For the Public
Home Buying and Selling in New Hampshire

This pamphlet is based on NH law in effect at the time of publication. It is issued as a public service for general information only. It is not a substitute for specific legal advice.

JUNE 2000

Introduction
Typically, buying a home is the largest single purchase you will make in your lifetime. Such a major step requires exceptional care and planning. Among other things, it involves the prospective buyer and seller and third parties in a series of legally binding contracts. There are many potential pitfalls in the purchase and sale of real estate that can turn the process into a financial disaster and legal nightmare now or many years into the future. The safest and most cost efficient course is to seek well-qualified professional assistance to guide you through the process and to protect your interests.

Appraisal
As the seller, your first step is to determine the market value of your property. There are firms specializing in home appraisals or you may choose to rely on a market analysis done by a qualified real estate agent. You should not, however, rely on the property tax appraisal to establish market value.

Listing Agreement
The first contract you face as the seller is usually the listing agreement. The real estate agent presents you with an agreement spelling out the terms of the relationship between you and the agent. You should approach this carefully. The listing agreement covers items such as the price and terms under which the real estate will be offered for sale and what personal property is to be included with the real estate. It also may give the agent exclusive rights to market the home for an extended period of time.

The listing agreement should spell out the agent's fee and under what conditions the agent may collect the fee. For example, under New Hampshire law, if an agent produces a buyer who is ready, willing and able to purchase the home but for some reason the sale is not completed, the agent may still be entitled to a commission from the seller. If you think you may be able to sell the property through your own efforts, make sure that this possibility is covered in the listing agreement to avoid paying the agent's commission. The listing agreement, like any contract, may be negotiated. If you have any doubts about the terms of the real estate agent's draft listing agreement, consult a lawyer before signing.

The listing real estate agent generally represents the seller only. A real estate broker may represent both buyer and seller but this is not advisable. The buyer may engage their own broker to represent their interests. Licensed real estate brokers who are members of the New Hampshire Association of Realtors follow professional rules which require them to complete and give to all parties a form commonly called a Statement of Representation (its actual title is Disclosure of Agency Relationship in Real Estate Brokerage). This form specifically identifies whom the broker is representing.

Seller's Property Information Report
Upon entering into a listing agreement, the broker will ask you to prepare and sign a Seller's Property Information Report. This is a detailed checklist of all the items in the home (including plumbing, heating and electrical as well as appliances, fixtures, cabinets, built-ins, and custom draperies, etc.). Also included is a statement of any existing problems or previous problems with the home. This should be entered into with care, because the agent will present a copy of this report to potential buyers when showing the home. Misinformation in this statement, or information deliberately not included, may become a point of contention before or after the sale.

Purchase and Sales Agreement
Once the buyer has made an offer to buy a house for a certain price and the seller has agreed to sell the house at that price, the parties enter into a written contract called a Purchase and Sales Agreement (P&S). No unwritten offer or oral agreement to purchase or to sell real estate is binding only a written contract can be enforced.

The P&S spells out a basic description of the property, the terms and conditions of the sale and a projected date or time frame for the closing. Typically, the real estate agent will offer a standard form P&S to which any special conditions may be added (e.g. specific kitchen appliances go with the house and are included in the purchase price.) Neither party should enter into a P&S without being absolutely certain they understand and agree to its contents. Remember that no "understanding" or agreement is enforceable unless it is written into the P&S. The safest course is to have a lawyer review this agreement before it is signed.

