Monthly Archives: July 2010

Internet Recording of Documents in Massachusetts–Our Commonwealth Joins the 21st Century

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Wonder of wonders!!! Massachusetts, the commonwealth (not state, thank you very much) where I practice real estate law, is joining the 21stCentury. Three different counties (there are 15 counties in the Commonwealth) have now made arrangements for attorneys, and other people involved in the land recording process, to record documents over the Internet. The counties which have made this “break-through” are Middlesex, Plymouth and Hampden, and the system is working extraordinarily well.

Massachusetts has a dual land registration system, which involves recorded land (most of the land in the Commonwealth) and registered land (a much smaller fraction of the land). Because of the idiosyncrasies involved in registered land, only “recorded” land filings may use the Internet system.  Just as importantly, the system can only be utilized by those recording entities who have established themselves as “qualified” to use it by  satisfying the particular  procedural and financial requirements established by the Registries, themselves.

My firm, Topkins & Bevans, was quick to become qualified, and we are now actively recording any available documents using the Internet. I am not aware of whether other jurisdictions have for a long time had a system like the one evolving in Massachusetts, or whether Massachusetts is in the forefront here. To me, it hardly matters because we are now able to eliminate, in almost all cases, the inconvenience of Registry closings for recorded land in the counties I described, and the consequent standing in line and waiting to record documents, in person, at the Registry.

If my Massachusetts realtors expect to be involved in closings that traditionally “had to close”  at the Registries described above, because the transaction is “back-to-back” or the Seller needs the funds “right away”, the new procedure should be a Godsend. Make sure to inquire of the closing agent involved whether he or she offers Internet recording. It is an idea whose time has come, and like all the technology which is becoming available to us every day, if that closing agent does not “climb on the bus”, the bus may just pass it by. Topkins & Bevans would be pleased to answer any questions of Massachusetts closing agents about this new process. In the long run, using the Internet for recording will make all of us more efficient and able to increase our productivity.

Representing an Out of State Client in a Massachusetts Real Estate Transaction–The “Massachusetts Rules” Can be Difficult to Comprehend

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When I attended a national law school almost 45 years ago, we would learn two sets of rules in almost every discipline–the law for 49 states and then the “Massachusetts rules”. Today, after practicing law in Massachusetts as a real estate lawyer, I must admit to each of you that the “Massachusetts rules” continue to operate loud and clear, and they can be downright confusing for people who are not used to them. At this time of the year when we all try to “give back”, I have decided to give you some examples of the “Massachusetts rules” with the thought that if you have further questions, you can check my profile and contact me directly. One of my New Year’s resolutions is “I promise to return each inquiry on a prompt and courteous basis”.

Here goes:

     1. Quitclaim Deeds Are the Standard Not the Exception.   In some of the western counties of Massachusetts, and sometimes on Cape Cod, I have seen Warranty Deeds used for conveyancing. Warranty Deeds are not, however, the normal type of Deed which is delivered at the closing. The standard Deed is the Quitclaim Deed, which at first blush, can drive an out of state practitioner wild with fear. You see, in most states, a Quitclaim Deed is what it sounds like. “I am not sure if I have any interest, at all, in this property, but if I do, I am conveying it to you, or words to that effect.” In Massachusetts the Quitclaim Deed says much more. Among other things, the person executing a Quitclaim Deed in Massachusetts warrants that the granted premises are free from all encumbrances made by the grantor, and the grantor and his heirs, successors and assigns will defend the title against all person making claims through, or under, the grantor. In other words, the Massachusetts Quitclaim Deed has similar characteristics to the Warranty Deed in other jurisdictions.

     2. Massachusetts Attorneys Run Almost all Purchase Closings.   Because there is a statute which requires an attorney to render a “title opinion” in every residential purchase to the extent of the purchase price, Massachusetts attorneys continue to conduct purshase closings and serve as closing agents. That is not to say there are not title companies, so-called, in Massachusetts. It just means that the title companies generally work for, or are owned by, attorneys. The concept of “going into escrow” really does not exist under the “Massachusetts rules”.

