Creating a NJ Use and Occupancy Agreement that Works for Buyer and Seller

use and occupancy agreement

“Help! My New Place Isn’t Ready, But My Home’s Buyers Need to Move In!”
How a Use & Occupancy Agreement can keep everyone in a “home sweet home” while all the paperwork is finalized.

Congratulations – you sold your home! And you found your new digs too!

But now you’re in that awkward in-between stage, hammering out the final details of the sales and juggling settlement dates on all the properties. What happens if those dates don’t align, and your buyer needs to move in to your house before you’re ready to move out?

Welcome to the land of Use & Occupancy agreements, where either you or your buyer agree to stay at the home for a set fee and a set time until all the dust settles and the transfer of the properties is legally complete.

What Is a Use & Occupancy Agreement?

A Use & Occupancy agreement – also known as a U&O – grants someone permission to do just that – use (get the benefit of) and occupy (inhabit) a property. No more, no less. For example, it can grant your buyer permission to move in and live at your home, or perhaps just leave a couch, bed, and other personal items there, until ownership is transferred. Or, it can allow you to stay in your home after settlement until your new home’s settlement is also finalized.

Five Tips to Ensuring Your U&O is A-OK

Home buying is stressful enough; follow these tips to keep your U&O agreement stress-free.

  1. Set Term Limits. Confirm the start and end dates, and how to remove the occupant if those dates are not honored.
  2. Show Me the Money. Set a rate that makes everyone comfortable with the compensation for use of the property. Be sure to include who’s responsible for electric, water, wi-fi, cable, telephone, and any other household fees. (It’s not a lease, but it should cover many of the same financial obligations.) Consider the benefits of a daily rate, just in case the agreement needs to be shorter or longer than originally anticipated.
  3. Practice Good Housekeeping. Who will be responsible for liability insurance? Who handles regular maintenance and upkeep? Can the buyer start home renovations during the U&O agreement period? Are you going to establish an escrow account to cover any damages that occur? Work out those details ahead of time.
  4. Take a Walk. Moving day is not the time for surprises. Just as you’d do a walk-through before settlement, make sure you do a walk-through at the start and end of the U&O term so everyone can agree on any changes to the condition of the property, and how to handle the situation if it arises.
  5. Spell it Out. Type it out in Word, hand write it on your favorite stationery, or grab a napkin and scribble it down at your favorite restaurant, but make sure you document all the terms of your U&O, and have both parties sign and date it. And if you’d like help ensuring that all the I’s are dotted and the T’s are crossed in your U&O, give us a call at Veitengruber Law. We’ll be glad to help you bridge the gap and keep the property – and everyone in it – happily occupied during the transition.

 

NJ Quitclaim Deed: Explained

During a real estate transaction, there are several different ways to transfer title to a property. The most common type of deed used is a warranty real estate deed. This deed is used when a house is sold to a third party in a typical real estate transaction. The warranty deed is a legal promise that the person transferring the property has good title and the right to sell the property. A warranty deed includes protections for the buyer, the seller, and promises there are no liens on the property. Although a warranty deed is the most common deed, it isn’t always the best choice for every real estate transaction. Here we are going to look at quitclaim deeds and when to use them.

A quitclaim deed is often used when transferring property between family members. A quitclaim deed will transfer the title of a property but makes no promises about the owner’s title. In other words, a quitclaim will transfer the owner’s entire interest in the property to the person receiving the property, but it only transfers property the owner actually owns. Therefore, if the property is jointly owned—or split among different family members as with an inheritance—the owner can only transfer the portion of the property he or she actually owns.

It is important to note that deed transfers, warranty or quitclaim, only affect the ownership of a property and do not impact the mortgage on the property. This is especially important to keep in mind for those in a divorce situation where one spouse may quitclaim the property to the other. While the spouse relinquishing ownership over the property will have no rights to the property, they will still be responsible for the mortgage unless they remove themselves from the mortgage itself.

With all of that said, when should you use a quitclaim deed? Typically, if you are transferring ownership of a property without a traditional sale, it will be easier to use a quitclaim deed. This is often the case when property is being transferred between family members, married spouses, divorcing spouses, or when the property is being transferred to a living trust. It can also be used to clear up title to a property if there is a question about ownership right after a title search. Unlike with a warranty deed, a quitclaim deed requires no title search or title insurance making it fast and easy.