Issues covered by the P&S may include, but are not limited to, the following:

• the price; whether the seller's Property Information Report or other building specifications are part of the P&S;
• how the buyers want their names and status listed on the deed; the date when title and possession pass to the buyers;
• who pays the real estate agent;
• how much land is included with the house, if possible, state the acreage or the dimensions of lot;
• what personal property such as fixtures, appliances, draperies etc. are sold with the real estate;
• what rights and property the seller keeps;
• whether the P&S is contingent on the buyer obtaining necessary financing;
• whether the P&S is contingent on the buyer obtaining necessary governmental permits or approvals;
• disclosure that radon and lead paint may be present and that testing is available to identify the presence of either substance (this does not mean that the seller has to perform tests);
• which party is responsible for insurance on the property before transfer of title;
• buyer's statement of whether the buyer will engage a home inspector to inspect the real estate and the time frame when such inspection will be conducted;
• how taxes and utility charges will be shared or prorated;
• the type of deed to be given;
• a statement that the seller will convey good and marketable title;
• and under what circumstances the P&S may be voided and the deposit returned.

As the buyer, you should review the language in the proposed P&S carefully and take the time to discuss any questions with your own agent and/or a lawyer. When the P&S is acceptable, bind it with a small down payment. If the seller accepts this offer, the seller will sign the P&S, triggering the P&S provision, if any, that the buyer make an additional larger deposit.

The buyer's inspection is ordinarily done within 10 to 15 days of signing the P&S. It is always advisable for the buyer to have an inspection done. The standard P&S provides that if the inspection uncovers "significant" defects, you present the seller a written notification of defects. If these defects were not previously disclosed or known to you, you may cancel the P&S or the seller may agree to correct the defects. According to the standard form P&S within five days of your written notification of defects to the seller, the seller must notify you in writing whether they intend to correct the defects. If the seller decides not to correct the defects, you may cancel the P&S or you and the seller may negotiate new terms. Any such negotiated settlement must be in writing and made part of the P&S .

While a specific date or a time frame for the closing should be included in the P&S, failure to meet this date or time frame is not usually considered a serious enough violation to breach the contract unless the P&S specifically spells out that "time is of the essence."

Special Rules for New Subdivisions
If residential real estate being offered for sale is part of a 15 lot or more subdivision or is a timeshare unit, special full disclosure requirements for the subdivider come into effect under the Land Sales Full Disclosure Act (RSA 356-A). Before offering lots or units for sale, the subdivider must register the subdivision with the State Attorney General's Office and have that office approve a Public Offering Statement containing all pertinent information. However, this does not guarantee the truth of the information in the Public Offering Statement.

As the buyer, you may cancel the sale up to five days from your receipt of the Public Offering Statement or the date of the Purchase and Sale Agreement, whichever is later. All deposits by you must be held in escrow until the closing. A subdivider who willfully makes any untrue statement of a material fact or omits to state a material fact in the application for registration or in the Public Offering Statement is subject to potential criminal penalties as well as a civil action by the buyer to reverse the sale and recover any payments with possible interest, finance charges, attorneys fees and up to $5,000 in punitive damages.

If you are considering a condominium purchase, be aware that a separate statute applies. See the NH Bar Association's pamphlet Condominium Law in New Hampshire.

Financing
The financing condition in the P&S usually specifies the buyer's acceptable mortgage interest range and type of mortgage. Some buyers may qualify for financing from the Veterans Administration, Rural Economic Community Development (formerly the Farmers Home Administration), or other types of income-based subsidized mortgages. Each lender has its own down payment requirements, which can range from 0% to 20%. Conventional bank financing requires at least a 5% down payment. Larger down payments will generally secure more favorable interest rates and reduce or eliminate the need for private mortgage insurance. Though larger down payments may be beneficial, no part of the down payment may be borrowed or a recent gift.

When you apply for a mortgage, the lender will require a signed copy of the P&S, a copy of the property deed, and enough documentation to fill out a detailed financial statement of your assets and liabilities. The loan officer should give you a "good faith estimate" of your financing and closing costs. The lender then processes your application. This includes obtaining your credit history and report, verification of your employment and income and an appraisal of the property. Fees for obtaining this information may be non-refundable even if your application is rejected.