     3. In Most Purchase Transactions, the Attorney Serves as the Agent for the Title Insurance Company and Writes the Policy.  This part of the “Massachusetts rules” is really a function of the title opinion statute referenced above. Since the Massachusetts attorney is certifying the title, it has proved more convenient for the title insurance companies to use the attorney as title agents.

     4. Despite all these Differences from other Jurisdictions, Title Insurance in Massachusetts is not as Expensive as in Other Jurisdictions. In keeping with all the other idiosyncracies in Massachusetts, you will not be surprised to learn that the cost of title insurance is not regulated in Massachusetts. In point of fact, I have found that most title insurance costs $4.00 per thousand for an Owner’s Policy and $2.50 per thousand for a Lender’s policy. If Owner’s and Lender’s are purchased simultaneously, there is a $175 extra charge. I am told that these rates are in the low to middle range of title insurance charges nationally.

As my clients start to obtain mortgage financing more and more on the Internet, our firm has been doing more and more work for out-of-state Lenders. If any of you fall into that category, please feel free to use Topkins & Bevans as your “source” for Massachusetts mortgages. We have lived with the “Massachusetts rules” for a long time, and we are comfortable wending you through them should you have the need.

The Offer To Purchase–Massachusetts (and perhaps other) Realtors Should Make Extra Effort on this Important Document

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In Massachusetts, where I practice as a real estate attorney, there is a two step process for most real estate purchases. Usually without the assistance of counsel, the parties enter into an Offer to Purchase (the “OTP”). There are some contingencies in the OTP, which generally center around a “satisfactory” inspection. If the property “passes” inspection, the next step is to enter into a Purchase and Sale Agreement (the “PNS”) which has more provisions than the OTP, and “fleshes out” the details of the transaction in greater depth. What every real estate professional in Massachusetts needs to take note of, however, is that there are Massachusetts Supreme Judicial Court decisions, which clearly hold that the OTP, if it includes the basic facts of the transaction (like purchase price, closing date and the like), can be viewed as an enforceable contract, upon which the Buyer can sue the Seller for specific performance, even if the parties are never able to work out a mutually satisfactory PNS.

That being the case, I thought I would make some observations about what I am seeing in many OTP’s which can, and should be, improved by the realtors who generally draw the documents up.

•1.      Make Sure the OTP is legible. This may sound like a basic truism on a document as important as the OTP, but I am amazed at how many times, I receive OTP’s to review, where I cannot read some of the important terms therein, because of strike-overs or substitutions in the margins. The OTP should really be written very neatly, and precisely, because it is from this document that an accurate PNS can be drafted by the attorneys representing the Buyer and Seller.

•2.      Think Long and Hard About Who Will Hold the PNS Deposit. If you are a Buyer’s agent, and would like to get paid at the closing, you are almost always better off having the attorney for the Seller hold the deposit(s). The Listing Broker holding the deposit often takes his or her time to pay you your fee. Then, you have that ugly possibility that the Listing Broker may experience some kind of financial difficulties which delay (or prevent) your getting paid. I would opt for the attorney, who is subject to strict disciplinary rules if the deposit does not get delivered and who should be willing to pay over the deposit(s) at the closing for distribution by the closing agent.

•3.      Be Precise in Indicating What is “Included” and Excluded” from the Sale.  The OTP is the place to be specific in this area. Many disputes at the PNS level can be avoided if there is definition of the inclusions and exclusions.

•4.      Be Realstic in Terms of Date for Mortgage Commitment and Submission.  I have seen many OTP’s where the date to submit the mortgage application has passed by the time I start working on the PNS. Make the dates comport with reality. Similarly, put in a realistic time frame for the receipt of a mortgage commitment. Lenders are understaffed, and appraisals are taking longer than in the past. Give all parties a chance to do what is possible.

