REAL ESTATE

Buying, selling, refinancing, taking out a home equity loan or line of credit (HELOC) Fred can help you make sure that your transaction goes smoothly.

Whether you are the Buyer or Seller, from the Attorney's perspective there are three (3) major segments to a real estate transaction:

1. Contract Formation. The first segment of a real estate transaction is the contract formation segment. Typically, but not always, when a buyer wishes to make an offer on a house, they submit the offer to the seller in the form of a proposed contract. The Ann Arbor Area Board of Realtors has created a form contract that is usually used in transactions occurring in Washtenaw County. The form of contract used is extremely important. The contract needs to be comprehensive enough to cover all pertinent issues pertaining to the transaction so that there is little room for a dispute involving the transaction to arise that isn't addressed by the terms of the contract. ​A contract is formed when both parties have agreed to all terms. Sometimes, prior to that occurring, different proposals, known as counter-offers will go back and forth between the parties as they zero in on a comprehensive agreement. In Michigan, with few exceptions, sellers are required to provide prospective buyers with a general disclosure statement which informs buyers of the conditions of all of the physical components of the house being sold. In addition, sellers are required to provide a Lead Based Paint Disclosure Statement which, as the name suggests, pertains specifically to the possible presence of lead based paint in the house. There are pre-printed forms for this as well.
2. Title Commitment. It would be unusual for a contract not to provide that the seller must furnish the buyer with a title insurance policy insuring that the seller is able to transfer a clear title to the buyer. The actual insurance policy is usually received by the buyer after the closing. Prior to the closing, a title company will issue a Title Commitment. This document outlines what the title insurance covers and any exceptions to the coverage. It will disclose whether all property taxes have been paid and if there are any liens on the property or right-of-way or easement conditions entitling a third party to some type of interest in the property. The title commitment might also disclose the existence of a condominium association or other homeowners association, which would have their own rules that people belonging to the association must agree to follow.
3. Closing Documents. Hopefully several days prior to the closing (which usually takes place at a title company) the closing documents will be disseminated to both parties for their review. The buyer and seller will both receive their own closing statement. In the case of the seller the statement will enumerate the seller's debits and credits and a bottom line dollar amount that the seller can expect to walk away with from the closing. The buyer's closing documents will similarly have a closing statement showing the dollar amount the buyer is required to bring to the closing and how that amount was arrived. In addition, the buyer's closing package should include information pertaining to the buyer's mortgage: the loan amount, the interest rate, the monthly payment, the length of the loan and a statement that there is no prepayment penalty if the buyer wishes to pay the loan off early.

Refinancing a Mortgage or Establishing/Utilizing a Line of Credit

It is highly unusual for someone to buy a house, take out a 30-year mortgage, and then actually proceed to make 360 monthly payments these days. In the intervening years any number of events might occur that would cause the mortgagor (the homeowner) to pay off a mortgage. First of all, the house might be sold, in which case the mortgage would be paid off at the closing. What also frequently happens is that mortgage interest rates drop and it becomes financially attractive to pay off a current mortgage and take out a new one at a lower rate. Sometimes a homeowner needs access to cash to pay off debts or to make a major purchase. This can be accomplished in one of two ways. The homeowner could take out a new mortgage in an amount sufficient to pay off the old mortgage and provide enough cash at closing to pay the debt or make the purchase. Sometimes a homeowner will instead maintain the current mortgage but take out a home equity line of credit (HELOC). A HELOC is a line of credit secured by the equity in the owner's house that gives the owner a revolving credit line to use to pay off debt or make a major purchase - just like a mortgage. There are always expenses (closing costs) associated with either taking out a mortgage or HELOC.

As with any buy or sell real estate transaction, Fred would be happy to make sure that your transaction goes smoothly and that your closing costs are calculated correctly.