Buying a House in Connecticut

Buying a house is one of the most important legal transactions you'll ever undertake. It's important to know your legal rights and understand the process.

Working With a Real Estate Agent

In Connecticut, real estate agents may represent the buyer, the seller or act as a dual agent in a home sale transaction, representing both the buyer and the seller. Real estate agents have what's called a "fiduciary duty" to the party who they are legally representing in the sale, which means that they are held by law to owe specific duties to the person who they are representing, in this case, the buyer. In addition to duties or obligations that are stated in an agency agreement or other contract, a fiduciary's duties include:

• Accountability
• Confidentiality
• Diligence
• Full disclosure
• Honesty
• Reasonable skill and care
• Undivided loyalty

Although the agent owes allegiance to the seller, the agent must always be fair and honest to you, the buyer. You may want to hire a "buyer's agent," which is someone that will act on your behalf. The sales commission is then split between the seller's and buyer's agent. Under Connecticut law, a real estate agent must disclose to buyers and sellers who he represents in a sale.

When selling a house, disclosure of all important facts actually known to the seller is critical, even though it may impact on the ability to complete the sales transaction or on the ultimate sales price of the house.

Under Connecticut law, the seller of residential property must disclose the following problems and information about the property, in the Residential Property Condition Disclosure Report, to prospective buyers:

• Other parties who own or have the right to use property
• Whether property is in flood plain or wetlands area
• Whether the seller has reason to believe that a city, town, or village may impose any assessment for improvements
• Whether the subject property is located in a historic village or special tax district
• Any problems with heating, plumbing, sewage, electrical or other systems and utilities
• Whether there are materials such as lead paint and plumbing, radon and asbestos insulation present on the property
• A buyer may request written disclosure of crimes that occurred on the property, including homicide, felony and suicide
• Any problems with the building, structure or improvements

Purchase and Sales Agreements

When you find a house you'd like to buy, you'll put together and sign a purchase and sale agreement, which is a contract that contains all of the terms of the sale, including the following:

• The names and addresses of the sellers and buyers
• Address and legal description of the property
• Sales price
• Personal property included in the sale
• Amount of earnest money deposit accompanying the offer
• A mortgage contingency giving the buyer the ability to obtain financing
• A home inspection contingency
• Date for the closing
• A contingency that seller promises to provide clear title to the buyer
• Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted between the buyer and seller
• Lead paint (required under the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 for homes built prior to 1978)
• Residential Property Condition Disclosure Report
• Dual Agency Consent Agreement or Dual Agency Disclosure, if applicable
• A provision that the buyer may make a last-minute walk-through inspection of the property prior to closing
• A time limit after which the offer will expire

An important thing to remember is that you should consult your Connecticut real estate attorney before you sign the contract. The real estate transactions involved in purchasing a home give rise to a number of legal questions that a lawyer with a real estate background and experience is best equipped to answer.

Inspection

It's always a good idea to hire an independent professional home inspection service before you buy a house. A home inspection is a visual examination of some combination of the structural, mechanical, electrical and plumbing systems that is designed to identify material defects in those systems and components. You can make your offer contingent on inspection.

An inspection generally covers the following:

• Roof surfaces
• Roof drainage systems
• Lot grading and drainage
• Exterior siding and components
• Decks, porches and patios
• Driveways and walkways
• Foundations
• Basements and crawlspaces
• Structural components
• Walls, ceilings and floors
• Doors and windows
• Electrical systems
• Plumbing systems and plumbing fixtures
• Hot water systems
• Heating systems
• Air conditioning systems
• Attics
• Insulation and ventilation
• Fireplaces and chimneys
• Kitchens and installed appliances
• Bathrooms
• Garages and outbuildings

Legal Title Issues

When a home is purchased, title insurance is also purchased. Based upon a search of public records, a title search brings attention to any known property title problems before the closing takes place. It also insures against loss due to certain title defects that didn't turn up during the title search. Your real estate lawyer or title company will investigate the legal title of the property you want to buy, and may find issues you'll need to understand.

In Connecticut, for example, an implied easement exists where a person grants lands to which there is no accessible right-of-way except over her or his land or retains land that is inaccessible except over the land which the person conveys. In such instances a right-of-way is presumed to have been granted or reserved. Such an implied grant or easement in lands or estates exists where there is no other reasonable and practicable way of accessing the property, and it is reasonably necessary for the beneficial use or enjoyment of the part granted or reserved.

The property you're interested in may also be subject to a "lien," which is a charge on the property to satisfy a debt or other obligation owed by the current owner of the property. A lien encumbers property for as long as it exists and has been recorded in the public records.

In Connecticut, liens on a piece of property may include:

• Mortgages
• Construction or mechanics' liens
• Judgment liens
• Tax liens

Closing Costs

In Connecticut, you can expect to pay for the following charges - called "closing costs"- at the time you purchase your home:

• Down payment
• Appraisal fee
• Title search
• Title insurance
• Lawyer's fees
• Points
• One-year homeowner's premium
• Private mortgage insurance (PMI)

RESPA

The US Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) administers several regulatory programs to ensure equity and efficiency in the sale of housing. One of these programs, under the Real Estate Settlement Procedures Act (RESPA), applies to almost all mortgage loans and mortgage companies, not just FHA-insured mortgages.

RESPA protects consumers by requiring a series of disclosures that prevent unethical practices by mortgage companies and that provide consumers with the information to choose the real estate settlement services most suited to their needs. RESPA helps consumers avoid surprises, like when an unexpected fee appears in your closing documents. The disclosures take place at various times throughout the settlement process. Certain disclosures are required at the time of loan application, before closing occurs, at closing, and after closing.

Mortgages

At the time of purchase, you'll sign a promissory note that legally obligates you to pay back the money you borrowed to buy your house. A promissory note is, in effect, an "IOU." You promise to pay your lender the full amount, payable in equal monthly installments, at the interest rate previously agreed upon. Your lender will keep the original until you completely pay off the loan. In Connecticut, the document you sign as a security interest in your house is called a mortgage.

A mortgage is the instrument, usually held by the lender, by which the property is pledged to secure the payment of a debt or obligation. Because mortgage terms and rates may vary, it's a good idea to shop around and get the best possible deal.

Private Mortgage Insurance

If you put down less than 20% on a home mortgage, lenders often require you to have "private mortgage insurance" (PMI). PMI is a type of insurance that protects the lender in the event the borrower defaults on the loan, which is a concern if you don't have much equity in your home. PMI covers the gap if a foreclosure sale of your home might not bring enough to pay off the mortgage plus cover the foreclosure proceedings. PMI is a cost added to the monthly payment of many conventional loans. The loan servicer collects these monthly premiums and pays them to a private mortgage insurance company.

The Homeowners Protection Act of 1998 (HPA) establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80% of the original purchase price or appraised value.