As I said above, the OTP is basically completed by the realtors. If you are involved, take the time to make your OTP accurate and realistic. It will make your transactions move more smoothly, and the extra time spent at the outset of the transaction will almost always bear fruit somewhere down the line.

Julie & Julia–An Excellent Film; An Excellent Example of the Power of Blogging

Marketing / Communication, Uncategorized

It was a Sunday night. The football game was one-sided. My wife talked me in to renting the movie “Julie & Julia”. This film turned out to be well worth the two hours I spent watching it, and a monument to the power of blogging on a consistent basis.

For those of you who have not seen the film, I will only touch on plot details. Suffice it to say, that this is a film about two extremely powerful women, whose careers advance, not in spite of their husbands’ support, but in large part, because of the supportive relationship of the respective marriages. All very 21st century “feel good”, but masterfully done.

One of the protagonists, Julie, sets out to write a blog a day. In her case, her posts concerns recipes and how they turned out and what feelings they engendered within her. One of the thrusts of the movie was that her blogging was as much for herself, as her audience, and that started to hit home for me, and, probably for most of you.

I have realized that I write posts to educate and entertain others, but also to make myself feel good. I am a full-time practicing attorney. While my “story” might interest some, it is probably not interesting, or unique, enough to be the subject of a novel or a biography. In other words, I would have little hope of being “published” even if I quit practicing real estate law in Massachusetts and wrote fiction, or non-fiction, every day.

On the other hand, I can write a blog post for Realtor’s Resource (my blog) or ActiveRain (our blog) any time I want to, and it will be read by a few people. Some will comment; most will not. It doesn’t really make that much difference. I am “in print” and I am saying something that I want to say to people who may be interested. That is enough for me.

Defaulting Buyers—What you do, and when, can make a lot of Difference to the Outcome of the transaction

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These are troubled times, and people’s lives are being adversely affected by changes every day. What may have looked like a great place to live,or a great investment property, today does not look so good after you have lost your job or been stricken with a serious and unexpected health emergency. While the judicial system is designed to be even-handed, and objective, it is amazing to me how difficult it has been for my Sellers to enforce their rights when a Buyer defaults, for whatever reason(s).

That being the case, I thought I would reinforce with each of you, as real estate professionals, some of the rules that I try to insist upon, when I am representing a Seller. Although adherence to these rules may not guarantee a great result in terms of specific performance, or at least retaining the Buyer’s deposit, in my opinion they provide you with the best chance of success in those endeavors.

     1. Make “Time is Of the Essence”Your Consistent Mantra in terms of Sale Documents. If your Offer says the P & S must be signed by a certain date, make sure that you get a draft of that P & S to the Buyer,or the Buyer’s attorney, well in advance of that date. A P & S “heaved” at opposing counsel the day before the signing date does not do the trick. The McCarthy decision in Massachusetts, its progeny and decisions in other jurisdictions make it clear that this type of treatment of the other side effectively nullifies “Time is Of the Essence”.  Once you have lost that advantage, you, as the Seller, are at a real risk. You then bring what is reasonable into the equation, and any judge, on any day, will give you a different decision on that issue.

     2. If Deadlines are not going to be Met, obtain written extensions.  There are valid reasons why deadlines for signing, and mortgage commitments, and closings can be delayed. Your job as a real estate professional is to keep track of the important dates, inquire in advance whether it is likely those dates can, or will, be met and then obtain signed extensions if they will not be met. There is no tougher road in a litigation to enforce Seller’s rights than one which shows “sloppy” adherence to the prescribed schedule of events. If it can be made obvious to the judge that the Seller was diligent in enforcing deadlines,or obtaining extensions when meeting such deadlines will not be possible, the chances of success are greatly enhanced.

