Q:       I’m thinking of buying a home, and my friend says a house purchase is a “buyer beware” situation. What does that mean?

A:        “Buyer beware,” also known as the doctrine of “caveat emptor,” is an age-old doctrine. It means that, if you intend to buy property, you generally bear the responsibility for finding out about the property’s condition before purchasing it. This doctrine appears to place the entire risk on the shoulders of the homebuyer, but only does so if 1) the condition of the property is open to observation or discoverable upon reasonable inspection to the buyer; 2) the buyer had the opportunity to examine the property; and 3) there is no fraud or wrongdoing on the part of the seller.

Q:       What do I, as a buyer, have to do about a defect that may be found during a home inspection?

A:        A defect that is open, observable and can be discovered through inspection and inquiry is called a “patent defect.” You, as a buyer, are responsible for making efforts to obtain all information about such obvious defects or problems with the property. Also, you will be held responsible and liable for all defects that you could have discovered upon inspection, so make sure you make reasonable efforts to view and inspect the property before buying it.

            For example, you may notice such “patent” obvious defects as large cracks in the concrete foundation of the home, a hole in the roof or rotten wood on the home’s front porch. If you decide to buy the home in spite of these obvious defects, you could not later seek damages or a remedy against the seller for the costs of repairing them. The burden is on you to notice these issues before buying the property.

Q:       What about defects that are not obvious?

A:        The home may have “latent,” defects that are known to the seller, but cannot be easily discovered by the buyer or may present a dangerous condition. They are hidden in nature. As an exception to the doctrine of the caveat emptor/buyer beware doctrine, sellers must disclose latent defects to the buyer. This requirement provides protection for the innocent buyer.

            Latent defects are more complex than patent defects. For example, if a leaking roof can only be noticed when it rains, and an inspection shows no evidence of water damage, this would be a latent defect. Similarly, if a septic tank produces a bad smell occasionally, this would not be a readily observable problem. In such instances the burden falls on the seller. If the seller fails to disclose such issues, the buyer can seek a remedy, if necessary, in court.

            It is very important to retain a licensed property inspector to inspect the property before purchase, and make the purchase agreement contingent upon the property passing inspection. An inspector has the knowledge, skills, and experience necessary to thoroughly evaluate the property and notice issues you may never discover until it is too late.

            A seller is also liable for fraud or misrepresentations to the buyer. For instance, a seller cannot lie and tell the buyer the foundation is in great condition if the seller knows it is in need of repair or in danger of collapsing. Similarly, a seller cannot tell a buyer a roof has never had any leaks if the seller has replaced the ceiling’s drywall and paint to conceal the fact that the roof leaks every time there’s a severe storm.

Q:       What is an “as-is” clause?

A:        In certain circumstances, a seller does not have to disclose latent defects. If a real estate agreement contains an “as-is” clause, then the buyer assumes the risk that latent defects may exist. An “as is” clause relieves the seller of any duty to disclose, and means that the buyer cannot bring a lawsuit against the seller for any passive non-disclosure.

            For example, in Ferguson v. Cadle, 2009-Ohio-4285, the court held that sellers had no liability under an “as is” home sale contract for failing to disclose the existence of a steel support structure that was installed in a basement wall after the wall had sustained water damage.

This “Law You Can Use” consumer information column was provided by the Ohio State Bar Association. It was prepared by Andrew L. Smith, a senior associate attorney in the Cincinnati office of Smith, Rolfes & Skavdahl Company, LPA. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Generally, you can finance a home through a conventional mortgage, a government-guaranteed mortgage, or through seller financing.  This article focuses on residential financing through the use of conventional mortgages and government-guaranteed mortgages.

Q:       What is a conventional mortgage, and how can I get one to finance my home?

