PURCHASING PROPERTY
IN CONNECTICUT
For most people, the purchase of a primary residence is the single largest investment of their lives. It is imperative that your legal interests are adequately protected whether you are purchasing or selling property.
The real estate closing process in Connecticut is different than in many other parts of the country. In addition, the process within Connecticut varies from County to County. The process in Fairfield County Connecticut is very different from that in other parts of the State. Therefore, it is very important to engage the services of both a licensed real estate broker and experienced real estate attorney to guide you through the process and protect your interests in this major purchase or sale.
BINDER
Once you have decided on your dream home, usually through a long tedious process with the aid of a Real Estate Broker, the next step is to sign a "Binder" or "Offer to Purchase" with the broker and tender a good faith deposit which is typically 1% of the amount of the offer.
The Binder should include all the essential elements of the transaction, including applicable dates such as the date by which the contract is to be signed, the mortgage contingency date, and the proposed closing date. It should also include the inspections to be performed and a deadline for completing same.
The Binder usually contemplates that a more formal sales agreement is to be prepared and executed by the parties. At this time you should inform the broker as to the name of the attorney you have decided to use, so the attorney's name can be included on the Binder. The broker then submits the Offer to Purchase to the Seller who can either accept or reject the offer, or submit a counter-offer. The negotiations continue until the parties eventually agree on the terms of the transaction. It is not unusual, especially in a market favorable to sellers, for multiple parties to be interested in the same property and to simultaneously submit bids. This can drive the price of the property significantly higher than your initial offer. In some area of Fairfield County, such as Greenwich, negotiations are done orally and the parties dispense with a Binder and proceed directly to a "Sales or Purchase Contract."
SALES CONTRACT
After the Seller accepts the offer, inspections are usually done by the Buyers. During the period of time allotted for the inspections, the Sales Contracts are prepared by the Seller's attorney and forwarded directly to the Buyer's attorney.
Quite often, negotiations will ensue between attorneys as to the terms of the Contract, and as to what repairs should be done to the property in light of the inspections or what, if any, credits to the contract price should be given for those repairs. The Buyer's attorney will probably include a Rider to the contract to better define the Buyers' rights.
When the terms are finalized, the Buyer will sign the Contracts and tender the remainder of the down payment, which usually totals 10% of the contract price. The partially signed contracts along with the down payment check is then forwarded to the Seller's attorney for signature by the Seller. Once the Seller signs the contract, a firm "deal" occurs, and the Seller's attorney will hold the down payment in an "escrow" or "trust" account.
Usually the Sales Contract will include a mortgage contingency clause which generally allows a Buyer to terminate the transaction in the event he or she cannot obtain a mortgage on the property by a specified date. Beware that in other sections of Connecticut, like New Haven County, the lawyers are not involved until after the Sales Contract is signed, meaning the real estate brokers handle the signing of the contracts by the parties. Before you sign anything you should seek the advice of a qualified real estate lawyer.
TITLE SEARCH
At some point prior to or subsequent to the Buyer signing the Sales Contract, a title search is conducted. A title search is an examination of the public records at the Town Hall where the property is located. An attorney or title company will examine all documents recorded at the Town Hall concerning that particular parcel of property.
The title search will reveal who the record owner of the property is, what easements or restrictive covenants exist on the property, if any mortgages are on the property, etc. The search is conducted to ensure that the Seller/Owner can deliver good and marketable title to the Buyer by the time of closing. The questions as to when a title search should be done, and why one is necessary should be thoroughly discussed with your attorney. This is a very crucial step in the transfer of real estate and one of the main reasons that you need to hire an attorney.
TITLE INSURANCE
Many purchasers do not understand the need for title insurance. Title insurance protects the insured's legal title to the property against a third party's claim that legal title belongs to them. It may sound like the chances are small that a third party could make a claim for title, but it actually happens quite often.
Common "claims" to title include mechanics' liens, the cutting off of an easement to a public highway, an unreleased prior mortgage of record, etc. Title insurance will be required by the mortgage lender to protect it against such claims. The lender will be issued a Lender's Policy which protects a lender's interest but does not protect the Owner or Buyer's interest.
A Buyer can purchase an "Owner's Policy" to be issued simultaneously with the Lender's Policy which protects the owner or buyers rights against such a claim, plus pays the costs of defending such a claim. Such protection will usually only cost a slightly higher premium than for the cost of a Lender's Policy and is usually very well worth it. For exact premiums and more information as to protecting title to your property, be sure to speak to your attorney.
CLOSING
Finally the mortgage is approved, all inspections are complete and title is clean. It is time to "close" the "escrow" and finalize the sale. At the closing, the buyer, seller, attorneys and brokers convene. The buyer signs the mortgage documents. The seller gives a Deed to the buyer in exchange for the balance of the purchase price, plus adjustments for all bills, taxes, etc.
Finally the deal is complete. After the closing, the buyer's attorney records the Deed, Mortgage Deed and Release documents with the Town Clerk to make things "official". I have just outlined the closing process in Fairfield County, Connecticut for a typical transaction. As you can imagine, even in a seemingly smooth and uncomplicated transaction, issues and pitfalls can surface at the most inopportune times to threaten timely completion of the transaction and cause all parties anxiety. Delays, title issues, repair issues, acts of nature, underground storage tank problems and lender related issues to name a few, can often arise and require quick and competent actions on the part of all parties. If you have selected an experienced real estate attorney to represent you in your transaction, he or she will likely be able to weather the inevitable rough spots that arise and take all appropriate steps to ensure that the transaction occurs with the least amount of expense, anxiety and legal exposure to you.