Real Estate Law

Alford Title Company, LLC | SlidellNeil and Lydia are active in both residential and commercial property transactions. They have represented buyers, sellers and lenders in all kinds of transactions from the simple to the complex, and from the starter home to the multi-million dollar commercial building. With Neil’s 40 years of experience examining titles, they have vast experience in addressing title problems.

Alford & Alford offers personalized service and strives to make the real estate transaction as seamless as possible.  Some real estate transactions may be handled through Alford Title Co., LLC, wholly owned by Neil and Lydia.

Ready to get started? Schedule a consult now.

Here are some issues in the real estate closing process:

1.   Purchase Agreement

2.  Deposit, Purchase Price & Offsets against purchase price

3.   Flood Insurance

4.   Property Condition

5.   Selling current property to finance property to buy

6.   Homeowners Association, Surveys & After Purchase Agreements Signed

7.   Closing Notary, Title Examination & Insurance

8.   Commercial Property

9.   Tenants

10.  Other real estate contracts

skyscapePurchase Agreement

Where do I start? That’s often the question we receive from our clients. And the answer is with a purchase agreement. Whether you know the other party or have a realtor, you need a purchase agreement.

The standard purchase agreement is on the Louisiana Real Estate Commission website, www.lrec.state.la.us. It is called a Residential Agreement to Buy or Sell.

The purchase agreement is a valuable document and should not be discounted. The failure to have one will unduly delay and complicate the closing process because invariably serious, deal breaking issues come up that were not contemplated by the “hand shake” deal. Get a purchase agreement, no “ifs, ands or buts” about it.

Deposit

How much deposit should I put down? Each transaction is different because the price is different. Consultation with Alford & Alford or a realtor can assist with evaluating this element of the purchase agreement.

Purchase Price

How do I know I’m not offering too much for the property? That’s where the value of a realtor comes in. Realtors have access to information that can compare similar listings. If the seller has an appraisal, he is not obligated to share it with you.

Offsets against purchase price

Are there offsets or prorations against the purchase price? There are several types of offsets between the parties. For commercial and residential transactions, the parties will usually prorate the property taxes and the buyer receives a credit against the purchase price. If insurance and/or association fees have been prepaid by the seller, then the buyer will owe the seller reimbursement.

For commercial closings there are usually offsets for prepaid rent and tenant deposits.

Flood Insurance

I hear a lot about flood insurance rates increasing. How will that affect me as a buyer? If possible, before you sign a purchase agreement, you should consult with your insurance agent on what is projected to occur in the near future with flood insurance and then request a quote on the flood insurance based on the location of the property you are interested in purchasing. Don’t rely on what the seller currently is paying for flood insurance as a guide for what your premium will be. It may be accurate, but then again it may not. These are uncertain times and the assistance of your insurance agent will be invaluable.

In addition, a conservative measure would be to state in the conditions section of the purchase agreement that the sale is contingent a stated maximum amount for the flood insurance premium to be collected at closing. Most purchase agreements are contingent on the buyer obtaining “financing” or “loan approval”. Whether or not the flood insurance is considered part of the “financing” or “loan approval” could be up for debate. That is, a buyer may qualify for the loan, only to find out later that the flood insurance is more than he/she can afford or wants to pay. So, the question then becomes whether the buyer has “loan approval” because if the flood insurance is not procured the loan will not be granted. Inserting the contingency in purchase agreement goes a long way to resolving the issue of whether the buyer can decline to purchase the property based on the flood insurance premium.

Property Condition

How do I know what condition the property really is in? There are at least three opportunities for the buyer to become acquainted and satisfied with the condition of the property (usually a structure): through the seller’s written property disclosure, by the buyer’s inspection and by the final walk through.

1. Property Disclosure:

There are a few disclosure documents on the Louisiana Real Estate Commission website, including a property disclosure form. This form is critical for the seller for several reasons.

First, most properties that are not new are sold AS IS. That means that the seller must disclose all hidden defects that he knows about; the property disclosure form is a good way for the seller to document the condition and defects he knows about, dissuading buyers from then alleging that the seller verbally made certain representations about the condition of the property.

Second, it binds the buyer to abide by the terms of the purchase agreement. Although the statute that enacted the property disclosure did not provide for any penalties on the seller for the failure to provide it to the buyer, recent case law held that a buyer could walk away from the purchase at any time, including at the closing table, if the disclosure was not provided. So, it is imperative for the seller to provide the disclosure to protect the integrity of the sale.