A:        A conventional mortgage is a loan that a lender (such as a bank or a mortgage company) makes to a buyer. A conventional mortgage generally follows guidelines set by Fannie Mae or Freddie Mac, two mortgage associations that the U.S. government originally created to raise home ownership levels. Although created by the government, Fannie Mae and Freddie Mac do not guarantee home loans (unlike VA and FHA loans, which the government guarantees). When shopping for a conventional mortgage, you will compare interest rates and terms. Most conventional mortgages have fixed or adjustable interest rates. Typical fixed-rate loans have a term of 15 or 30 years. A shorter-term loan generally carries a lower interest rate. Adjustable-rate mortgages (ARMs) fluctuate, so your monthly payments can go up or down according to the rate of a standard financial index. Before agreeing to give you a conventional mortgage, the lender will review your financial history, income and credit score. Generally, you will need an excellent credit score to qualify for a conventional mortgage with a good interest rate. The standard down payment for a conventional loan is currently 20 percent of the purchase price.

Q:       What are the benefits of getting a conventional mortgage?

A:        Typically, conventional mortgage loans are less expensive over the life of the loan than government-guaranteed loans. 

Q:       What are the drawbacks of a conventional mortgage?

A:        Some borrowers have difficulty qualifying for a conventional mortgage because they cannot meet credit score or other documentation requirements.

  

Q:       What is a government-guaranteed loan, and might I qualify for one?

A:        Government mortgages are guaranteed either by the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA). This means that the government guarantees that the value of the home will be high enough to repay the lender in the event of foreclosure.  To qualify for a government loan, you must meet the requirements of the loan program you choose.  VA loans are for military veterans.  FHA loans are typically for first- time home buyers and have income limitations.

Q:       What are the benefits of getting a government-guaranteed loan?

A:        There are two primary benefits. Initially, and for many new home buyers, the most important benefit is that the lender will loan you a much higher percentage of the purchase price. FHA and VA loans typically cover nearly 100 percent of the loan as compared to the home’s value, while a standard mortgage covers no more than 80 percent of this “loan-to-value” ratio. Secondly, a government program generally doesn’t require as high a credit score as conventional financing does.

Q:       Are there any drawbacks to financing my home through government -guaranteed loans?

A:        Yes. The government insurance component is not free. As a borrower, you would pay an insurance premium to the government that can be as much as three percent of the loan amount, depending on the loan-to-value ratio. Also, not everyone qualifies for government-guaranteed loans. A VA loan is intended for veterans and FHA loans are restricted to those who qualify according to income and other criteria. Additionally, government-guaranteed loans require inspections by certified inspectors and will require certain repairs to be made. Many sellers do not like working with buyers who use government-guaranteed loans because of these requirements and because some fees traditionally paid by buyers are required to be paid for by the seller.

Q:       What if I don’t qualify for a government-guaranteed loan and don’t have 20 percent down payment money for a conventional mortgage?

A:        You can also consider getting private mortgage insurance so that you can borrow more than 80 percent of the value of the home you want to buy.  Private mortgage insurance increases the overall cost of the loan, and this cost is built into your payments or financed through a higher interest rate.

Q:       How do I find out which loan is right for me?

A:        Any reputable, full-service mortgage lender will offer both standard financing and government- guaranteed financing, and will be able to explain the product options to you.

            The Department of Housing and Urban Development (HUD) provides information about mortgage loan shopping and the home buying experience. HUD’s mortgage borrower’s information booklet is available at:  www.hud.gov/buying/booklet.pdf.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Dublin attorney William C. Heer III, vice president and counsel for First American Title Insurance Company. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Most people have emotional ties to their homes because of family memories created there, but the responsibilities that come with home mortgages can become financially burdensome to seniors. There are many factors you should consider when thinking about applying for a mortgage to buy, refinance or make improvements to your home.

Q:       What should I keep in mind when considering a mortgage loan?

A:        If you already own a home, consider whether it makes sense to stay in your current home or to downsize. As children move out, a large home may no longer be practical. Downsizing can both cash out equity from a larger home and reduce monthly expenses by replacing a larger mortgage payment on a larger home with a smaller mortgage payment on a smaller home. Moving to an apartment or condominium without a yard or where much of the maintenance is handled by a homeowner’s association is also an option.