There is no quitclaim deed format specifically for New Jersey. An experienced real estate attorney can help you use a standard format to create your quitclaim deed. You will need to use the legal description of the property. This can often be found on the existing deed, a tax bill, or by contacting your local county clerk’s office. Once the quitclaim deed is completed, you will need to get it signed and notarized in the presence of a notary public. After that, you will need to file the deed with the county clerk’s office where the property is located. There is typically a small filing fee that varies by county.

As a full service real estate and estate planning law firm, Veitengruber Law can guarantee that your quitclaim deed is completed properly in compliance with local laws as well as filed correctly. Our  attorney and real estate team strive to handle all transactions with efficiency and professionalism. We can help you determine when and how to use a quitclaim deed to achieve your real estate goals.

Joint Property Ownership and Bankruptcy in New Jersey

chapter 7 bankruptcy in new jersey

When you have unmanageable debt, sometimes the best way forward is through a personal bankruptcy petition. If you own joint property with friends or family members, things could get a little more complicated. If a family member co-signed for you or a parent added you to a bank account or deed as an estate planning tool, you will need to know how your bankruptcy will potentially impact this jointly-held property. There are a lot of variables when it comes to joint-owned property and bankruptcy. Here we look at what to expect as you move forward with your bankruptcy petition.

When you file for bankruptcy, your assets become property of the bankruptcy estate unless you can properly exempt it. Depending on how you file for bankruptcy, this could mean different things for your nonexempt property. Under Chapter 7 bankruptcy, the trustee managing your bankruptcy will have access to all property to which you have a claim. This property can be sold to pay your creditors. Under Chapter 13 bankruptcy, any property you jointly own with others will enter into the calculation used to determine how much you will need to pay your creditors.

Bankruptcy exemptions can be used to protect a specific amount of property under Chapter 7 bankruptcy or reduce the amount you will have to pay back your creditors under Chapter 13 bankruptcy. In most situations, if the property you jointly own has no equity or is fully exempt, it will not be impacted by the bankruptcy. If you can prove to the courts that the funds used to purchase the property were principally contributed by your co-owner, then you may be able to get the property exempt from your bankruptcy case to protect your co-owner’s interest.

There are some situations in which your jointly owned property will be considered part of the bankruptcy estate. New Jersey is a common law property state. This means that in most legal matters, each co-owner’s individual interest in joint property is treated as that person’s separate property. The courts will tend to view an jointly held property as owned equally by all parties. So if you own property with one other person, half of the properties value will be considered your individual interest. Therefore, only your portion of the joint asset will enter the bankruptcy estate and the trustee will be unable to take your co-owner’s portion to pay back your creditors.

It is important to note, though, that if you cannot get the property exempt or if the property has equity, your trustee may be able to sell the entire property. Even if your co-owner’s share isn’t part of the bankruptcy estate, your trustee could prove that the benefit of selling the property as a whole overrides any inconvenience or loss to your co-owners. If the trustee is able to get the courts to approve the sale of the property, the proceeds will need to be used to pay the co-owners their share.

In New Jersey, the courts have made it clear that if you are not in bankruptcy, creditors cannot force the sale of jointly owned real estate to settle what an individual debtor owes to their creditors. Therefore, by filing for bankruptcy you could unintentionally be putting jointly owned property at risk of being sold. Keep in mind also that a bankruptcy involving joint property could negatively impact you co-owner’s credit record. To avoid these consequences, it may be worthwhile to look into alternatives to bankruptcy.

The best solution to this issue is not to title assets jointly if you or your potential co-owners are facing financial difficulties. Of course, this isn’t always realistic and sometimes financial difficulties are unpredictable. If you are facing unmanageable debt and want to protect your jointly owned property and your co-owner’s interest, you have options. Veitengruber Law is an experienced bankruptcy law firm. We can help you understand all of your options and demystify the complexities of bankruptcy proceedings.

Top 5 Reasons to List Your NJ Home for Sale This Winter

Spring time is widely considered the best time to sell a house. Potential buyers are looking to take advantage of the warmer months for a big move. But if you are looking to sell your home, you don’t necessarily need to wait for the weather to warm up before you enter the real estate market. In New Jersey, selling your home during the colder months has some great advantages. Here are five reasons to sell your home this winter.

