions from A Z A 101 Course Co-Sponsored by the Real Property Trust and Estate Law Section

Transcription

1 2017 NJSBA ANNUAL MEETING 2017 Real Estate Transactions from A Z A 101 Course Co-Sponsored by the Real Property Trust and Estate Law Section Moderator/Speaker: Heather G. Suarez, Esq. Suarez & Suarez, Jersey City Speakers: Nicole Plath, Chief Executive Officer Fortune Title Agency, Inc. Carol J. Truss, Esq. Gross Truss & Herstik, PC, Freehold

2 1 REAL ESTATE A TO Z Heather G. Suarez, Esq. Suarez & Suarez Jersey City, NJ Carol J. Truss, Esq. Gross, Truss & Herstik, P.C. Freehold, NJ Nicole Plath Fortune Title Agency, Inc. Roseland, NJ

3 2 Introductory Remarks Basic walkthrough of a residential real estate closing 1. Negotiation and Execution of Contract 2. Mortgage Process 3. Due Diligence (inspections, title search, survey) 4. Closing 5. Post-closing follow up items

4 3 Representation Letter Fee Arrangement Flat Fee Billing Time-Incurred Billing Engagement of Client Billing for Services and Disbursements Payment for Services upon termination of contract before closing No Dual Representation Other ethical considerations (trust accounts, informed consent of clients, executing closing documents)

5 4 The Contract A contract is a binding agreement between the purchaser and seller that imposes and defines legally enforceable rights and obligations of the parties. Under the NJ Constitution, the New Jersey Supreme Court has sole jurisdiction with regards to the practice of law (New Jersey Constitution, Art. VI, Sec. 2, para. 3 (1947). In New Jersey State Bar Ass n v. New Jersey Ass n of Realtor Boards, 93 N.J. 470 (1983), Supreme Court approved settlement between State Bar and State Board of Realtors concerning the preparation of residential contracts and leases.

6 5 Primary Forms Of Residential Contracts MLS Real Estate Brokers Form of Contract Pre-Printed Forms, e.g. All-State Form/Legal Zoom Draft contract prepared by Seller, Purchaser (or likely their attorneys)

7 6 3-Day Attorney Review Clause Settlement codified in N.J.A.C. 11:5-6.2: Study by Attorney. Buyer and/or Seller may retain attorney to review contract within 3 day period. Counting of Time. 3 days from the date of delivery of the signed contract to Buyer and the Seller. You do not count Saturdays, Sundays or legal holidays. 3 day period may be extended in writing. Notice of Disapproval. If attorney disapproves of contract, must notify broker and other party within 3 day period. Notice must be sent via certified mail, telegram or personal delivery. Conley v. Guerrero. Argued before NJ Supreme Court in January 2017

8 7 Addressing the Contract Upon receipt of contract: Attorneys can agree in writing to extend attorney review Approve the contract in toto. Disapprove of the contract and cancel the transaction Disapprove of the contract in accordance with the terms of the attorney review clause but then provide suggested revisions to the contract to make it satisfactory Offer an entirely new contract in place of original. Contracts can be amended by rider or letter agreement Best practice is to have buyer(s) and seller(s) sign to ensure enforceability Request back title, permits and surveys

9 8 Property Condition Disclosure Statement Age/ownership of house Water/mold problems Insect infestation

10 9 Property Condition Disclosure Statement Remodeling/ permits Water source Abandoned wells, sewage tanks

11 10 Property Condition Disclosure Statement Flood hazard zone Shared common areas Underground storage tanks

12 11 Property Condition Disclosure Statement Deed restrictions Legal actions Mortgages Other defects

13 12 Property Condition Disclosure Statement Items included in sale

14 Property Condition Disclosure Statement 13

15 Broker Disclosure Notice 14

16 15 Commonly Negotiated Items Mortgage contingency Sales contingency Items included in purchase Inspection provisions and terms o Structural inspections o Environmental inspections (radon, formaldehyde, asbestos, pesticides, toxic chemicals, water contamination) o Septic/well testing o Oil tanks

17 16 Commonly Negotiated Items Closing date/time Closing Documents (Form of Deed, Affidavit of Title, bulk sale, etc.) Closing Adjustments Use and Occupancy/Property Storage post-closing

