Vermont real estate listings: a picture is worth very few words

Real estate agents are skilled at taking great pictures of their listings.  The ultimate purpose for this is to show the excellent attributes of a home, while leaving the less desirable to the imagination.  For real estate investors, looking to make a play in the Vermont market, sometimes, a listing sheet, tax bill, sellers disclosure form and pictures are all they secure before making a determination if a piece of Vermont real estate is worth their investment dollars.

Although nothing can replace an actual site visit, there are ways to dig into the property without setting a foot on the land itself by looking into the land records to see if a story can be told as to the properties marketability.  Below are a few of the key documents one might look for in performing this research.

  1.  History of property.  Understanding the history of a piece of Vermont real estate, how many owners it is has had and whether or not there is an indication as to the price that was paid each time the property was transferred should give a prospective buyer a good indication of what the property may be worth currently.  Looking into the land records and finding the deeds mortgages and Vermont Property Transfer Return Forms may shed some light on this important question;
  2. Improvements To Property:  Anytime a structural change will be taken place to a building, a permit may be required before construction begins.  These permit applications should be available in the town clerk or zoning office.  The application itself may give a rough cost estimate and an overall sketch of the proposed improvement, which can be taken into consideration when making an offer.  Further, if a new septic or other improvement was completed during ownership, a Vermont waste water permit with a proposed plan conducted by a septic planner may be available either at the land records or by researching the septic application at the Vermont Agency for Natural Resources.
  3. Is the Seller Motivated?  There is a different selling ,mentality when selling a primary residence as opposed to a second home or one that was transferred as a result of an estate or trust.  In many occasions. where a property is transferred after the death of the owner, the new owner lives several states away.  This is an important piece of information that should be evidenced in the land records and can have a significant effect on how low a bid an owner is willing to take, when they consider the carrying costs of a home that is located so far from them.

The three examples above are just a few of the pieces of information when can extract from the Vermont Land records if they, or a Vermont title abstractor, visit the town clerk for a few hours.  This information can make all the difference in making the right bid for the right property.

The information above should not be considered legal advice.  Parties are encouraged to contact a Vermont attorney for specific questions regarding Vermont real estate transaction.

The hidden closing costs of a Vermont real estate transaction

For those who are looking to purchase or sell their home, it can be difficult to discern  the exact cost of closing on such a deal.  Although the purchase price agreed to in the Vermont real estate transaction puts the parties to the deal in the ballpark of the actual overall cost, this ballpark can vary by thousands of dollars depending on a multitude of factors.  Learning about the potential factors prior to entering into a contract can be a valuable lesson in understanding what the bottom line cost will be when the parties meet at the closing table.

  1. Title Insurance: If a purchaser of Vermont real estate is borrowing some of the purchase price for the transaction, it is likely that the bank will require that their interest is covered by a lender’s title policy.  Even if a bank is not involved, it may be a wise idea to insure title through the purchase of an owner’s policy.  The cost of title insurance is dependent on the amount of money being borrowed and/or the overall purchase price of the real estate.  To get a general idea of the cost click here for a rate calculator.
  2. Insurance Premiums:  The cost of insurance is once again dependent on the size of the mortgage and factors related to the property.  Most banks require a policy that covers the replacement value of the home.  Thus, in insuring Vermont real estate, the total amount covered will likely exceed the purchase price.  Is the property in a flood plane?  This is a very important designation to research prior to contract formation, as flood insurance can significantly increase the overall monthly costs required to purchase the property.
  3. Recording Fees: Town clerk’s customarily charge $10 per page for recording mortgages, deeds, property transfer returns and other documents surrounding the transfer of property.  Depending on the complexity of the transaction, these fees can result in several hundred dollars being added to the closing costs.
  4. Loan Origination and Processing Fees:  Banks need to be compensated for drawing up the paperwork and conducting their due diligence in processing a mortgage application.  This cost can be upwards of several hundred dollars which will be expected to be paid out of closing proceeds.
  5. Attorneys’ Fees:  In most transactions, both the sellers and purchasers are represented by attorneys who assist in the transfer.  These fees in most cases are paid at closing and are either added to the overall costs to the purchaser or deducted from the seller’s expected proceeds.
  6. Title Search Fees:  In most cases a title search of the property to ensure marketable title is available for the purchaser is required.  This not only informs the purchaser of what issues may surround the property itself, such as easements, restrictions on the use of the land and permit violations, but is also a requirement of any purchaser that is required or desires to purchase title insurance.
  7. Municipal and State Taxes:  As part of the transaction, all municipal taxes need to be caught up at closing.  Many banks also require that an entire year of taxes be paid at closing.  Also, the State of Vermont imposes a “Property Transfer Tax” of 1.45% of the purchase price, which will need to be paid at closing.
  8. Real Estate Agent Commission:  A seller in many cases enlists the assistance of a real estate agent to market their property.  It is customary for a real estate agent to collect upwards of 6% of the purchase price as a commission on their work.

The above list is not an exhaustive in detailing all the potential costs of a Vermont real estate closing.  However, it gives the parties to a real estate contract a general idea of what to expect.  Simply put, running calculations based on these figures prior to entering into a contract may assist all parties in ensuring that they are not surprised when they sit at the closing table and see exactly where all the funds are going and what the actual cost for conducting this transaction will be.

 

The above information should not in any way be construed as legal advice.  Before entering into any real estate contract it is important to consult an attorney in order to understand all the complexities of the transaction.