If your application for a mortgage is rejected, you have the right to find out why. If it was due to a poor credit history, you have the right to review that report and challenge any inaccuracies. The process for doing so is described in the NH Bar Association pamphlet Consumer Protection in New Hampshire. Finally, if you believe you were denied a mortgage on illegal discriminatory grounds, such as your race, ethnic origin, religion, gender or sexual orientation, you should bring it to the lender's attention and consult with a lawyer.

Title Search
If you intend to mortgage the property, the lender will require you to pay for a title search, by an attorney who represents the lender, not you. The lender does this to ensure that the title is sufficiently clear before lending money to you using the real estate as collateral.

In addition to the lender's title search, as the buyer you should always have a title search by a professional, usually an attorney, who represents your interests. While two title searches may seem unnecessary, the cost is small compared to the risk of a defective title.

The purpose of the title search is to uncover any defects, mortgages, attachments, liens, unpaid taxes, easements or rights of way, restrictive covenants or other encumbrances filed in municipal records or the Registry of Deeds that affect the title. Certain title defects (such as a title restriction that prevents using the property as a home business) do not affect the lender's mortgage but might affect your intended use of the property. This is why it is important you do your own title search. Any title defect or encumbrance that cannot be corrected quickly would generally be grounds for you to be released from the P&S and to have your deposit returned.

Many lenders now require you to purchase title insurance to protect the lender. For an additional fee, you can also be covered. Title insurance protects the buyer if a problem with the title is discovered after the title has been conveyed.

Boundaries and Personal Inspection
Title searches are no substitute for a visual inspection of the property and its boundaries. Only by actually walking the land can you find encroachments or encumbrances that may not be in the records. Obtain a copy of the seller's deed and any survey or sketch of the property and check with the neighbors especially to confirm the amount of land you are buying. If you have questions or doubts, consult a surveyor immediately before the sale is complete.

Deeds
Sale of real estate is completed with the transfer of title to the buyer. In New Hampshire, title may be conveyed by one of three types of deeds: warranty, quitclaim or fiduciary.

With a warranty deed, the seller guarantees that the seller owns the property, is lawfully conveying it, and that there are no defects in the title (ownership) not stated. The seller stands behind the title and agrees to make good on any proven title defect. This is the seller's "warranty." This is the most common form of conveyance and gives the buyer the most protection.

With a quitclaim deed, the seller represents only that the seller did nothing to impair the title and is conveying nothing more than the title the seller actually has. The buyer has no "warranty" or guarantee of title. If the property is purchased at foreclosure or tax sale, it is highly likely that the seller will only give the buyer such a quitclaim, foreclosure or tax deed. If so, the buyer takes the property with all existing defects and problems in other words "as is."

In a fiduciary deed, an executor of an estate or some other "fiduciary" makes the conveyance. Here the seller acts merely in a representative capacity and makes no personal guarantees.

Title and Ownership
Passing of title from seller to buyer conveys ownership in a form chosen by the buyer and spelled out in the deed. Essentially, real estate may be owned by an individual (the individual may be a corporate entity) or by two or more parties jointly. If real estate is owned jointly, it may be owned as "joint tenants with right of survivorship," or as "tenants in common." This distinction is especially important when one owner dies. In a joint tenancy with right of survivorship, the deceased owner's interest in the property automatically passes to the surviving joint tenant(s). With a tenancy in common, the deceased owner's share goes into his or her estate. Because of tax implications and other complications, you should consult with your attorney as to what type of title should be taken.

Closing
At the closing, title (ownership) of the property passes from the seller to the buyer. This generally takes place at the lending institution on the closing date. The seller receives their money from the lender and/or the buyer, the buyer receives a deed to the property, and the lender secures its loan to the buyer with a mortgage.

As the buyer, you should expect to pay typical closing fees and lender's expenses. In addition to those discussed above these may include: the lender's attorney's fees; transfer taxes (split with the seller) and recording fees; escrowed taxes and homeowners insurance, and any points or fees that the lender charges to issue the loan.

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