18 Standard MLS Broker s Contract 17

19 Standard MLS Broker s Contract 18

20 Standard MLS Broker s Contract 19

21 Standard MLS Broker s Contract 20

22 Standard MLS Broker s Contract 21

23 Standard MLS Broker s Contract 22

24 Standard MLS Broker s Contract 23

25 Standard MLS Broker s Contract 24

26 Standard MLS Broker s Contract 25

27 Standard MLS Broker s Contract 26

28 Standard MLS Broker s Contract 27

29 Standard MLS Broker s Contract 28

30 Standard MLS Broker s Contract 29

31 Short Sale Addendum 30

32 Short Sale Addendum 31

33 32 Financing The Acquisition Selecting Lender and the Loan o What, if any, type of financing is necessary? o Term of the Loan o Interest Rate o Mortgage related costs Application fees Points Real Estate Taxes and Insurance Escrow Prepaid Interest Mortgage Insurance

34 33 Mortgage Commitment Loan Term & Interest Rate Monthly payment ARM? Loan Amount Commitment deadlines

35 34 Mortgage Commitment Balloon payment Tax/insurance escrow Origination charges

36 35 Mortgage Commitment Named insured

37 36 Mortgage Commitment Prepayment penalty

38 37 Mortgage Commitment Additional Closing Conditions

39 Mortgage Commitment 38

40 Mortgage Commitment 39

41 40 Know Before You Owe Rules and enforcement mechanisms established by the Consumer Financial Protection Bureau (CFPB) CFPB Bulletin : Service Providers The Consumer Financial Protection Bureau (CFPB) expects supervised banks and nonbanks to oversee their business relationships with service providers in a manner that ensures compliance with federal consumer financial law Lenders are very focused on compliance and enforcement risk Many Lenders are using the American Land Title Association Title Insurance and Settlement Company Best Practices as a foundation for vendor management

42 41 Updates on Real Estate Closing Procedures The Real Property, Trust and Estate Law Section is hosting a number of seminars during this 2017 Annual Meeting Please consider attending these seminars One which may be of particular interest to you is "Hot Topics in Residential Real Estate"

43 42 Possible Home Inspections List Lead Based Paint (Dwellings built prior to 1978) Private Well Test (Seller's obligation if well exists) Cesspools (Seller must abandon and replace with a septic system) Septic System (if no public sewer) Radon Test Home Inspection - all aspects of structure, utility equipment, appliances, exterior features including driveway, drainage, landscaping Underground storage tank/tank sweep Other environmental testing Wood destroying insects/vermin Flood search

44 Title Insurance A title insurance policy may be defined as: contract of indemnity under which the insurer for valuable consideration agrees to indemnify the insured in a specific amount against loss through defects of title to, or liens and encumbrances upon, realty in which the insured has an interest. Sandler v. N.J. Realty Title Ins. Co., 36 N.J. 471 (1962) ALTA Loan Policy Typically required by the Lender and protects the Lender s interests only. ALTA Owner Policy Optional to the consumer Protects the interests of the Owner (they have no coverage under the Lender s Policy) Require a waiver if the buyer decides not to purchase an Owner s Policy 43

45 44 Title Insurance Title is your ownership rights to your property Title insurance is a policy that protects your investment and property rights Owner s policy and lender s policy Purchased by the homebuyer The best way to protect your interests as well as your trustees, inheritors, and beneficiaries Lender s policy Paid for by the homebuyer Almost always required by the lender Only protects the lender s interest

46 45 Title Insurance What does owner s title insurance cover? Any unforeseeable errors in the title Forgery: making a false document; for example, the seller misrepresents the identity of the person who signed the title Fraud: deception to achieve unfair gain; for example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and walks away with the money Human error: inconsistent paperwork and historical records; for example, an unforeseeable discrepancy in the property or fence line can cause confusion in tracking the title history.

47 46 Title Insurance Policy Title Policies are divided into six (6) parts Insuring Clauses/Covered Risks Exclusions from Coverage Conditions & Stipulations or Conditions Schedule A Schedule B Endorsements

48 47 Title Commitment Type of Policy Proposed Insured Current owner Description of Property

49 Title Commitment 48

50 Title Commitment 49

51 Title Commitment 50

52 Title Commitment 51

53 Endorsements 52

54 Endorsements 53

55 Tidelands Search Certificate 54

56 Tidelands Search Certificate 55

57 Tidelands Search Certificate 56

58 Tidelands Search Certificate 57

59 Tax Search 58

60 Flood Search 59

61 Upper Courts 60

62 Patriot Search 61

63 Survey 62

64 63 Closing Service Letters Closing Service Letters ( CSLs ) protect institutional lenders against actual losses due to an issuing agent or approved attorney s failure to properly secure title, comply with written closing instructions, and collect and pay the loan proceeds. North Jersey In most cases, the attorney represents the buyer and engages a title company to conduct the closing. If an attorney is to handle the closing, they must be approved by the Title Company (Underwriter) in order to receive a CSL from said Title Company. South Jersey Closings are referred to as a settlement and are generally conducted by title companies in their offices who control the closing, including the disbursement of funds. CSLs may be given with respect to title company s settlement agent. Trending towards title companies handling all settlement related functions given level of compliance required.

