How is a Binder/Offer to Purchase Different from a Contract?

What is a Binder or Offer to Purchase? 

A real estate binder is an agreement that is commonly drafted by real estate agents. It is a document that contains all the terms of a proposed real estate transaction and usually contains the names of both parties, who their real estate agents are, who their attorneys are, the address of the subject real estate property and of the course the purchase price.

What is the Purpose of a Real Estate Binder?

A binder serves two main functions: to outline the basic terms of the agreement and to commemorate the intent of both buyer and seller to enter into the deal.

However, is the real estate binder a binding contract? After all, it is in writing and signed by both parties, it identifies the property and the sales price. Sometimes there is even an earnest money deposit that is made. Isn’t that enough to bind the two parties, as the name binder implies?

Whether the binder is a binding contract depends on the customs of your area and the language of the binder. Even within Connecticut, there are very different customs between say Fairfield County and the Hartford Area. In Fairfield County it is custom for attorneys to draft the final contracts. Therefore, it is common to find binders with language that calls for a further “superseding contract between the parties to incorporate the details stated herein”. In northern parts of Connecticut, some real estate agents specifically draft binders that are meant to binding real estate purchase and sale contracts, with language that allows for an attorney review period that is often 7 or 14 days from date of signing.

The three factors to look for when deciding when a binder is meant to be the contract are (1) does the language indicate intent to be bound without further contracting, (2) due the circumstances of the transaction indicate an intent to be bound, and (3) was the purpose of signing the binder to bind the parties to a final deal?

What Are the Real Estate Binder/Offer & Contract Customs in Fairfield County, Connecticut?

With the Fairfield County custom being that the attorneys draft the real estate purchase and sale agreement, how does this process with binders play out? It all starts with the real estate agents.

The real estate agents in Fairfield County know the custom and therefore, they use binders that call for a superseding contract. Many realtors do not use a binder, per se, but chose instead to use an “Information Sheet”, which has all the same contents as a binder, but does not have the signatures of the buyer or seller.

The binder or information sheet need to find their way to the Seller’s attorney. The Seller’s attorney then drafts a proposed contract using those terms and sends two unsigned copies to the Buyer’s Attorney. The Buyer’s Attorney reviews the contract, negotiates any changes that may be necessary, and has his client sign both originals, as well as provide a check for any deposit amounts due at contract signing. Both originals and the deposit funds are sent back to the Seller’s Attorney, who has the Seller sign both originals, and returns one original to Buyer’s Attorney and keeping one original for their file.

Get A Real Estate Attorney ASAP

Please understand that the sooner you get a real estate attorney involved in your transaction the better. You should have somebody to call and ask questions about the documents you are expected to sign BEFORE you sign them. After you sign, all we can do as your real estate attorney is explain what it says and means.

The post What is a Real Estate Binder or Offer to Purchase? appeared first on Glouzgal Law PLLC.

Can Land Records Documents be Valid if Defective?

The land records of a town or county contain the relevant documents in regards to land ownership in the that location. Whenever buying or selling property, a title search must be performed to make sure the seller is giving the buyer clean title. Sometimes during these searches, attorneys come across documents that are defective, or missing something require by Connecticut law to make that document effective. One of the common areas where we have seen this is when individual attempt to create or manage their on trusts, but it happens in other situations as well.

The good news is, Connecticut General Statute 47-36aa can validate certain defects in recorded documents, as long as those documents were recorded 2 or more years earlier and have not yet been challenged in court.

What Kind of Defective Documents Can Be Validated?

CGS 47-36aa, known as the Validating Act, can cure defects in a multitude of common land records documents. The documents which can be validated if defective include:

• Deeds
• Mortgages
• Powers of Attorney
• Releases
• Notices of Lease
• other documents affecting real estate

What Kind of Document Defects Can Be Cured?

When searching land records, it is not simply enough that the document is there. Documents must be drafted in a specific manner, contain specific information, must be executed via specific procedures and be recorded in a specific manner; all of which is regulated by Connecticut law. While it is impossible to go over every type of defect that can occur in land record documents, here are the types of defects that can be cured by the Validating Act:

• defective or non-existent acknowledgement (the person signing the document did it wrong or forgot to do it)
• lack of a witness or witnesses
• missing, incorrect or conflicting dates
• where a business or trust entity is the grantor, but an individual signs the document in their individual capacity
• where a business or trust entity is the grantor, but an individual signs without disclosing their authority to sign
• a document signed under a power of attorney, but signed without referencing the power
• if a document is signed under a power of attorney which is effective but not recorded until after
• a document transferring property to a recipient who does not have the legal capacity to hold interest in real estate

What Kind of Defects CAN NOT be Cured?

The validating act does not cure any and all defects in documents that have been recorded yet unchallenged for 2 or more years. The following defects are NOT cured by the Validating Act and therefore make their documents invalid:

• errors in or missing property description
• errors in the names of relevant parties
• Incorrect references in deeds, mortgages and releases (to other land record documents)
• documents not signed by the original signature of the grantor
• unrecorded or missing documents
• defects in foreclosure proceedings
• gaps in chain of title

How Do You Stop Defective Documents from Being Validated?

If you want to make sure that a defective land records document is not cured and validated, you must challenge the document by bringing a court action and recording a lis pendens within 2 years of the document being recorded.

The post Validation of Defective Documents Recorded on the Land Records appeared first on Glouzgal Law PLLC.

Trusts and Real Estate Conveyance

Trusts can be used for a variety of purposes in estate and wealth planning. A common use for a Trust is to hold real estate property. Whether holding the real estate is the sole purpose of the Trust, or just one of the assets with which the Trust is funded, the real estate must be conveyed into the Trust, and one day the property may be sold and will need to be conveyed out of the Trust to a Buyer.

The Current Law for Conveying Real Estate into a Trust

Currently, the law regulating transfers of real estate property into a Trust holds that a Deed conveying real estate to a Trust directly does not convey good title because a Trust does not have the capacity to hold title to land. In order to properly convey title the Deed must name the Trustee of the Trust as the “Grantee”, or individual receiving the property. The idea here being that the Trustee is holding and caring for the property on behalf of the Trust.

If the property is in fact conveyed to a Trust directly, it is not validated until 2 years have passed without issue.

When it came time to transfer the property out of the Trust, once again the Trustee would be needed, but it is in fact the Trustee who is holding the property.

New Law Takes Effect October 1, 2016

Coming into effect this October is Public Act 16-194 which changes the procedure for transferring real estate property into a Trust. The Act reads:

“Any conveyance of an interest in land to a trust rather than the trustee or trustees of the trust shall constitute a valid and enforceable transfer of that interest. Any conveyance by the trust, which conveyance is signed by a duly authorized trustee of such trust, shall be treated as if the conveyance was made by the trustee.”

The new law should resolve any confusion or problem when transferring property into or out of a trust by allowing the trust, and therefore any trustee, to convey the real estate.

The post 2016 Connecticut Law Changes How A Trust Handles Real Estate appeared first on Glouzgal Law PLLC.