Nearly everyone, at some point in life, faces the need to buy or sell real estate. Because the purchase of the house is probably the largest single investment a typical person will ever undertake, any buyer and seller should carefully consider the practical and legal implications of such a transaction before proceeding.
Contract
As a buyer, once you have found the house you want to buy and have agreed on the price, you will be asked to sign a contract which is prepared by the seller’s attorney. Before signing it, you should consider seeking legal advice. Once you sign a contract, your rights and obligations are determined and your attorney may no longer have the opportunity to structure the contract to meet your objectives.
Whether you are a buyer or a seller, you should understand the contract terms and how they affect you. Other parties to the contract have no legal obligation to tell you what the contract means. You may not understand the legal meaning or much of the terminology or what must be changed or added to protect you. So, if you plan to have an attorney representing you in the transaction, the time to consult one is before you sign anything.
The contract of sale should identify the parties and the purchase price and specify how the purchase price is going to be paid. It should adequately describe the property to be sold, the type of deed to be delivered, the quality of the seller’s title to the property, a description of personal property included in the sale, and the date of the closing or the date the buyer will take possession to the property. It should also cover dozens of other issues about the property and the responsibilities of the parties to each other.
The contract should in most cases let the buyer cancel the contract if the buyer can’t obtain the mortgage loan or if the sale falls through for some other reason that isn’t the buyer’s fault. In each of these cases, the buyer should receive back the contract deposit.
Sometimes the seller wants to stay in the house after the closing while arranging new accommodations. Although this can be risky to the buyer, it does occur, and the attorneys can work appropriate arrangement to protect both parties’ interests.
These are only a few of the matters that any contract covers. They amply illustrate the range of the terms and conditions to consider when you enter into such a transaction.
Title
The title to real estate means the right of the owner to its peaceful possession and use, free from the claims of others. The exercise of that right is, however, often limited by the other rights, such as easements. To obtain electricity, sewer, telephone, and other services, an owner often gives the municipality or public utility the right to run its lines or pipes across his or her property to the house. An owner must comply with these easements and the buyer needs to consider them.
An owner’s use of his or her property may also be limited in other ways. Deed restrictions might apply. So might local zoning law. Almost all land is subject to real estate taxes. If those taxes are not paid, the owner may lose his or her real property. When you buy a house, you need to know that you have the right to occupy it without interference and that you later will be able to sell or mortgage it without problems.
Title Search
After you sign the contract as a buyer, you should satisfy yourself that the seller can convey to you a clean title to the property as the contract requires. Your attorney will have the title insurance company search title and issue a title insurance policy. Title insurance does not eliminate the need for an attorney. It may protect you against financial loss and the possible expense of defending your title in court, it does not lessen the importance of your attorney’s advice. Your attorney can advise you whether and how to obtain title insurance and also on its terms, exceptions and limitations.
Form of Deed
The buyer’s attorney in a real estate transaction needs to make certain that the deed being tendered complies with the contractual provisions. If there is a discrepancy between the contractual provision and what the seller can deliver, an inquiry should be made to the title company to determine whether there is a basis for obtaining title insurance. If neither an escrow nor an indemnity is feasible, the buyer has to consider whether proceeding with the purchase is prudent. In NY the typical deed is a “Bargain and Sale Deed With Covenant Against Grantor’s Acts”. The covenant against grantor’s acts means that the seller is promising that he has done nothing during his ownership of the property to encumber title, except as specifically noted in the deed.
Representation
The seller, buyer and bank in the transaction may each have their own attorney. An attorney representing any of these parties (even if you pay their fee, such as for a bank’s counsel) is not your attorney. It is your own responsibility, as a buyer or a seller, to seek the professional advice of an attorney to protect yourself and to ensure that you get precisely what you are legally entitled to receive.
Closing
The closing of the purchase of your home is the event where the buyer receives the deed to the house with all the related documents for that transfer.
At the closing these documents are reviewed to be sure that the conditions and promises of the purchase contract are fulfilled. If they are, the balance of the purchase price is paid to the seller.
Arrangements are made at the closing for the time when you will occupy the home. Typically, when the full purchase price is paid, the keys to the house are delivered to the buyer, who then has the right to move in immediately. However, your purchase agreement may also specify that you move in at a later date.
The important thing to remember is that buying a home is a major investment. It usually involves making payments over a period of years. In the long run, it is more economical to have professional legal advice and guidance in making the purchase, than to risk the trouble and expense that could result from not having that advice in the first place.