     3. Take all necessary Steps to Perform even if you are aware that the Buyer will not attend the closing or pay the balance of the Purchase Price. This may be a “hard sell” to the Seller, because it may seem to the Seller that you are throwing good money after bad. Most jurisdictions, however, do not take kindly to premature defaults, and there is much more difficulty in enforcing Seller rights if a representative of the Seller has not appeared at the relevant Registry of Deeds with a Deed, and other related closing documents, and then paged, perhaps as many as three times, the Buyer to inform the Buyer that the Seller is “ready, willing and able” to perform.

There are times when enforcing Seller rights in a defaulting Buyer situation just does not make sense. I can tell you from experience that most litigations whcih I have been involved in are expensive and do not always prove beneficial from a “risk-reward” standpoint. On the other hand, if your Seller wants to have any chance at all of victory, adherence to the advice set forth above is essential.

Desperate Times Call for Desperate Measures–Some “Amplifications” in Your Purchase Agreements which can Save Your Deals

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Massachusetts, where I practice real estate law, is not experiencing the suffering as hard as other areas of the country. Perhaps, that can be put a little differently. Massachusetts was one of the first states to get hit by the real estate slowdown. Because of that fact, we may be ahead of some other states in recovering.

The real estate market is still not booming in Massachusetts. There are sales in certain pockets. It is becoming painfully clear that Lenders in Massachusetts are as slow, or slower, than other jurisdictions, appraisals are coming in “all over the place”, and people continue to lose their jobs. With that in mind, I have adapted my purchase and sale agreements, when I am representing the Buyer, as follows:

     1. Closing Date. Massachusetts remains a “time is of the essence state”. The dates in the contract mean something, at least that is what the reported cases say. I put in a provision in my agreement that says, flatly, “The Closing Date may be extended for a period not to exceed 14 calendar days, if, for any reason, Buyer’s Lender is not prepared to close on the Closing Date”. No real need for explanation here. The Lenders are deadly slow in processing, even on purchases. I cannot afford to have some nervous Seller pull the plug on my client if the Lender does not deliver documents and money.

     2. Mortgage Contingency Subject to Appraisal at the Purchase Price. This is becoming more and more important as appraisals, generally delivered the day before the mortgage contingency date, cannot be predicted as to value. I generally will permit the deal to go forward, if the Seller agrees to adjust the purchase price to the amount of the appraisal received by the Lender. This keeps things moving, and many times times Sellers will agree to this provision, as so modified.

    3. The Buyer’s obligations are Subject the one or both Buyers being employed on the Closing Date. This problem just arose for me when I got a timely commitment from the Lender (wonder of wonders) and my client lost her job between the date of the commitment and the Closing Date. In that situation,cooler heads prevailed, and we worked things out based on the husband’s income. People continue to lose their jobs. When they lose their jobs, they generally lose their mortgage. We need to protect our clients against this not terribly remote problem.

I am sure there are more “recession driven provisions” which you are using. Share them with me and the ActiveRain nation. We are all in this situation together, and there could not be a more important time for us to hang together.

Law Office Confidentiality–Make Sure Your Attorney takes this Seriously

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In Massachusetts, where I practice real estate law, the lawyer is still very much involved in the entire residential real estate process. We draft, and review, real estate offers and purchase and sale agreements, examine the title, prepare the title insurance policy and conduct the real estate closing, many times in one of the three offices (Boston, Braintree and Waltham) which we operate.

Conducting a closing at our office has proven to be extremely convenient for realtors, buyer and sellers in most instances. Massachusetts has started to institute electronic recording for some Registries of Deeds, so we can avoid the chaotic climate that most Registries present by doing our closings “on location”.

There is an old basketball adage, “if you live by the jump shot, you die by the jump shot”. In other words, there are some “confidentiality” risks inherent in office closings, and I thought I would detail some of the steps our firm, Topkins & Bevans, is taking to prevent “leaks” of privileged, and sometimes proprietary, information from falling into the wrong hands. 