The buyer should request the property disclosure prior to signing a purchase agreement. As to the buyer, the AS IS clause means that the buyer is responsible for observing apparent defects and may rely on the seller’s property disclosures. However, if hidden defects unknown to the seller are discovered after the closing, the buyer is not entitled to rescind the sale, ask for a reduction in the purchase price or demand that the seller make the repairs.

2. Inspection Period:

The purchase agreement usually provides for an inspection period. It is usually starts upon the signing of the purchase agreement. The time period and provisions for negotiating repairs under this section are strictly construed, so it imperative that the buyer begin the inspection immediately.

The inspection period for residential property is usually about 10 days. It is usually substantially longer for commercial property.

3. Final Walk Through:

The buyer is also usually given the opportunity for a final walk through on the day of closing.

Other Conditions

1. Landlocked, But Not Out of Luck. Brochure on the rights of a landlocked landowner to hookup to utilities on his neighbor’s property.

Landlocked, But Not Out of Luck.  Blog on the rights of a landlocked landowner to hookup to utilities on his neighbor’s property.

 

Selling current property to finance property to buy

I can’t buy a house unless I sell the house I currently own. How do I handle that? That’s called a contingency. Under the conditions section of the purchase agreement, the buyer should insert that his/her purchase of the new house is contingent on the sale of their currently owned house.

Beware, sales back to back based on a contingency can be dicey for all parties. If the buyer’s sale of his existing house falls through, then the buyer’s acquisition of his new house will also fail. If these closings are scheduled back to back, dreams are dashed, time and effort are wasted and money spent on bank fees and closing costs  is wasted.

Don’t believe it won’t happen? Think again. We actually had back to back closings scheduled were the sellers showed up at the sale of their house with the moving truck packed ready to go to their new house. So, when the sale of their house failed due to financing problems, they literally had an empty home to return to, had a truck to unload and their dreams were dashed. The sellers of the second transaction at that point had to start all over again to find a purchaser and had lost a couple months in the process.

Ready to get started? Schedule a consult now.

Homeowners Association

What else should I check on before buying property in a subdivision? Make absolutely sure you know if the property is subject to a mandatory homeowner’s association. Whether a homeowner’s association is a good thing or a bad thing depends on each homeowner’s beliefs. Only those who are willing to abide by strict rules and can afford the dues and assessments should own property subject to restrictions. The restrictions are of record. The seller and real estate agent should be able to assist with this before a purchase agreement is signed.

Need for a survey

Do I need a survey? From a title examiner’s perspective, yes. However, your mortgage company may not require it. So the risk if you do not get one is that if there is a title defect, such as an encroachment onto the property or an encroachment by the current owner onto the neighbor’s property, you cannot look back to the title examiner, the title company that conducted the closing or the title insurance company to fix the problem. Title opinions and title policies contain exclusions to coverage for issues that a survey would have disclosed. Don’t think that just because the property is in a subdivision a survey is not needed; we have had a case where a driveway encroached on the neighbor’s property.

After purchase agreement signed

What happens after I sign the purchase agreement? The buyer then begins the loan process. The mortgage company will fairly soon after the loan application is made, and generally before there is loan approval, send a closing request to the closing notary. As a notary, we’d like for buyers to know that we generally begin work, which means we are spending time and money, on a closing that has the potential to fail for one reason or another.

Closing notary and title examination

Exactly, what do the closing notary and title examiner do? Skilled Professionals Work Behind the Scenes to Make Sure Everything Runs Smoothly

When purchasing property, there are many people involved (the buyer, seller, mortgage company, real estate agents and closing notary), loan and closing processes by different companies moving simultaneously and so many details to take care. Our goal as the closing agent is to have as smooth of a closing process for you as possible.

Our first step as the closing and title agent is to conduct preliminary title work. We conduct an exhaustive search of the public records to make sure there are no issues with the title such as liens against the property, utility easements, etc. This generally means checking the title for decades of owners and loans. It is not a simple click of a button or cursory review of a summary of documents. It requires skill and expertise to consider a multitude of legal issues involved with each transaction in the chain of title. It can take many hours, sometimes days, to perform these searches; sales documents must be carefully reviewed to make sure all parties are accounted for and that property laws are satisfied; property descriptions in each sale must be verified to make sure there are no errors; property descriptions may need to be plotted and/or verified against existing surveys; judgments, liens and mortgages must be verified as cancelled. If a problem is discovered, most often we will take care of it without you even knowing about it.  After the title is cleared, we can provide title insurance.

