Residential Real Estate
For most individuals, the purchase of a home represents the largest investment they will ever make. Whether it is a “starter” home in Ely, a country home in Duluth, or a cabin on Lake Vermilion, protecting your investment is our primary concern.
Each lawyer at Klun Law Firm strives to take the worry and anxiety out of buying or selling a home.
Typical Real Estate Transaction with Lender
A real estate lending transaction often begins with a mortgage application. The loan application is usually prepared by the lender for the borrower’s signature. Upon receipt of the application, the lender completes its underwriting process and decides whether or not to offer to make a mortgage loan to the borrower.
If the lender decides to make the mortgage loan, it usually prepares a written offer—called a mortgage loan commitment—to make a mortgage loan. Mortgage loan commitments are frequently prepared by loan officers or in-house lawyers. In complicated or unusual transactions, however, a lender might ask its outside counsel to prepare the commitment. Upon receipt of the mortgage loan commitment, if the borrower decides to proceed with the transaction, the borrower accepts the commitment by signing and returning it to the lender, often accompanied with a fee paid to the lender.
Upon the borrower’s acceptance of the commitment, the lender will usually obtain an appraisal of the real estate serving as collateral for the loan, and an environmental study of the real estate, called a Phase I. The lender will also order title work in the form of a title insurance commitment from a title insurance company and sometimes obtain an engineering or other professional analysis of the real property and its operating systems.
At some point in this process, the lender will also direct its lawyer to prepare the documents. When the lender’s lawyer has completed the documents, the documents will be forwarded to the borrower and the borrower’s lawyer for review. After negotiations, the lender’s lawyer will place the documents in final form.
If the appraisal of the property, environmental reports, title insurance commitment, engineering or other professional reports, and documents are satisfactory, the parties will close the loan transaction. This process often (but not always) involves a face-to-face meeting between the lender and borrower, called a “closing.”
At the closing, the borrower will execute the loan documents, and the lender will provide the loan proceeds to the borrower. It is not uncommon, however, for the loan to be made without a formal closing. In this situation, without meeting face-to-face, the borrower will make arrangements to execute the closing documents, often through the services of a closer at a title insurance company, and the lender will make arrangements to make the loan upon the borrower’s execution of the documents.
Twenty-five percent of homes have a septic system. To protect home buyers from costly and frustrating septic issues, St. Louis County created an ordinance often called a point of sale requirement, states that a home cannot be sold unless one of the following requirements is met:
- The seller discloses to the buyer that there is not a sewage treatment system on the property
- The property has a sewage treatment system with a vaild certificate of compliance or notice of non-conformity
- The seller and buyer file a transfer agreement with the St. Louis County Environmental Services Center
If you are a home owner, it is in your best interest to get a septic inspection often. A valid certificate of compliance lasts three years, so having the system inspected in a timely manner can save the property owner, a potential property buyer, and other parties a vast amount of time and money.
At the time of sale a home owner must disclose the status of all wells on the property along with a valid sketch of the location of each well. In St. Louis County and Lake County a well is not required to be tested or inspected at the time of sale, but often the lending institution may require a well test and inspection in order to protect the buyer. Often water contaminentsare found leaving the seller distraught and unable to close on a home. Having well testing and inspections done regularly along with the above mentioned septic testing can truly save a land transaction.