            If your home is already the right size and you can afford to stay, you may want to consider refinancing your existing mortgage loan. With proper financial planning, younger seniors can plan to repay their mortgages before they retire. However, many seniors are not able to retire without mortgage debt, and refinancing allows you to lower the interest rate or reset the term of your existing mortgage. By resetting the mortgage term, the outstanding balance of your existing loan will be spread out over a longer period of time. Extending the term may increase the overall interest charges you will pay, but it also will lower your monthly payments and free up money for other monthly expenses. If you are on a fixed income, consider refinancing from an unpredictable adjustable rate mortgage to a stable fixed rate mortgage.

 

Q:       Will I qualify for a mortgage loan?

A:        Your eligibility for a mortgage loan generally will depend on your income, your assets (checking, savings, stocks, bonds, IRAs, etc.), your credit score and the value of the property that will be securing the mortgage loan.

            Not everyone who applies for a loan will be approved or will get the same loan terms, but lenders must consider reliable income from part-time employment, Social Security, pensions and annuities when making mortgage loan decisions. They must also consider reliable public assistance income in the same way that they consider other income. The Equal Credit Opportunity Act (ECOA) prohibits lenders from credit discrimination on the basis of a number of factors, including your age and whether you get public assistance. A lender may ask you for most of this information in certain situations, but may not use it as the basis of a decision to reject your mortgage application or to set your loan terms. If your mortgage application is denied, the lender must give you specific reasons for the denial.

Q:       Even if I qualify, how will I know if a mortgage loan is right for me?

A:        There are many types of mortgage loans, including conventional home loans, FHA insured loans, VA guaranteed loans for veterans, Rural Housing Service (RHS) guaranteed loans, home equity lines of credit and reverse mortgages. Some loans have strict qualification requirements while others are designed for lower income homebuyers.

            Obtaining a mortgage loan carries costs that can vary with the type of loan you choose. Usually there will be lender fees, an appraisal fee, title insurance costs and other closing expenses related to the mortgage loan. You must also factor real estate taxes and homeowners insurance into your budget. Usually you will be required to make a down payment of between 3.5 percent and 20 percent, depending on the type of loan and the bank’s requirements. While lower down payments can be appealing in the short term, they come with higher monthly payments due to higher interest rates. Smaller down payments also may require additional mortgage insurance, increasing your total costs over the long term. However, making a higher down payment can deplete your savings and investments. It is critical to consult a trusted financial advisor and get independent financial advice before deciding which mortgage product may make sense for you, and what terms best suit your financial situation.

This “Law You Can Use” legal information column was provided by the Ohio State Bar Association. It was prepared by Adam Saurwein, an attorney in the Cleveland office of the firm of Benesch Friedlander Coplan & Aronoff. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek the advice of a licensed attorney.

Q:       I’m getting ready to file a Chapter 7 bankruptcy. Can I keep any of my property after bankruptcy?

A:    Yes. “Exempt property” refers to property the debtor in bankruptcy can keep. For example, you can keep cash of up to $450 (the “cash-on-hand exemption”) and household goods worth up to a total of $12,250  (the “household goods exemption”), as long as no one particular item is worth more than $575. The theory behind these exemptions is that, as a debtor filing bankruptcy, you need to keep some property to emerge from bankruptcy with your financial fresh start. Even though bankruptcy is federal law, these two exemptions are set forth in Ohio’s state statutes.

Q:       Do I get to keep my home after bankruptcy?

A:        If your mortgage is current and the house worth less than what you owe the mortgage lender, you can usually keep your home. Even if there is no mortgage, you may be able to keep your home if it is worth less than the amount of Ohio’s homestead exemption. This exemption is now $132,000, assuming your house is held in only one name. If your house is held jointly by you and a spouse, the exemption is $264,000. If your house is worth more than what you owe the lender, you may be able to keep your home so long as the equity does not exceed the applicable homestead exemption. The homestead exemption only applies if you or a dependent of yours is living in the home. This means that you can’t apply the homestead exemption to a property that you own, but rent out to others.

