Ask an Attorney - Q&A
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The following questions were questions posed to Picket Fence Preview, which were then referred to interested attorneys. Disclaimer: The following answers are not intended as, and cannot be taken as, legal advice on any particular transaction. Seek advice specific to your situation.
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1) What is the Vermont Property Transfer Tax? Is it like a sales tax?
Vermont’s Property Transfer Tax is a transaction based tax which was originally implemented as a way to generate revenue for regional and local planning operations. The tax taxes the first $100,000.00 of the sale price at 0.005% and the remainder of the sale price at 0.0125%. As part of its strategy to improve affordable housing opportunities for Vermonters, the Legislature has provided an exemption from this tax for those who finance their home purchase through the Vermont Housing Finance Agency.
2) Is it customary for the buyer to reimburse the seller for any property taxes paid at closing?
The general practice at closings is for local property taxes to be prorated at closing. This is done so that the seller pays only that portion of the property taxes for the duration of the year that they have owned the house.
3) Is it illegal for the seller to replace house appliances that were in place when a home was shown? How can buyers protect themselves from this situation?
The seller may not exchange or remove appliances from the house after a contract is signed without the buyers’ permission if these appliances were made a part of the contract. The buyers should inspect the house within 24 hours of the closing to make sure that everything they purchased is in the house before they attend the closing. If during the inspection they notice that appliances have been changed, they should mention it to their attorney. At closing money can be put into escrow to ensure that the seller will return the proper appliances
or cover the cost to the buyers of purchasing a replacement of equal value. By removing or exchanging appliances, the seller has breached the contract and may be held liable for the costs associated with that breach.
4) Is title insurance optional? What benefit does this coverageprovide the home buyer (or is it the lender that requires it)?
A title insurance loan policy is usually purchased for the benefit of a mortgage company for the amount of the mortgage. A loan policy only covers the amount of the mortgage and when the mortgage is paid the policy no longer exists. Therefore every time homeowners refinance they need to purchase a new title insurance policy.
However, a buyer (or seller) may also purchase an Owner’s Title Insurance Policy. The advantage of an owner’s policy is that it protects the owner for the purchase price of the house forever. With an owner’s policy homeowners are protected even after they sell the house. For example, assume that an easement deed was not recorded properly and therefore the attorney performing the title search was unable to find it. Later the owner of the easement wants to construct a road through the middle of your property right where you built your barn. Title insurance would either pay you for the lost value of your land, up to the amount of the coverage, or it would attempt to correct the problem. If you had owner’s title insurance you would be protected from a potential suit against you by future owners up to the amount of your policy.
Some sellers and buyers purchase a new Expanded Title Insurance product to protect them from future litigation for zoning, planning or Act 250 violations. Title Insurance can also be used to insure homeowners against known problems such as improperly executed deeds or undischarged mortgages where the problem is impossible to correct because of the death of one of the parties involved.
Vermont’s Property Transfer Tax is a transaction based tax which was originally implemented as a way to generate revenue for regional and local planning operations. The tax taxes the first $100,000.00 of the sale price at 0.005% and the remainder of the sale price at 0.0125%. As part of its strategy to improve affordable housing opportunities for Vermonters, the Legislature has provided an exemption from this tax for those who finance their home purchase through the Vermont Housing Finance Agency.
2) Is it customary for the buyer to reimburse the seller for any property taxes paid at closing?
The general practice at closings is for local property taxes to be prorated at closing. This is done so that the seller pays only that portion of the property taxes for the duration of the year that they have owned the house.
3) Is it illegal for the seller to replace house appliances that were in place when a home was shown? How can buyers protect themselves from this situation?
The seller may not exchange or remove appliances from the house after a contract is signed without the buyers’ permission if these appliances were made a part of the contract. The buyers should inspect the house within 24 hours of the closing to make sure that everything they purchased is in the house before they attend the closing. If during the inspection they notice that appliances have been changed, they should mention it to their attorney. At closing money can be put into escrow to ensure that the seller will return the proper appliances
or cover the cost to the buyers of purchasing a replacement of equal value. By removing or exchanging appliances, the seller has breached the contract and may be held liable for the costs associated with that breach.
4) Is title insurance optional? What benefit does this coverageprovide the home buyer (or is it the lender that requires it)?
A title insurance loan policy is usually purchased for the benefit of a mortgage company for the amount of the mortgage. A loan policy only covers the amount of the mortgage and when the mortgage is paid the policy no longer exists. Therefore every time homeowners refinance they need to purchase a new title insurance policy.
However, a buyer (or seller) may also purchase an Owner’s Title Insurance Policy. The advantage of an owner’s policy is that it protects the owner for the purchase price of the house forever. With an owner’s policy homeowners are protected even after they sell the house. For example, assume that an easement deed was not recorded properly and therefore the attorney performing the title search was unable to find it. Later the owner of the easement wants to construct a road through the middle of your property right where you built your barn. Title insurance would either pay you for the lost value of your land, up to the amount of the coverage, or it would attempt to correct the problem. If you had owner’s title insurance you would be protected from a potential suit against you by future owners up to the amount of your policy.
Some sellers and buyers purchase a new Expanded Title Insurance product to protect them from future litigation for zoning, planning or Act 250 violations. Title Insurance can also be used to insure homeowners against known problems such as improperly executed deeds or undischarged mortgages where the problem is impossible to correct because of the death of one of the parties involved.
