What You Should Know About Your Closing (Buyers and Borrowers)
At the time of closing, please bring with you a homeowner Fire and Extended Coverage insurance policy or binder for such insurance either in an amount at least equal to the total of all new mortgages on the property or 100% of the replacement cost of all insurable buildings and other improvements on the land. IF YOU ARE GOING TO RELY ON THE 100% REPLACEMENT COST AMOUNT AS SUFFICIENT INSURANCE, THEN THE POLICY OR BINDER MUST STATE THAT 100% REPLACEMENT COST IS IN EFFECT. The insurance policy or binder must name all of the persons who will hold title to the property. The mortgage clause adding the mortgagee’s insurable interest to all policies MUST BE WORDED in accordance with the instructions listed in your commitment letter issued by your lender.
Your insurance agent MUST fax or deliver to our office a copy of a binder for such insurance along with a receipt showing that the first year’s premium is paid in full, at least three (3) business days prior to closing.
If the premises is located within a specially designated federal flood hazard area then flood insurance is a mandatory requirement and you must provide a flood insurance policy together with a paid receipt for the full first year’s premium at or before the closing. Please note that if the premises is located within Zone B, flood insurance is not required.
Rent Loss Insurance
If this transaction involves a loan on investment premises or a 2-4 family dwelling then rent loss insurance may be required and an appropriate binder to that effect will be required at or prior to closing. You should check with the bank for applicability of rent loss insurance to your loan.
The lender requires that they be provided with a lender’s title insurance policy (loan policy) to protect their interest in your property up to the amount of the mortgage. While the premium for the loan policy is included in your closing costs, it does not protect you. Your ownership interests are insured only by an owner’s title insurance policy (owner’s policy). While the lender’s coverage under the loan policy decreases as the mortgage is paid down and terminates when the final payment is made, your owner’s policy remains in effect for as long as you and your heirs own the property. The owner’s policy is available for a one-time premium and at a discounted rate if purchased simultaneously with the loan policy at the time of closing.
The owner’s policy provides coverage for numerous matters which are not covered by the standard attorney’s Certification of Record title and which are not discoverable by searching the land records. Typical examples of such matters include forged documents, the incapacity of a grantor, undisclosed or missing heirs, missing signatures, mistakes in recording, unknown creditors and problems involving access to the land. The best owner’s policy now available is known as the Eagle policy, which provides additional protection for problems such as zoning and building permit violations, restrictive covenant violations, encroachments and defects in title.
Because we believe that obtaining an Eagle Owner’s Title Insurance Policy is in your best interest we will plan to issue same and include the additional premium cost in the settlement figure you will bring to closing unless you advise us to the contrary.
If the mortgage involves a condominium unit, we will require a Certificate of Insurance from the insurance carrier for the condominium naming you and the association and identifying the unit you are purchasing. Please contact our office for the exact language naming the bank. Please note that you may be required to purchase additional insurance if the insurance company does not provide 100% replacement cost coverage.
OTHER CONDOMINIUM REQUIREMENTS. A “6 (d)” certificate stating that there are no unpaid common charges to the condominium association as of the date of closing must be issued and sent to us prior to closing. This certificate is obtained from the trustees or managers of the condominium and must be in the form prescribed by law. You should be sure that the seller procures such a document before the closing.
Manner in Which the Title Will Be Held
Below, you will find an explanation of some options on how to hold title to real estate. Please advise our office on how you would like to take title to the property and fax it back to us. This information should be provided to us as quickly as possible since many documents which we prepare require this knowledge.
Our Certification of Title
The following matters apply only if the transaction involves a purchase of real estate with a dwelling designed to be occupied by not more than four families and occupied in whole or in part by one or more of you. For a detailed explanation please see Massachusetts General Laws, Chapter 93, Section 70. We are required to certify to you that the title to the premises meets the standard established by that law. Our certification to you should not be construed as establishing an attorney/client relationship between you and our office. The services we render are only on behalf of the mortgage lender unless other arrangements are made with our office, and we cannot advise or counsel you relative to the transaction. If you wish to obtain legal advice regarding the quality of the title or with regard to some other aspect of the transaction, you should retain independent counsel.
Smoke and Carbon Monoxide Detector Compliance
We call your attention to the provisions of Massachusetts General Laws, Chapter 148, you may be required to execute a certification at the closing that you have inspected the installation of the smoke and carbon monoxide detectors and are satisfied as to compliance with this law. You should contact the sellers and ensure that they have obtained, and will bring with them, a current certification from the city or town fire department relative to the installation of smoke and carbon monoxide detectors. The foregoing may not apply in certain commercial transactions. If you are unsure of the applicability of this law, please check with your counsel or contact our office.
Water, Sewer, and Electricity
You should ask the sellers to obtain a final reading of the water meter so that all outstanding water and sewer bills may be taken care of at the closing. If you are purchasing a condominium unit, it is likely that water and sewer charges are included in the monthly condominium fee. In that case, a final water and sewer bill is not required. If electricity is provided by a municipal light plant, the sellers should obtain a final electric reading.
Our office can prepare a Homestead Declaration for you for this transaction if the home you are purchasing will be your primary residence. Under Massachusetts law an owner of a home who intends to occupy it as their principal residence can protect a portion of the equity in their home by merely filing a Declaration of Homestead in the Registry of Deeds where the property is located. Please let us know if you want us to prepare and record this Declaration.