Purchasing a house is an exciting and stressful experience. You have piles of paperwork and documents to deal with when you’d rather be thinking about paint colors and new furniture. A good real estate attorney will review all the documents for you and alert you to any issues. Most buyers intently read the appraisal report and the home inspection report, but there are other legal documents that you should understand. Here are three additional documents to review with your attorney:
1) Title Report
A title examiner will investigates public property records to determine whether the property is free from liens, encumbrances, and other claims or defects. Any items that might affect the Seller’s legal ownership of the property, such as mortgages, easements, or court judgments, will be identified in a Title Report. Any unresolved items, such as defects in prior deeds, are the Seller’s responsibility to address and fix.
While some items may show up as “encumbrances” (a mortgage or other claim on the property), that doesn’t necessarily mean there is a problem to be resolved. For example, the Title Report might show that the electric company has an easement to access a portion of your property to repair wires, or the city or town may have the right to maintain the sewer system connected to your property. Neither of these would impede the sale of the property, although you need to be aware that they exist.
2) Municipal Lien Certificate
Your lawyer or your bank will obtain a Municipal Lien Certificate from the municipality where the property is located. This document will show whether any municipal fees and taxes, such as water/sewer fees, property taxes, or other charges, are in arrears. If so, the Seller should make any outstanding payments prior to the closing so that you are not responsible for paying the Seller’s bills.
The Municipal Lien Certificate is also used to calculate the tax adjustment that is typically part of the real estate transaction. For example, assume the town operates on a quarterly basis (meaning taxes are due four times per year, with each payment covering three months) and the August 1 payment covers July, August, and September. If you are purchasing the property on August 15, and if the August 1 payment has been made by the Seller, you would then pay back the Seller (as a credit at closing) for the taxes covering August 15 through the end of September. This shows up as a tax adjustment/credit on your final settlement statement.
3) Plot Plan
A Plot Plan is essentially a bird’s eye view of the property you are buying. It depicts the property lines and identifies the structures within the lines, such as the house, garage, shed, pool, and so on. You should review the Plot Plan for two purposes: first, to make sure that your structures are within the lot lines of your property and that they do not overlap with a neighboring property, and, second, to ensure that none of your neighbor’s structures encroach upon your property.
All three documents are essential to the real estate transaction and merit your attention. Ideally, no issues will arise, but it is always worthwhile to understand all the details of the property you are purchasing and to ensure that all the T’s are crossed and I’s are dotted before you sign at the closing table. Our attorneys at Mountain Dearborn will be pleased to assist you through all steps of your real estate transaction. Contact us to learn more.
Image: Ave Calvar