    1. All attorneys and staff have been instructed NEVER to mention the names of firm clients so that a visitor to the office would be able to gain this information. This is a ZERO tolerance rule, and we have dismissed one employee who failed to adhere to it.

     2. Without express approval from the supervising attorney, no visitors to our office will be given access to any areas other than the reception area, the conference room and the rest rooms. There are often documents and information lying around offices, and people can glean information not intended, in any way, for them. If entry is permitted for a side conference or negotiation,no visitor will be permitted into the office of any attorney or staff member, unless accompanied by a representative of the firm.

    3. The rule for discussions about client matters described in Paragraph 1 also applies to conversations outside of the office, even with spouses and other family members. As my father used to tell me all the time “I never got in trouble for something I didn’t say” People’s legal affairs are serious, and they should never be the subject of conversation with outsiders.

We consider it a privilege to work with realtors and clients, and we welcome them with open arms into our offices. With that privilege comes responsibility, and we take our ethical responsibilities very seriously. It behooves all people practicing law to go out of their way to make sure that client confidences are never breached. Without this trust, we cannot really provide effective representation.

Let the Camera be Your Friend–Use Your Digital Camera to Enhance Your Professional Image

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It has not always been this way. When I started practicing law in Massachusetts in 1968, single reflex cameras were heavy and required a host of accessories to insure proper lighting, focus and the like. The modern digital camera has none of this complexity, or bulk, and I have found my camera useful in marketing myself as an “in-tune” professional. The plethora of self-taken photographs on ActiveRain is ample evidence of the fact that most of us know how to “point and shoot” which is really all that is required to produce an acceptable photo that can be useful in the following types of situations:

     1. Photographs at the closing. Generally, everyone is smiling once the papers are signed and the keys delivered. I bring my camera to every purchase transaction. I try to get pictures of the Buyers with the Buyer’s Agent. I later email them to both parties. It is something that a savvy realtor can use to his or her advantage, and I have provided it. Here we are at one of the most important days of our lives, and our realtor helped make it possible.

     2. Photographs during the home inspection. The potential buyer have a lot on their minds. They will NOT be taking pictures. If you are their realtor, you can assist them with pictures. If a situation comes up regarding repairs or substandard conditions, you have a contemporaneous photograph of the problem. It may help you work out a solution with the other realtor or the Seller. And, of course, there is always the problem of “what is included” with the home. A photograph at the time of inspection will be great evidence of what was shown to the Buyer.

     3. Photographs when the Buyer moves in. If you are the type of realtor who participates in this event, why not take some photographs when the Buyers are crossing the front door, or flopping on the living room rug, after a rigorous day of moving? These shots will be cherished somewhere down the road, and you will be person providing the memories.

I have just touched the surface here. I am sure each of you can devlop other scenarios where a photgraph can be helpful. I am alwasy interested in new ideas and thoughts. Share them with me when you comment,

Carefully Drafted Mortgage Contingency Clauses–The Deal (or Customer) you Save May be Your Own

Mortgages

I know in a lot of jurisdictions attorney do not get involved in drafting Purchase and Sale Agreements. Since in Massachusetts, where I practice, such practice is not the case, I deal with Mortgage Contingency Clauses literally every day. I might add that my experience has been that most Buyers and Sellers, and some realtors, for that matter, do not understand some of the nuances of the Mortgage Contingency Clause, so I thought it might be helpful for people in Rainland to know a little bit more.

BELOW PLEASE FIND SOME FACTS THAT MAY PROVE USEFUL FOR YOU:

     1. The Mortgage Contingency Clause (the “MCC” for short) is designed to afford protection to the Buyer. It is a vehicle through which the Buyer can sign a purchase agreement, and still get his or her deposit back if financing is not committed to. Please understand that significance of the term “committed to”. I assume most of you know that if after a mortgage commitment, a potential Buyer loses a job, or has some other kind of financial problem, the Lender may not complete the mortgage financing. Unfortunately, I have seen this happen, on more than one occasion.