Q:       Are there any catches?

A:        Yes. The law was changed on March 27, 2013. Before then, the exemption was much lower – only $21,265 for a house held in one name. The new law says the higher exemption of $132,000 applies only to claims arising after March 27, 2013. It is unclear exactly what this means. Let’s say, for example, that one of your creditors has a judgment lien on your house that was filed before March 27, 2013. That creditor may claim that the old law (with its homestead exemption of $21,265) applies or that no homestead exemption applies. The trustee appointed in your bankruptcy case also may argue this, which likely will mean that the court must decide which law applies in your case. This is why it is very important for you to consult with a bankruptcy attorney to see how the new law will apply to your situation.

Q:       Do the changes to the Ohio exemption law affect any other property?

A:        Yes. Another change to the law makes it clearer that you can keep an IRA account when you file a bankruptcy. Some brokerage firms offering IRAs require their customers to pledge their IRAs as collateral to secure any amounts the customers might owe to the firm, but Internal Revenue Service regulations do not allow this. Some bankruptcy trustees were taking the position that any pledge of the IRA for collateral negates its exempt status, which would allow the bankruptcy trustee to liquidate the IRA for the benefit of creditors. The change in Ohio law is intended to make it harder for the bankruptcy trustee to assert that an IRA can be liquidated in bankruptcy in order to satisfy creditors.

Q:       What else should I know about bankruptcy exemptions?

A:        One of the many issues that arise when applying bankruptcy exemptions involves insurance policies with cash surrender value. If you own a policy that insures your life and the beneficiary is your spouse or children, then the policy’s cash value is exempt. This means that you can keep the policy if you file a bankruptcy. However, if the policy beneficiary is someone else who is not your dependent, or if the policy is on the life of your child, then the policy is not exempt. This means that the trustee can cash the policy in for its cash surrender value and distribute the proceeds to your creditors. In a bankruptcy situation, many other issues involving exemptions arise. Your bankruptcy attorney should be able help you sort out these issues.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Julie E. Rabin, a principal in the Cleveland firm of Rabin and Rabin LPA. Articles appearing in this column are intended to provide broad general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

 Q:      My condominium is new right now, but what happens when the roof needs repairs, the driveways need resurfacing, and the siding is fading? Is the condo association responsible for the expense, and if so, where does the association get the money to make the repairs?

A:        Ohio law requires the unit owners’ association to adopt and amend budgets and to collect assessments for common expenses from unit owners. Unless the condominium organizational documents say otherwise, the code also requires the association to set aside no less than 10 percent of its annual budget to repair and replace major capital items. The owners may decide to waive the 10 percent set-aside each year with the approval of a majority of the unit owners. Typically, money put into reserves is used to fund the long-term maintenance of the condominium, including the roofs and roads. 

            If, however, the association does not have the necessary reserves for a major repair, it can pass a special assessment to fund the repairs. Ultimately, the owners must bear the financial costs for major repairs, either through the board’s planning for adequate reserves or by special assessments as the need arises. In recent years, reserve studies have been used to more rationally determine the amount of reserves necessary for future maintenance projects.

Q:       I am going to be a first-time condominium owner. What should I know about the closing process?

A:        First, consult with your attorney, who will help you draft your purchase contract. Your closing really starts with the contract. If the contract is not right, the entire transaction will be difficult. Buying a condo is different from buying a single family house, and the closing agent is not always looking out for your best interest. Having a knowledgeable attorney assist you should be a priority. Before closing, your attorney will review with you all of the crucial documents that govern your condominium, including the declaration, bylaws and rules of the association. He or she will review the closing statement and inspection reports for the property, and make sure you are getting what you bargained for. Your purchase contract should be contingent on your satisfactory review of these documents, including financial statements and the balance sheet for the association. Your attorney will review the title work with you and advise you about the proper insurance you should have for your unit. Once you are at the closing table, the title company will explain the closing statement, and you will be asked to sign multiple documents including the lender’s note and mortgage, which your attorney should review with you. At closing, you will receive the keys to the unit and be asked to put the utilities in your name. You should be able to close your purchase in about an hour if all of the reviews of the closing documents have been done in advance. 