65 64 ALTA Best Practices 1. Comply with All State and Local Licensing 2. Procedures and Controls Regarding Escrow Trust Accounts Reconciliation 3. Physical and Network Security Protecting Confidential Customer Information and Trust Accounts 4. Recording and Pricing Procedures 5. Title Policy Delivery, Premium Reporting and Remittance 6. Errors and Omissions Insurance/Fidelity Coverage 7. Dealing with Consumer Complaints Resource:

66 65 Settlement Charge Charge imposed by a Title Insurance Agent for attending or conducting a real estate closing or settlement, including settlement-related functions performed before, during or after the occurrence of the closing or settlement itself The charge shall be $ for a settlement which does not exceed 60 minutes in length plus additional charges Outside the Settlement Agent s Office - $25.00 plus travel fees (tolls, parking, mileage, etc ) Outside regular business hours - $50.00 Greater than normal length - $ per hour

67 66 The Closing At Closing Seller is to provide as follows: Deed Seller s Affidavit of Title Organizational Documents (if applicable) Documents to Remove Title Exceptions 1099 Signed Settlement Statement Other deliveries (tax bills, unexpired warranties, Certificate of Occupancy, Smoke Detector Certificate, Keys, Security Codes, Garage Door Remotes, etc.) Certificate of Non-Foreign Status Any other documents requested by title company and lender

68 67 The Closing At Closing Buyer/Mortgagor would deliver: Notice of Settlement Mortgagor s Affidavit of Title Execute Lender s Closing Documents (Note, Mortgage, other ancillary loan documents) Proof of Homeowner s Insurance Funds Due to Seller Signed Settlement Statement Documents to Remove Title Exceptions Bulk Sale Clearance Letter (if applicable)

69 Deed 68

70 Deed 69

71 Deed Acknowledgment 70

72 Seller s Residency Certification 71

73 Affidavit of Consideration (Buyer) 72

74 1099-S 73

75 Seller s Affidavit of Title 74

76 Seller s Affidavit of Title 75

77 76 Settlement Statement and Disclosures All transactions with a Residential Mortgage are required to have a Closing Disclosure and ALTA Settlement Statement A HUD-1 can only be used in the following scenarios: Home-equity revolving lines of credit Reverse mortgages Mortgages secured by a mobile home or dwelling not attached to land No-interest second mortgages made for down-payment assistance, energy efficiency, or foreclosure Loans made by persons who are not considered creditors, because they make five or fewer mortgages in a year Cash or Commercial Transactions

78 Closing Statement (HUD-1) 77

79 Closing Statement (HUD-1) 78

80 Closing Statement (HUD-1) 79

81 Closing Disclosure Form Page 1 80 General information Closing information Transaction information Loan information Loan terms table Projected payments table Costs at closing Closing costs Cash to close

82 Closing Disclosure Form Page 2 81 Loan costs itemized fees Origination charges Services borrower did not shop for Services borrower did shop for Other costs itemized fees Taxes and government fees Prepaids Escrows Other costs

83 Closing Disclosure Form Page 3 82 Calculating cash to close Comparison table from the loan estimate form. Summaries of transactions Similar to Page 1 of the current HUD-1.

84 Closing Disclosure Form Page 4 83 Loan disclosures Assumption Demand Partial payments Security interest Escrows ARM info tables Adjustable payment Adjustable interest rate

85 84 Closing Disclosure Form Page 5 Loan calculations Total of payments Finance charge Amount financed Annual percentage rate Total interest percentage (TIP) Other disclosures Appraisal Contract details Liability after foreclosure notice Loan acceptance notice Refinance notice Tax deductions Contact information Confirmation of receipt

86 85 Seller s Closing Disclosure Summaries of transaction Contact Information

87 86 Seller s Closing Disclosure Loan costs itemized fees Origination charges Services borrower did not shop for Services borrower did shop for Other costs itemized fees Taxes and government fees Prepaids Escrows Other costs

88 ALTA Settlement Statement 87

89 ALTA Settlement Statement 88

90 Note 89

91 Note 90

92 Note 91

93 Mortgage 92

94 Mortgage Excerpts 93

95 Mortgage Excerpts 94

96 Mortgage Excerpts 95

97 96 Post-closing Disbursement to all payees according to the Settlement Statement Recording of Documents Deed and/or Mortgage Discharge of Mortgage or other lien Update of title to confirm required documents were properly recorded Confirmation all taxes are paid current Confirm that all requirements have been met Issuance of policy Lenders require the policy to be issued within 30 days of closing