What is an encumbrance on a Vermont real estate title?

There are easy encumbrances to identify in the land records such as mortgages, liens and judgements.  Then, there are other interests  that are not so clearly defined, such as rights of first refusal, easements and other language in the land records that raise a question as to whether or not a property should be considered encumbered so as to diminish the value of the subject Vermont real estate.    The question then for any Vermont title abstractor is  whether or not these factors could be identified as “marketability issues” and thus subject to a reworking or withdrawal from a real estate contract.

Title marketability is best defined in Section 1.3 of the Vermont Title Standards, which states:

A marketable title is one that may be freely made the subject of resale.  A marketable title is one that allows an owner to hold the land free from the probable claim of another. It is a title which would allow the holder of the land if he or she wanted to sell, to transfer a title which is reasonably free from doubt. A title is marketable when its validity cannot be said to involve a question of fact and is good as a matter of law. First National Bank v. Laperle, 117 VT 144, 157 (1952).

The question in the National Bank analysis then becomes whether or not a “probable claim of another” can cloud the title to the point where it is considered unmarketable, even if the interest does not directly effect the condition of the property or the intended use.  Thus, it is important for a Vermont title abstractor to investigate and disclose to their client all potential defects, not just those that hold a direct financial interest to a property.

A right of first refusal held by a third party is a prime example of such a disclosure.  For arguments sake, a case can be made that such an option by a third party breaches the marketability provision by giving preferential treatment to someone other then the buyer if they intend to sell the land at a future date.  However, what if the first refusal only allows the third party to purchase the property at a price that is set by the owner and thus, not subject the owner to a discount or other concessions to the third party?

Abstracting a Vermont tile is not as simple as running a 40 year chain of title and then running back a list of mortgages and liens to see which are still active on the land. It takes a much deeper understanding of the property and the instruments that bare an interest in the land for an effective title opinion to be constructed.  Understanding the Vermont case law that surrounds such an analysis is a crucial first step in being able to advise clients of all potential defects that can hold a substantial impact on their final purchasing decision.

How to disclose what you can’t find in Vermont land records

Vermont is best know for its rural charm.  Small towns with under 3000 residents are the norm throughout Vermont’s landscape.  Also, in a similar fashion, many of these town offices are quaint in size and somewhat unique in how they index their land records.

From online databases, to card catalogues to “ledger sheets”, it can be difficult to find exactly what you are looking for if you first do not have experience in how to look for it.  Although many of the larger cities have converted to a digitized index that easily allows the abstractor to search by name or physical address, most of the smaller towns still rely on the hard copy approach, indexing their recordings through a physical recording.  Although most of these indexes are organized fairly well, there is a significant reliance on documents being returned to the exact location they were found.

This process can lead to misplaced index cards, or improperly recorded documents, which an abstractor needs to exercise diligence in finding before submitting their final title report.  To minimize this risk it is important to research the type of index prior to visiting the town clerk and to understand what potential errors can occur with these indexes so that a proper plan can be put in place when making the trip.

Vermont Title Standards Section 1.1 states that “an attorney has an obligation to identify those factual circumstances which constitute clouds on the title that are disclosed in the public records and report those matters to the recipient of the results of the search.”  Due to this standard, the question then becomes, what effect an improperly recorded instrument would have on the marketability of title.

It is difficult to discern whether an instrument improperly filed still raises a standard of care by the title abstractor to disclose.  The closest analysis that can be found in Vermont Supreme Court Case law is in the decision of Estate of Fleming v. Nicholson which states “in conducting a title search for a client, an attorney has a duty to inform and explain to the client the implications of any clouds on the title that would influence a reasonably prudent purchaser not to purchase the property.”

Although it is impossible to catch all errors that surround an index or filing mistake, understanding one’s role in exercising due diligence in looking beyond what the indexes read, will limit any potential errors suffered by Vermont title searchers.  Taking a careful and organized approach that may vary depending on the clerk’s index system is an excellent first step in reducing the risk for these costly errors.

 

Where have all the Vermont title searchers gone?

Vermont is a tough place to get to.  With its mountainous terrain and narrow single lane roads that curve through the rugged landscape, it can be difficult for many to get from point A to point B within a reasonable amount of time.  Add some snow or ice, and the task can seem next to impossible for those who don’t have a half day to kill.  Thus, for those out of state businesses and individuals who wish to ascertain some information about Vermont real estate, looking for a local professional to provide travel to the town where the land records are stored can be extremely valuable.

However, finding a Vermont title searcher may not be an easy task, especially for properties that are located in the many rural towns throughout the State that are an hour’s drive or more from any major Vermont town or city.  Ever navigated your way through the beautiful mountains to the town of Chelsea?  Ever driven up over Brandon Gap from Route 7 to reach the town of Rochester?  For anyone who has some time on their hands, driving these rural routes to these quaint towns is an experience one may never forget.  However, reaching these towns on a strict time line can be just the opposite, an experience one wants to immediately forget.

A recent article by the Burlington Free Press has made public what many have known for a while, Vermont is aging faster then any other State in the nation.  As a result, less real estate professionals are entering the Vermont market then are leaving.

The Vermont real estate market is filled with opportunities, both for those looking to make Vermont a home, as well as those looking for a second home or investment property.  However, without knowing the true legal status of the property and what title issues may play a role in the marketability of the title of the real estate, one may not be able to fully grasp the risks versus the rewards of such an investment, windy icy mountain descents included.