An experienced Grantsville Utah real estate lawyer can assist you in many ways. Don’t be under the impression that only home buyers need the assistance of an experienced Grantsville Utah real estate lawyer.
If you own a piece of land and you want to construct a house or an apartment block on that land, you will need the services of an experienced Grantsville Utah real estate lawyer. Generally you will be hiring a contractor to complete the construction.
A Real Estate Attorney can also help you with Quiet Title Actions, Boundary Disputes, evictions, partition actions, tenants in common issues, and anything related to real estate.
When you select a contractor, you have to sign the construction contract. The construction contract should require the contractor to indemnify and hold you harmless against any claims resulting from the performance of the contractor’s work. The legal and insurance aspects of this clause will vary from site to site. You should take all necessary steps to limit your exposure to circumstances and conditions over which you have direct control. Shifting additional liability to the contractor by modification of this clause may be problematic because these standard provisions are widely accepted and understood.
The time finally comes when the job is complete and the newly developed property purportedly ready to be occupied. However, the hallways are strewn with rubbish, the units are littered with the debris of construction, and four spaces of the parking lot are occupied with a dumpster filled to overflowing with old appliances, mattresses, furniture, and debris. The contractor is gone, and the final payment due the contractor is not enough to pay the carting expenses.
This scenario is more common than might be imagined. There is little you can do in this situation, and it is best avoided. The contractor is responsible for keeping the premises “free from accumulation of waste materials or rubbish caused by the contractor’s operations.” This responsibility should be strictly enforced throughout the construction process. Failure by the contractor to maintain a clean project site can cause fires, accidents, and delays to the project schedule. The cleaning-up provision of the standard contract allows the owner to clean the site and charge the contractor. The prudent owner will not wait until the final contract payment to exercise this option.
When you are looking for a loan to develop land, seek the assistance of an experienced Grantsville Utah real estate lawyer. Your lawyer will assist you negotiate with the lender and ensure that your rights as a borrower are protected. The lawyer can review the lenders documents before you sign them and advise you if any changes or modifications need to be made to those documents. The lenders documents will be prepared by the lender’s lawyer. For the lender’s lawyer, the lenders rights are important and he will draft the documents keeping in mind the lender’s rights. He will not be worried about your rights. More often than not, the lender’s documents are tilted in favour of the lender. Never sign any document that the lender has asked you to sign without showing them to your Grantsville Utah real estate lawyer.
Loans to buy your home
If you are applying for a loan to buy your home consult with an experienced Grantsville Utah real estate lawyer. Underwriting loans to people to buy their own homes is simple. All the lender has to do is (1) check the applicant’s credit with a credit agency which maintains a file on just about everybody’s prior defaults, bankruptcies, etc., (2) check the applicant’s earnings, (3) make sure that a percentage of the earnings (typically 25 percent to 33 percent) will cover the interest and principal on the loan, and (4) get an appraisal of the property. The appraiser will compare the house with similar recently sold homes in the area and will determine a value based on those comparisons. The lender will make the loan only up to a specified percentage of appraised value. Servicing the single-family mortgage loan is a mechanical task of making sure that the payments are made every month. If a loan gets into arrears, foreclosure actions are fairly routine. It’s important that you review the loan documents before you sign them. These documents are prepared by the lenders lawyer and will be biased towards the lender. Having an experienced Grantsville Utah real estate lawyer review the documents before signing ensures that you are aware of the documents and you will know how to protect yourself.
Single-Family Construction Loans
Making loans for the purpose of constructing single-family homes is a bit more complicated. Most homes are built by tract developers who buy a large parcel of raw land, obtain subdivision approvals, put in roads, water mains, and sewers, then build homes they hope to sell to individuals. If the lender finances the land before governmental approvals, the lender is taking additional risks: governmental risks, environmental risks, longer-term cost and market risks. Administration of construction loans must be assiduous. Construction draws are based on estimated percentages of completion, which often are a source of disagreement between the bank and the builder. The builder claims to be 50 percent complete; the bank says “no, you’re only 40 percent complete.” If 40 percent of the money has already been advanced, the developer doesn’t get more money. Having an experienced Grantsville Utah real estate lawyer assist you when you are negotiating with the bank will ensure that you do not face such problems.
Occupied Apartment and Commercial Property Lending
Making loans on occupied apartment buildings or occupied commercial properties is again an entirely different business. The key to lending on occupied commercial structures is the cash flow that comes from rent paid by tenants. The lender wants to make sure that this cash flow is sufficient to cover the payments on the mortgage as well as taxes, insurance, and operating expenses. In addition, because income property loans usually are not completely self-amortizing — that is, the payments of principal during the term of the loan are not sufficient to pay it off — the lender wants to make sure that at the end of the loan term there will be enough cash flow to refinance the remaining principal even if interest rates are somewhat higher.