Q:       We have an unruly tenant in our condominium community who is renting the condominium.  Is there any way to remove that tenant without involving the owner of the rental unit?
A:        As an owner of a condo unit, you own real estate, and you may be able to rent the unit instead of living in it, just like any other piece of residential real estate.  However, with tenants sometimes come problems.  Since 2004, Ohio law has allowed the association to evict unruly tenants without permission from the unit owner.  There is only one step that must be taken in addition to the normal eviction process, and it involves notifying the owner before the eviction is filed. The process is quick, but it can be expensive if the tenant puts up a fight. The most common reasons for eviction of a tenant are the tenant’s violation of the association rules, such as maintaining too many pets, or harboring a vicious dog, parking in restricted areas and creating noise violations associated with loud parties. If the condominium association prohibits leasing, the tenant also may be evicted because the owner has rented the property in violation of the rules. 

This “Law You Can Use” legal information column was provided by the Ohio State Bar Association (OSBA). It was prepared by Charles T. Williams, Esq of Williams & Strohm, LLC, located in Columbus. For more information on a variety of legal topics, visit the OSBA’s website at www.ohiobar.org. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       How is real estate transferred in Ohio?
A:        Most commonly in Ohio, one party transfers title to or an interest in real property to another party through a written document called a deed. There are a few situations, however, such as when the government uses its eminent domain power to acquire private property for a public improvement, where a court may order the transfer of real estate without a deed. Also, in rare cases, title may be transferred as the result of continuous possession by a person other than the owner. Ohio law requires a transfer of real estate to be in writing.

Q:       What must a deed contain?
A:        A deed must:

·         identify the current owner (“grantor”) and the new owner (“grantee”);

·         specifically describe the land to be transferred (a street address is not enough; a legal description is required); and

·         contain language saying that the grantor “grants” the property to the grantee.

The grantor must sign the deed in front of a notary public or another authorized officer, who will acknowledge the signing of the deed.

Q:       The title to my house is in my name alone. Will my spouse have to sign the deed when I sell the property?
A:        Yes. Ohio law gives your spouse what is known as “dower” rights, which means that after your death, your spouse may claim an interest in the property even though you have sold it, and even though your spouse’s name does not appear in your deed. Your spouse must sign the deed to the buyer to clear the dower interest from the title.

Q:       If I want to transfer my property to someone else, must my deed to the property be recorded with the county recorder’s office?
A:        While it is generally wise to record your deed, Ohio law does not require a deed to be recorded for title to pass from you (the grantor) to a grantee. To transfer title, you must deliver the executed and acknowledged deed to the grantee. This means that you must give up control over the deed during your lifetime and intend to transfer title to the grantee. To complete the transfer, the grantee must accept the delivered deed. If the deed benefits the grantee, acceptance ordinarily will be presumed, but if the deed is not recorded in the county recorder’s office where the property is located, the grantee may risk losing the property to a subsequent buyer. The subsequent buyer generally will not have legal notice of the transfer unless the deed is recorded. Let’s say you, the property owner, give a deed to Buyer A, but Buyer A does not record that deed. Later, you deed the same property to Buyer B (who pays for the property without knowing about the deed you gave to Buyer A). Because Buyer A’s deed was not recorded, Buyer B will not have legal notice of the deed to Buyer A. If Buyer B records the deed, Buyer B may be considered the new owner.