  1. Less Competition

With most people putting their homes up for sale in the spring, the market is super crowded with plenty of options. On the other hand, there is typically a low inventory throughout the winter months. One of the best reasons to list your home when temperatures drop is you will have less competition. With fewer homes for sale, there is a better chance your home will not get overlooked by potential buyers. It will be easier for you to grab buyers’ attention and keep it if you sell during the winter.

  1. Growing Families

September is on average the most popular month of the year to have a baby. Any parent knows how quickly a home can “shrink” with the addition of a new baby. This means that growing families are more likely to be looking for a bigger home at the end of the year. These buyers are motivated by running out of space and a time crunch to get moved and settled before the next school year.

  1. Serious Home Buyers

Not every single person who looks at a home for sale is actually looking to buy. Some people start viewing homes while they’re still contemplating whether or not they really want to buy a home. Since homes tend to go on the market in the spring, this is also when real estate window shoppers are the most abundant. On the flip side, those who are viewing houses in the colder months tend to be serious. Buyers who are ready to move don’t want to miss out on a great house by waiting until the spring.

  1. End of Year Financial Payouts

Year-end performance reviews and holiday bonuses mean a potential buyer has more money to work with when buying a home. First time buyers might be waiting for these payouts to go towards a down payment. Homeowners who receive a raise might be looking to upgrade their living situation. Financially flush buyers are more likely to be serious about a real estate purchase.

  1. Corporate Relocation

In New Jersey, the end of January and beginning of February are statistically the most popular time for job relocations. These buyers need to move quickly and are very motivated to find a home close to their new placement. Once these buyers find a home to meet their requirements, they are normally ready to sign on the dotted line. This urgency can be a great advantage for someone selling a house in the winter months.

If you are thinking about selling your home, there is no better time than now! Don’t be intimidated by a supposedly tougher winter market. There are plenty of buyers looking for a new home during the colder months. Veitengruber Law is a full service real estate law firm any time of the year. If you are selling a house this winter, don’t close without the help of our experienced real estate team. We are ready to sit down with you for a free consultation to discuss your real estate goals.

How To Calculate Your Debt-to-Income Ratio

Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income. Lenders will use a debt-to-income ratio to measure a potential or current borrowers ability to handle monthly payments to repay borrowed money.  If you apply for a loan modification, this is often one of the metrics by which the servicer of the loan will approve or deny your request. Calculating your debt-to-income ratio can help you see how your debt comes across to potential lenders before you apply for a loan. Here is everything you need to know about your debt-to-income ratio.

 

When calculating your debt-to-income ratio, add up all your monthly debt payments and divide them by your gross monthly income, or what you earn every month before taxes and other deductions are taken out. For example, the total debt for someone with a $1,000 mortgage, a $200 car payment, and $300 in other debts is $1,500 a month in debt payments. If this person brings in $5,000 a month before taxes, their debt-to-income ratio is 30% ($1,500 is 30% of $5,000).

 

For mortgages, there are two components lenders will look at when determining a DTI ratio: the front-end ratio and the back-end ration. The front-end ratio, also called the housing ratio, shows what percent your gross monthly income goes towards your housing expenses, including your mortgage payment, property taxes, homeowners insurance, and any HOA dues. The back-end ratio shows what portion of your monthly income is used to pay for your monthly debt payments, including mortgage and housing expenses as well as credit cards, car loans, child support, student loans, and any other debts. Most lenders typically agree that the ideal front-end ratio should be no more than 28% while the ideal back-end ratio should be 36% or lower.

 

So why is the debt-to-income ratio important? This ratio was essentially created to protect potential borrowers from predatory lenders and to ensure they do not bite off more debt than they can chew. There is evidence that borrowers with a higher debt-to-income ratio are more likely to have issues making regular monthly payments. Generally, lenders see consumers with a high DTI as risky borrowers. Because of this, 43% is the magic number for debt-to-income ratios. In accordance with the Consumer Financial Protection Bureau guidelines, 43% is the highest ratio a borrower can have and still receive a Qualified Mortgage.