The underwriting process begins by finding out how much rent is being paid and how much it costs to run the building. By subtracting the cost from the rent, the underwriter can figure out how much net operating income (NOI) the property generates. Of course the property may generate a given level of NOI today but not tomorrow; tenants may move out or they may be unable to pay; or rents in the area may decrease or expenses may increase. The underwriter therefore will evaluate factors such as market rental rates and trends in the area, lease terms compared with the loan term, credit quality of tenants, and environmental and structural factors affecting the building. If the results of these investigations are satisfactory, the lender usually will apply a standard of “debt service coverage,” that is, the ratio of the amount of fairly certain NOI (as determined after investigation) to the payments called for under the loan. Administering income property loans usually is not extremely complex, but it is very different from administering single-family loans. Income property loans can lose value quickly if, due to inadequate rents or high vacancy levels, owners allow properties to fall into disrepair.
Most lenders won’t make construction loans with just the borrower’s assurances about costs, approvals, and markets. They not only will investigate those matters for themselves, but they also will structure the loans so that they do not fund anything until approvals have been obtained, acceptable contractors have been hired (often at a fixed cost for the entire job and sometimes bonded), and some level of preleasing or guarantee of debt service coverage during a lease-up period or a committed takeout* by a permanent lender has been arranged. These all are hotly negotiated issues between the lender and the borrower — and as the lender gets more security, the amount that the borrower will be willing to pay decreases. Always ensure that you are assisted by an experienced Grantsville Utah real estate lawyer during the negotiations. Construction loan administration needs to be far more intensive than permanent financing administration. Whereas in a permanent loan the money is advanced on day one and then paid off over time, in a construction loan the money is advanced in stages as the construction goes along, and the lender expects to be paid back in a lump sum when another lender makes a permanent loan on the property. Intensive administration is required at every “draw” of funds under the loan, including an engineering report, so that the lender can satisfy itself that after advancing the money, there will be enough left in the loan budget to finish the project. If the projected cost to complete is higher than the amount in the budget, then the loan is said to be “out of balance” and the lender is not obligated to fund.
Before you apply for a mortgage, speak to an experienced Grantsville Utah real estate lawyer. There are different types of mortgages. The lawyer will help you chose the right one. Traditionally, a term is fixed by agreement, at the end of which the whole loan falls due; accrued interest is payable at stated intervals during the term or in toto at the end. A mortgage containing these provisions is called a “straight-term” or a “straight” mortgage and is well adapted for a debtor who expects to pay the debt on or before its due date and for a lender who wishes to lend for a period approximately equal to the term agreed upon and to recover the whole sum at the end of that period.
Yet the straight-term mortgage is frequently used in transactions in which both the borrower and the lender recognize that the borrower is not likely to be able to pay the debt at the end of the term. Sometimes an agreement to extend the mortgage is part of such a straight-term mortgage. This agreement, however, is commonly tacit or verbal and is not enforceable at law. Thus, its use leaves some uncertainty or creates an advantage for one of the parties. Notwithstanding its inappropriateness, the use of the straight-term mortgage persists.
The partial-payment mortgage, which is a variation of the straight term mortgage, provides that at specified intervals during the term a partial payment shall be made to reduce the debt. These payments usually fall due on annual, semi-annual, or quarterly dates, when interest is also due. Under the partial payment play, the sum of the payments on principal is less than the original debt, and a balance, called a “balloon payment,” becomes due at the end of the term.
This arrangement is appropriate when the borrower anticipates receipt of income corresponding to payments scheduled during the term and of a sum sufficient to meet the balloon payment at the end of the term, and where the lender, instead of keeping the original amount of funds outstanding for the entire term, prefers to recover a portion of them at stated intervals and the remainder at the end of the term. In practice, these conditions are seldom found. The balloon payment is usually considered by both parties to represent a sum which the borrower will not have provided and which the lender will not demand, or does not expect to receive, when the term expires. Both parties usually anticipate that this sum will be “refinanced.”
Fully Amortized Mortgages
Another type of agreement, the amortized mortgage, is used more and more frequently in mortgage loans on homes. The most common terms embodied in this type of home mortgage provide for full reduction of the debt at maturity by fixed monthly payments. Payments are credited first to interest accumulated for the month at the agreed rate and the balance toward reduction of principal
“Past Due” Mortgages
There is one other arrangement frequently entered into in connection with home mortgages, namely, where the mortgage is payable on demand or after a very short term. After execution of the agreement or upon expiration of the term, the obligation is carried as an “open” or “past due” mortgage. In some instances the borrower keeps his obligation in good standing merely by paying interest at agreed intervals; in others he also pays something toward amortization. In both cases both parties assume that the loan will not be called and it seldom is. During periods of stress, however, it may be necessary for the lender to request payment; in other circumstances, he may wish to insist upon curtails, that is, on reduction of principal.
Grantsville Utah Real Estate Lawyer Free Consultation
When you need legal help with a real estate matter in Grantsville Utah, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506