Buying and Selling a Home in Today’s Market
With interest rates at an historical low, many people have decided that this is an opportune time to purchase a home or refinance an existing mortgage. As of January 2009, the new Conforming Loan Limit is $625,000.00. Anything over that is considered a Jumbo mortgage (higher interest rate). The previous conforming loan limit was $417,000.00.
For most people, the purchase of a house is likely to be the single largest investment they ever make. This momentous event can turn into a legal and financial mess if not handled correctly. You should seek the advice of an attorney whether you are buying or selling a home, condo or co-op. If you are interested in a foreclosure or short sale, you should do a lot of research and enlist the help of a competent and experienced realtor.
From a Buyer’s Perspective: Ownership, Step by Step
You find what appears to be the perfect house! What happens next? You and the Seller agree on the price and terms and generally sign a short form known as a binder that indicates you are both seriously interested. You leave a small deposit in good faith. You should then have a competent inspector carefully examine the house, both inside and outside, BEFORE YOU SIGN THE CONTRACT. This may save you thousands of dollars later.
The Contract covers all the terms of the sale, including purchase price, a description of the property, a description of personal property to be included in the sale, the date you are expected to take possession and other important terms of the deal.
Your attorney should also ensure that you have an opportunity to have the house inspected for termites, other wood destroying insect infestation and damage. This clause is very important and may well save you years of aggravation and thousands of dollars.
Another important provision your attorney should insist upon is a fair mortgage contingency clause. You will want to ensure that if you are unable to obtain financing, despite your diligent efforts, your contract deposit is returned to you. Next, the contract is signed and your contract deposit (typically 10% of the purchase price) is entrusted to a third party, usually the Seller’s attorney to be held in escrow.
While you obtain financing and insurance, your attorney will arrange a title search. A title insurance company researches the property to determine whether the Seller is really the owner and whether there are any outstanding judgments, liens or encumbrances against the property. The title insurance company will research whether there are any violations or unpaid real estate taxes, and whether there are proper certificates of occupancy for the home. This includes any additional structures, such as pools, sheds or dormers.
At last, if everything is in order and your mortgage has been approved, the Buyer, the Buyer’s Attorney, the Seller, the Seller’s Attorney, the Real Estate Broker and the Bank Attorney all come together to finalize the sale. At the Closing, the Buyer is required to sign more documents than is imaginable. The job of your attorney is to ensure that you know what each document means and where every penny is spent. The proceeds of the mortgage are paid to the Seller, along with the escrow deposit and any additional monies due. The Seller signs the deed over to you, and the deed is recorded in the County Clerk’s office. Congratulations! You are now a homeowner!
From a Seller’s Perspective: Important Points to Consider
There are some very important steps an attorney should take when representing a Seller. In this period of extreme financial and economic turmoil, it is important to determine the type and amount of mortgage the Buyer will seek. Firstly, you will want to try to ensure that the Buyer is qualified for the proposed mortgage prior to Contract signing. This is something that a good real estate broker will assist you with. It is also important to require the Buyer make a significant contract deposit. Otherwise, you risk that the Buyer may feel like they do not have much to lose and may simply “walk-away” from the deal if they change their mind or find a different house.
As a Seller you are now required to provide the Buyer with a Property Condition Disclosure Statement concerning your knowledge of the condition of the property. This Disclosure Statement can be the subject of post-closing litigation if statements in the Disclosure Statement are claimed to be untrue. Fortunately, a Seller can elect against providing the Disclosure Statement and instead, give the Buyer a $500.00 credit against the purchase price. Due to its potential to lead to litigation, we generally recommend against a Seller providing the Disclosure Statement.
Your attorney will want to prepare the Contract and have it negotiated with the Buyer’s attorney immediately after the Buyer’s inspection. The Seller’s attorney will attempt to minimize your exposure for repairs and costs in the Contract. This may include the cost of repairing or replacing appliances or personal property that breaks down prior to Closing, or the cost of obtaining a certificate of occupancy for a deck or swimming pool. Although a Seller may be able to pass off the cost of obtaining the necessary certificates and permits to the Buyer, it still may be an impediment to the Buyer obtaining a mortgage. Accordingly, it is best to ensure that your home and all existing structures have the necessary certificates and permits prior to placing your home on the market.