 

There are some exceptions to this 43% rule. Small creditors—those with less than $2 billion in assets and who made no more than 500 mortgages in the previous year—can offer a Qualified Mortgage when your debt-to-income ratio is higher than 43%. Larger lenders may also be able to give you a mortgage loan if your ratio is higher than 43%, but they will need to prove they have made an effort to determine whether or not the borrower can actually pay back the loan.

 

If you need to lower your DTI ratio to get a loan or a loan modification, there are a few things you can do. Start by making a plan to pay down your debts as quickly as possible. Cut out unnecessary expenses and make a budget that emphasizes paying off your debt. You can also try to see if your lenders or credit card company will lower your interest rate. If your account is in good standing and you regularly pay your bills on time, you may be surprised at how willing your creditors are willing to work with you. Consolidating your debt by transferring high-interest balances to an existing or new account with a lower rate may also help you manage monthly payments. Most importantly, avoid taking on more debt until your DTI ratio is where you need it to be.

 

Figuring out your debt-to-income ration can be useful in determining how much debt you can handle. Veitengruber Law is a full service debt negotiation law firm. We can help you determine your DTI ratio and help you lower your ratio if needed. Whether you are looking to lower your ratio to buy a house, modify a mortgage payment, or simply get out from under your debt, Veitengruber Law can help.

Disclosure Obligations When Selling Your Home in New Jersey

Applied to real estate transactions, “let the buyer beware” means that the buyer is responsible for doing their due diligence to determine the status of a property. But if you are the seller of a residential property, there are certain things you should disclose to a potential buyer in order to avoid them backing out of the transaction or worse—taking you to court. In New Jersey, there are laws in place to protect buyers against sellers who fail to disclose important information about a property.

 

Here are some things you must disclose if you are selling your NJ home:

 

  1. You Must Promise the House is Fit to Live In

 

If you are selling a residential property in NJ, you are legally implying that the house is fit to live in. This is the case whether you are trying to sell it as habitable or not. Therefore, you cannot sell the house “as is” to escape the requirement.

 

  1. You Must Disclose Any Known Latent Material Defects

 

A latent material defect is one that is concealed but known to the seller. For example, if you know there is a leak in your attic but there is no obvious evidence of this leak, you must disclose this to the buyer. Hidden defects that may impact the future health or safety of the buyer are specifically important to disclose. As the seller, any false statements you say or write, or any omissions you make, can result in a lawsuit if they result in loss to the buyer or make the property uninhabitable. A lawsuit can be brought before closing or many years after depending on the specific statue of limitations laws specific to the lawsuit, such as for fraud or misrepresentation.

 

  1. Disclosures Pertinent to the Sale Contract

 

The sale contract itself will often tell you what kind of representations or promises you are making about the property. These are typically items about which there are not specific laws, but their presence in the sale contract makes you subject to their terms. One of these promises is that all systems and equipment are functional. The contract can also compel you to identify how you have used the property and ensure you are using the property legally under current local zoning laws. Similarly, you will need to state that any work done to improve the property was done after obtaining the necessary permits and approvals. The buyer will want to know the work was done up to code and that the property tax includes any property improvements.

 

  1. “Intangible” Problems

 

There are some issues with a property that buyers cannot discover through an inspection. A property can contain some intangible problems that are impacted by psychological or other factors that have nothing to do with the physical condition of the property. A property could be considered less desirable to live in due to a history of deaths in the house, an incident of violence on the property, or even a supposed haunting. While under NJ law a seller is not required to tell a buyer up front about these issues, if a buyer specifically asks about them, the seller has to answer honestly.

 

If defects you were unaware of surface on an inspection, don’t panic. The discovery of home defects will not automatically lead to the transaction falling through. Most contracts include provisions that will allow the sale to go through. This provision will allow the seller time to make necessary repairs or enable the buyer to accept the property with a price reduction.

 

You should always disclose any physical issues or other defects about a property when selling it. If you fail to follow the disclosure obligations laid out by New Jersey law, you could end up paying for it. The money you would lose to price reductions or repairs by being up front about the problems won’t come close to the cost you could incur by trying to lie about them. Ideally, the buyer and the seller will be up front with each other concerning all information important to the real estate transaction.

 

A standard real estate contract will include many promises and representations. Contracts of Sale are long, complex legal documents. Veitengruber Law is an experienced, local real estate attorney. We can review the contract with you and explain any uncertain terms and the importance of any listed disclosures.