There are two kinds of title insurance coverage—a Loan Policy, which covers the lender for the amount of the mortgage loan, and an Owner’s Policy, which covers the buyer for the amount of the purchase price. If you are obtaining a loan, the lender will require that you purchase a Loan Policy. However, it only protects the lender. We always recommend you obtain an Owner’s Policy to protect your investment.

Once the preliminary title work is complete, the title company will issue a title commitment.  Meanwhile, we are simultaneously coordinating other important details.  If the contract calls for a prior mortgage to be paid off, we will order payoff figures from the existing lender. If the buyer is assuming the loan, an assumption package will be ordered showing the current status of the loan. Other tasks typically include ordering property inspections, surveys, and termite reports.  Each closing is unique, which is why it requires a skilled professional to oversee the process.

Any problems or discrepancies discovered by the settlement agent are reported to the appropriate parties so that they can be corrected.  Our role as the closing and title agent role is to facilitate cooperation, coordination, and compliance between all of the settlement service providers.

By the time we receive our closing orders, you should have already received a Good Faith Estimate of the closing costs from the lender. Keep in mind this is just an estimate.  The final costs will be outlined on the HUD-1 Settlement Statement we prepare near the end of the process. Items shown on a typical HUD-1 include costs paid at closing as well as pre-paid costs such as your earnest money deposit or loan application fee.

As closing day approaches, we will update information that may be required. Once we are satisfied that the paperwork is in order, we will confirm the date, time, and location of the closing with all the parties involved.

On closing day, all of the behind-the-scenes work is done. While you’ve been busy packing, ordering utilities and coordinating the movers, the closing process has been happening behind the scenes so that your new home or building is ready for you to move in.

Title Insurance

See the discussion above concerning the notary and the title examination.

Commercial Property

Commercial property contingency: If you are looking to buy or build a new building for a commercial enterprise, check with the local government authority before you sign a purchase agreement to make sure the zoning will allow your type of business. And, insert a contingency in the purchase agreement that the property must be zoned properly for your business, in case the situation changes or you get bad advice from the zoning department.

Are there offsets or prorations against the purchase price? There are several types of offsets between the parties. For commercial and residential transactions, the parties will usually prorate the property taxes and the buyer receives a credit against the purchase price. If insurance and/or association fees have been prepaid by the seller, then the buyer will owe the seller reimbursement.

For commercial closings there are usually offsets for prepaid rent and tenant deposits.

Tenants

There are tenants in the property. What are my rights as the new owner? Generally, it is the existence of the tenants that makes the property attractive and valuable, so the new buyer just continues on with the leases. However, unless the leases are recorded in the land records or the purchase agreement requires that the leases be honored, the new buyer is not obligated to abide by the existing leases. So, tenants of valuable lease space, should record their leases or a short form of the lease, unless the lease prohibits the recordation of either of these documents. If the lease has a clause prohibiting the recordation, the prospective tenant should consider the viability of the space very carefully or be prepared to move out if the building is sold; in these cases, the buyer would have recourse against the original landlord, but whether that is a viable remedy may be difficult to determine.

Other real estate contracts

Alford Title Company, LLC | SlidellIn addition, clients seek counsel from Alford & Alford to prepare:

  • leases: residential and commercial
  • purchase agreements: residential and commercial
  • documents for owner financing transactions
  • contractor liens
  • construction contracts
  • donations
  • sale documents
  • mortgage documents
  • options
  • right of first refusal

Other real estate related services include:

  • tax sale confirmations
  • discovery, analysis and cure of title defects
  • title examination
  • enforcement and defense of construction contracts and liensReady to get started? Schedule a consult now.

The Closing Process

Steps for closing on a home purchase

Steps for closing for refinance transaction

Title Insurance

Ownership of real estate, particularly a home, can represent a substantial investment of wealth and a way of life. Alford & Alford offers title insurance to protect this valued asset.

Three Reasons Every Homeowner Needs Title Insurance, Fox Business article

Helpful resources:

Mobile Apps

Mobile apps are increasingly assisted home buyers in their search for the American Dream. Here’s a video on how mobile apps are used in the home buying process.

The U.S. Housing and Urban Development Agency has produced a Guide to Buying a House. It is a broad review of many issues involved with the purchase of real estate.

Learn more about Condominium and Homeowners Associations

Ready to get started? Schedule a consult now.

Pamphlets

  • What You Should Know About Buying a Home
  • ALTA Title Insurance flyer
  • Gathering Your Personal Information & Documents with a Personal Organizer
  • What You Should Know About Your Legal Health
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