Q:       What is a quitclaim deed, and how does it differ from a warranty deed?
A:        A quitclaim deed transfers whatever title the grantor may have without giving the grantee any assurance that the grantor has any title to the property. A parent who gives a parcel of real estate to a child might use a quitclaim deed, because the child likely will trust the parent’s title.
            In a warranty deed, the grantor promises (“covenants”) that he or she is transferring title free of liens and other encumbrances. Ohio law recognizes: 1) general warranty deeds covenanting against all lawful adverse title claims and 2) limited warranty deeds covenanting only against adverse claims created by the grantor.

Q:       Can I sign a deed so my house can be transferred automatically when I die?
A:        Yes. You can sign a survivorship deed, which transfers the title to yourself and at least one other person named in the deed. When you die, your interest will transfer automatically to the other person if he or she is alive. For example, if you and your spouse sign a survivorship deed to your house and you are the first to die, title will pass to your spouse without going through your probate estate. You can also sign and record a transfer-on-death designation affidavit identifying one or more beneficiaries who will receive the property when you die.  Unlike a survivorship tenant, a transfer-on-death beneficiary does not have an interest in the property until your death. Also, you may revoke a transfer-on-death designation before your death by signing and recording a new affidavit.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Dayton attorney Steven J. Davis of Thompson Hine LLP. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       My mortgage lender foreclosed on my house. How would I know if the lender had the right to file the foreclosure?
A:        Every mortgage loan has two important documents: the note and the mortgage. The note is your agreement to pay the lender. The mortgage is the document that gives the lender the right to foreclose if you don't make the payments due under the note. Your lender can gain the right to bring a lawsuit against you in one of two ways. First, your mortgage might have been assigned to the lender before your foreclosure case was filed.  If so, a document called “assignment of mortgage” would be attached to the foreclosure complaint, and the name on that assignment would be the name of the plaintiff (that is, the person or entity bringing the foreclosure suit, such as your lender or an entity your lender has designated). Second, the plaintiff might hold your note, although this may be difficult to establish.  Sometimes the note will include a stamp that says “endorsed to [plaintiff],” indicating that the plaintiff probably held the note. In other cases, the note will say “endorsed to (blank).” In such a case, the plaintiff is not specifically named and can bring the case only by having physical possession of the note when filing the foreclosure case.

Q:       My house is in foreclosure and will be taken soon.  Is there anything I can do to make sure my rights are protected?

A:        Your foreclosure complaint will have a note and mortgage attached to it. An assignment of mortgage also may be attached.  If the mortgage is either in the plaintiff’s name or is assigned to the plaintiff, then the foreclosure is probably valid. If not, look at the note. If the note is made payable to the plaintiff, then the foreclosure is probably valid. If the note is endorsed in blank, the plaintiff should have alleged in the complaint that it holds the note, and later will submit an affidavit stating that it holds the note. If the plaintiff did not take any of these steps, there could be a defect, and this may entitle you to have the case dismissed.

Q:       My property was sold at a foreclosure sale a couple of years ago.  Now I understand that a Supreme Court of Ohio decision may affect the validity of that sale.  Is that true?

A:        Possibly. On October 31, 2012, the Supreme Court of Ohio issued its decision in Fed. Home Loan Mtge. Corp. v. Schwartzwald. In that case, the court found that the lender’s right to bring a foreclosure case is determined on the date that a complaint is filed.  To have the “standing” necessary to bring a foreclosure case, the plaintiff must either hold the note or have been assigned the mortgage. If your foreclosure was filed and the plaintiff either did not hold the note or was not assigned the mortgage at the time of filing, the foreclosure may not be valid.

Q:       What will happen to future foreclosures in Ohio in light of this Supreme Court of Ohio decision?

A:        In the post-Schwartzwald world, lenders will be very cautious to make sure that they have the right to bring the foreclosure in the first place. As the law currently stands, the plaintiff can bring the foreclosure if the plaintiff either holds the note or was assigned the mortgage. However, a case is now being appealed to the Supreme Court of Ohio to determine whether the plaintiff must hold both the note and the mortgage of record in order to bring the foreclosure case. 

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by J. Michael Debbeler, a partner in the Cincinnati firm of Graydon Head. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.