     2. MCC’s come in all shapes and sizes They can be tailored to meet the particular needs of the Buyer. If the Buyer is seeking FHA or other high-leverage financing, it may be important to have the MCC indicate, straight-out, that the commitment must contain an appraised value at least as high as the purchase price. That will give the Buyer protection if the appraised value comes in lower. I have done MCC’s which indicate that if the appraisal comes in lower, the Buyer and Seller agree to renegotiate the purchase price. If you can get that for your Buyer, you are doing a good job for him or her.

     3. In my purchase and sale agreements, I always provide that the mortgage commitment must be written, and must contain no terms and conditions which the Buyer cannot reasonably be expected to satisfy in a reasonable amount of time. That may help save your customer’s deposit, if a “commitment” is issued, but is full of conditions which are difficult.

     4. Do not let the Seller require the delivery of a rejection for the MCC to take effect. The MCC is for the Buyer. If the Buyer cannot get a mortgage commitment by the time set forth in the purchase and sale agreement, there is no deal. That is the way things should be structured. Anything else leads to needless haggling and a waste of everyone’s time.

     5. Keep track of the commitment date. If it is missed, and the appropriate notice is not given, your Buyer’s deposit is in jeopardy. Whose responsibility is it to monitor the date? That is an excellent question. I have a paralegal in my office who does this. You may have similar assistance. The date is important, especially in those jurisdictions (not new York, I am told) which take “time is of the essence” in a contract seriously.

Home Owner’s Title Insurance–Hidden Real Values for the Realtor

Marketing / Communication,

The subject of Home Owner’s Title Insurance always comes up in purchase transactions in which I am involved. For my more sophisticated clients, it is generally a “no-brainer”. The client spends a little extra money and then has piece of mind respecting his or her title which will last throughout ownership of the home. Even if the person performing the title search missed a probate, or didn’t see an undischarged private mortgage, HOTI will cover it. More importantly, even if there is a forgery in the chain of title or the Registry has lost, or misfiled, an important document, the company providing the HOTI will stand behind the title. This assurance provides a lot of comfort for an investment that far out-shadows all others for the average purchaser,

Having said all this, and truly believing that HOMI is the right way to go, I am continually shocked when realtors at a purchase closing are neutral,or even negative,about their customer’s purchasing HOTI. Perhaps, they are “grandstanding”, trying to show how they are helping the purchaser to husband each and every of their hard-earned dollars for more important things. Perhaps, they are ignorant of the true benefits of HOTI to the realtors, especially the Buyer’s agent who may be involved in the sale of the property being purchased somewhere down the road.

There follow several reasons why this writer, a person who has conducted thousands of real estate purchases over more than 40 years of practice in Massachusetts, believes that realtors should provide whole-hearted endorsement for the purchase of HOI, not only for their customer’s benefit, but for their own, as well:

     1. If there is a title claim, it is more than likely that everyone involved int he purchase transaction, including the realtor, will be named in the litigation. This will mean that time, effort and money will need to be expended by ALL participants to exculpate themselves.

     2. If there is a title claim, no matter what the outcome, all people involved will be “tainted” with being involved in a transaction that didn’t turn out quite right. If there is HOTI, the title insurance company will absorb the costs from dollar one. It is unlikely that anyone, other than the person, or entity, certifying the title, will be involved in any of the proceedings. If anything, the realtor who endorsed the purchase of HOTI will seem like a hero for making such a practical, and ultimately beneficial, suggestion.

     3. Many times, your purchaser will be a seller some day. If the transaction went well, you will get the listing. Won’t you feel that much better knowing that while selling the property my have its owns set of obstacles, obtaining clear title will not be one of them if HOTI was obtained when the property was purchased. 

So the next time you hesitate, or even balk, when the subject of Home Owner’s Title Insurance comes up, think again. The deal you save may be your own!!!!