98 97 QUESTIONS? Heather G. Suarez, Esq. Suarez & Suarez 2016 John F. Kennedy Blvd. Jersey City, NJ Phone: (201) Nicole Plath Fortune Title Agency, Inc. 39 Woodland Road Roseland, NJ Phone: (973) Carol J. Truss, Esq. Gross, Truss & Herstik, P.C. The Woodhull House 63 West Main Street Freehold, New Jersey Phone: (732)

99 98 Nicole Plath Bio Nicole Plath is the CEO and majority owner of Fortune Title Agency, Inc. where she is responsible for long-term and short-term strategies, contract negotiation, and business development. She is a graduate of Villanova University where she received a Bachelor s Degree in Business Management. She also has her Master s Degree in the Management of Information Systems from Stevens Institute of Technology. Nicole speaks often on real estate topics. She lectures frequently for the American Land Title Association where she serves on the Best Practices Executive Committee, Homebuyers Outreach Program (HOP) Committee, and is a Certified HOP Leader. In 2017 she was nominated and accepted a three year term on the Agent s & Abstractor s Executive Committee for ALTA. She has also spoken several times for the New Jersey State Bar Association on title insurance and the effects the CFPB has had on the real estate industry and closing process. Nicole is a member of the New Jersey Land Title Association (NJLTA) where she serves on the Planning Committee, Exploratory Committee and Convention Committee. She also serves as the Secretary for the NJLTA Agency Section and is the Editor in Chief of the Advocate, the official publication of the NJLTA.

100 99 Heather Suarez, Esq. Bio Heather G. Suarez is of counsel to Suarez & Suarez, where she is responsible for the firm s real estate, corporate and commercial matters, including complex financing. Ms. Suarez has represented New Jersey lending institutions including Core States, the Trust Company of NJ, North Fork Bank, and Capital One. In addition, she handled all aspects of the development of real estate including but not limited to condemnation, zoning, planning, traffic, and environmental issues. She is currently a trustee of the New Jersey State Bar Association, and is Chair to the Board of Consulters of the Real Property, Trust and Estate Law Section of the New Jersey State Bar Association. Heather is a frequent lecturer on real estate topics. From , she was a guest lecturer for two real estate courses on condemnation and environmental issues at the Goodman School s Real Estate Institute at Lehigh University in Bethlehem, PA. She lectured at the New Jersey State Bar Association Annual Convention in Atlantic City for 2012 through She also lectured at the 2006 and 2012 through 2016 Annual Real Estate Conference hosted by New Jersey ICLE. Heather has been recognized throughout her career for her successes and has earned honors from many segments of the community. NJBIZ named Heather as one of New Jersey s Best 50 Women in Business in 2007, and she received NAWBO s Woman of Inspiration Award, also in In 2008, Heather was recognized by Executive Women of New Jersey at its Salute to the Policy Makers awards event. In 2013, Heather was recognized as a Woman of Achievement by the Tri-County Scholarship Fund. In 2016 Heather was recognized by the New Jersey Law Journal as one of its 2016 Women of Achievement. Heather is a past President of Commercial Real Estate Women, NJ, Inc., served on the board of the Women s Fund of New Jersey, and currently serves on the board of Women Rising, Inc., a Hudson County based non-profit. Heather graduated Rutgers College with a BA in Business Administration, where she was selected as a member of Phi Beta Kappa. She then attended Rutgers University Law School in Newark.

101 100 Carol J. Truss, Esq. Bio Carol J. Truss is the managing partner of the law firm of Gross, Truss & Herstik, P.C., in Freehold. Her practice focuses primarily on real estate law, including commercial and residential title transfers and refinances, and commercial leasing. The purchase and sale of small businesses and the general representation of such businesses are also a significant part of her practice, including the sale, transfer and use of liquor licenses. Ms. Truss is a Past Chair and a lifetime member of the New Jersey State Bar Association Real Property, Trust and Estate Law Section Board of Consultors. In 2015 she was awarded the Arthur S. Horn Distinguished Service Award by the Section for her contributions to the development of Real Property Law in the State of New Jersey. She is also a member and currently serves as the President of the Monmouth Bar Association, and she is a member and Past Chair of the Monmouth Bar s Real Estate and Land Development Committee. Ms. Truss received her undergraduate degree from Monmouth University, her M.A. in Clinical Psychology from Farleigh Dickinson University and her J.D. from Rutgers University School of Law-Newark.

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