Articles Posted in Residential Home Purchases

The Supreme Judicial Court of Massachusetts is expected to decide a case that will have a resounding impact on the way real estate is handled under Massachusetts law.

The case, Monell, et al. v. Boston Pads, LLC, et al., will address whether the lower court judge properly exempted the real estate industry from the requirements set forth for independent contractors in Mass. G.L.c. 149, § 148B.

In the initial case, the plaintiffs worked for a real estate company, in which they were paid by means of commission. However, their positions were allegedly controlled and directed in a manner more commonly carried out in a typical employer-employee relationship. Such control included such factors as a dress code.

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The lower mortgage rate and more stable inventory in the Massachusetts real estate market has several sources, including the real estate website Zillow, predicting that millenials will be the largest group of homebuyers this year.

One young woman claimed that a major motivation for her decision to buy a home was due to difficulty in finding a suitable location to rent.

Additionally, in December, Fannie Mae and Freddie Mac announced they would reduce the minimum down payment on certain mortgages from 5% to 3%, among other changes that are aimed at getting more first-time homebuyers back into the market of buying residential real estate.

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The landmark decision reached by the U.S. Court of Appeals for the First Circuit, in Real Estate Bar Association (REBA) v. National Estate Information Services (NREIS), 459 Mass. 512 (2011), affirmed not only the mandatory presence of but the substantial participation and involvement of a Massachusetts attorney in real estate closing proceedings.

The issue in the case was the legality of the NREIS’s actions related to providing so-called “drive by closing attorneys” and all the necessary required documents as part of its services. NREIS provided nationwide services for closings, and it had a list of contract attorneys who would arrive at closing proceedings to provide limited services and in order to meet the attendance requirement under Massachusetts law.

The justices in the case cited a lack of information necessary to determine whether the NREIS was engaged in the unauthorized practice of law, but they reaffirmed that the conveyance of real property and the various corollary documents associated with the transfer did amount to the practice of law, and therefore the situation required more than the mere presence of an attorney.

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Buying a new home can be an incredibly exciting and simultaneously stressful situation. It is not difficult to imagine the potential hassles that can arise when the property that you saved up for years to purchase, and continue to work hard to afford, begins to show signs of problems that were not fully disclosed at the time of purchase.

Generally speaking, since the buyer and seller are by the very nature of the transaction in a conflict of interest, there is no special fiduciary relationship, and thus sellers do not owe much of a legal duty to disclose information to buyers at the time of the sale.

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The Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac, is initiating changes in lending rules that would allow more potential buyers to qualify for home mortgages, especially in high-demand markets like Massachusetts. These changes should enhance buyers’ ability to participate in the housing recovery.

Fannie Mae and Freddie Mac are not themselves mortgage lenders but are potential purchasers of loans from banks, credit unions, and other financial institutions. This frees up funds so the direct lenders can make loans to more aspiring homeowners. To qualify to sell loans to Fannie or Freddie, the lenders must follow guidelines laid down by the federal agencies or face the possibility of being forced to buy back the loans.  During the recession and the decline in property values and the plague of foreclosures, Fannie/Freddie  imposed stringent requirements on borrowers and lenders. In response, banks adopted additional requirements—called “overlays”—that impose even more rigorous requirements on borrowers. Although Fannie/Freddie loans currently require a FICO credit score of at least 620 to qualify, most lenders demand a credit score of 740 or more for a borrower to qualify for a loan.

Although interest rates are currently the lowest they have been in 18 months, the overlays have excluded many potential borrowers from the real estate market. This in turn has led to a decline in home sales, slowing the housing recovery. In fact, home sales have been down in six of the past nine months in 2014 in Massachusetts and are down nationally too.

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Major storms Katrina and Sandy have made catastrophic hurricane damage in the United States a reality, and there are significant lessons that need to be applied to protect our shorelines in the future. There are specific vulnerabilities the city of Boston will face in the event of sea level rise, and there is a need to ascertain how critical some of these threats are to the average Bostonian, and in particular the Boston property owner.

Up and down the New England coastline, a precedent has been set for the utilization of sea walls, dunes, and other effective man-made and natural flood protective strategies. There has not been a significant flood preventive structure built since 1978, but waterfront development of Boston has continued. The desirability of both commerce and real estate in the Boston Harbor region has increased significantly, especially since the completion of the project nicknamed “The Big Dig.” Moving forward, as this ongoing development continues, constant vigilance is needed to be certain that both new and existing development is assessed as to adequacy in curtailing ongoing threats from flooding.

Massachusetts became the first state to officially incorporate climate change effects into its environmental review procedures by adopting legislation that directs agencies to consider reasonably foreseeable climate change effects, including additional greenhouse gas emissions and predicted sea level rise. Massachusetts G.L. ch. 30, § 61 (2012).

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If you purchase or rent out residential property in Massachusetts where young children live or may live, you need to be aware of the requirements of the Massachusetts Lead Law, 105 CMR 460.00, and in particular CMR 460.100, Duty of Owner(s) of Residential Premises.

Lead poisoning is a hazard to many young children in Massachusetts, who are exposed to lead paint with harmful effects. Children exposed to lead may experience brain damage, kidney failure, and learning disorders. The Lead Law was enacted to prevent these serious health consequences, which can be permanent and disabling.

Under the Lead Law, a property owner must either remove or safely cover lead paint. The Lead Law applies to all homes built before 1978 when a child under the age of six is a resident of the household. Examples of hazardous circumstances that would trigger the law include paint chips and lead paint anywhere that a child may reach it. Subject properties include both an owner’s residence and a rental property. There are grants and loans available to help pay for lead abatement.

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A prospective purchaser of property may discover that there is an easement giving a non-owner, whether a person, company, or public entity, the right to use a portion of the property. An easement is usually a passageway between two properties, possibly for a driveway when one property does not have direct access to a street, or for power or telephone lines.

An easement may be negotiated between neighbors regarding their adjacent properties, during the course of their ownership. The issue may then be raised or contested by subsequent owners of what is called the servient estate, the property on which the easement exists.

The existence of an easement may be shown in the property deed, or in a subdivision plan, or both. Verbal agreements are not favored by the courts, but if they are well verified, they may stand up, if there is additional evidence that both property owners intended to create the easement.

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Home prices rose in May by the greatest margin in more than six years as the housing market recovery gains momentum. The S&P/ Case-Shiller index climbed 12.2 percent from May of 2012, marking the biggest twelve month gain since March of 2006.

Record low borrowing costs, short supply and an improving job market are boosting demand for residential homes and driving prices up. An economist stated, “We continue to look forward to upward momentum. We still have historically low inventory levels.”

The year-to-year gauge compares figures back to 2001, and provides a better indication of price trends. All twenty cities in the index showed an increase in year-to-year prices, led by gains of 24.5 percent in San Francisco and 23.3 percent in Las Vegas.

The number of signed contracts to buy homes rose in March to the highest level in three years. The National Association of Realtors stated its seasonally adjusted index for pending home sales rose 1.5% to 105.7, the highest since April 2010. It is also above February’s reading of 104.1.

Signed contracts are seven percent higher than a year earlier, which means that in the next month or two these will become completed sales. However, sales of previously occupied homes decreased in March to a seasonally adjusted rate of 4.92 million, from February’s 4.95 million.

Total existing-home sale are projected to increase close to seven percent from 2012 to nearly five million sales this year, with the median existing-home price is estimated to rise about 7.5%. An index reaching 100 is the average level of contract activity during 2001, when home sales were between 5 million to 5.5 million.

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