Using a Real Estate Attorney When Buying a House
Real estate transactions can be one of the largest financial decisions a person will ever make, so having legal assistance during this process is invaluable in protecting one’s rights as a buyer.
Most buyers finance at least part of their purchase through a mortgage loan from a lending institution. A lawyer will help the lender review all relevant documents related to the seller’s property.
1. Reviewing the Contract of Sale
Contract of sale agreements are essential documents when buying a home, outlining both buyer rights and obligations as well as any necessary contingencies such as home inspection or mortgage appraisal contingencies that may exist for backout. They serve to establish an agreed purchase price between buyer and seller as well as details on earnest money requirements and deposits due dates for earnest money deposits, any necessary contingencies that could prevent backout (such as home inspection/mortgage appraisal contingencies).
Purchase agreements should detail when and how a property will close as well as any closing costs that will be incurred by buyers. Furthermore, the agreement should include details about the property including its location and address as well as names and current residential addresses of both parties involved in the agreement as well as all chattels (furnishings) sold with it as well as warranties offered.
The language of any contract will depend on the type of property and any contingencies it might involve, for example a condo or co-op will use different terms than single family homes, while properties requiring mortgage contingencies or home inspection contingencies will often have addenda added to their PSA contract.
2. Preparing the Closing Documents
At closing, many papers must be reviewed and signed; some, like the deed and title insurance policies, serve to transfer ownership while others, like Transfer Tax Declaration and Closing Disclosure (CD), provide information regarding accounting activities during the closing process.
The CD provides buyers with an overview of their charges, such as sales price, loan charges, title and government charges, escrow account beginning balances for homeowner’s insurance, interest and taxes and inspection fees. It also lists credits such as earnest deposit balance reduction, mortgage loan balance adjustments and seller closing cost concessions; these credits are deducted from gross amount due to reflect what a net amount will be credited back at closing.
When creating the CD, an attorney reviews the lender’s pay-off letter and calculates amounts owing for both buyers and sellers at closing. By having this information at their fingertips early, parties can adjust as necessary until an agreed upon closing date has been set.
3. Obtaining a Title Report
Title reports provide information on the chain of ownership for any given piece of real estate and examine any legal rights attached to that piece of property, such as mortgages, liens, easements or restrictions that exist on it.
Buyers must clear the title in order to own a house they are buying, which involves paying off any outstanding liens such as mortgages held by sellers as well as drawing up a valid deed.
Title reports also disclose whether there are other owners or heirs with an interest in claiming the property and any liens on it which require repayment, such as real estate taxes or mortgage payments that need to be settled.
Title companies will issue a preliminary title report for prospective buyers to review, with serious issues like lien or encroachments leading them to cancel the agreement and make other arrangements for closing. Minor problems can often be settled at closing; your attorney can explain all of your title holding options such as sole ownership, tenancy in common or joint tenancy which affect rights and obligations associated with owning property.
4. Obtaining a Mortgage Commitment
Mortgage commitment letters are promises from lenders that they will finance the purchase of a home under certain conditions, usually after preapproval and appraisal are complete. Acquiring such commitment letters can take some time and it is essential for buyers to understand their rights and responsibilities during this process.
An engagement letter helps you figure out your budget and proves to real estate agents and sellers alike that you are serious about purchasing a home. Furthermore, it shows them that the mortgage application process has already started, which can reduce delays at closing time.
To obtain a mortgage commitment letter, first complete the loan preapproval process by providing various documents such as pay stubs and bank statements. When your application has been fully processed, an underwriter will analyze all the information to assess your debt-to-income and loan-to-value ratios as well as make sure no additional liens will be added against your property.
5. Obtaining a Payoff Letter
Purchase of a house can be one of the largest financial transactions a person will undertake, so having legal advice to ensure you understand both the process and any rights and responsibilities is invaluable.
Your attorney will work with you to provide all the documents requested by lenders for mortgage applications, and work closely with title companies and attorneys involved in closings to ensure all funds are transferred accurately.
Payoff letters provide a detailed account of any outstanding balance on an outstanding loan loan balance owed, such as principal, interest and fees that must be paid in order to release property from collateral and discharge any liens on it. They’re an essential document both new lenders and buyers use when closing property deals quickly.
Your attorney will review and negotiate additional provisions such as a mortgage contingency clause to protect yourself in case your loan application is denied and recover your earnest money as part of a termination transaction.
6. Obtaining a Survey Map
Survey maps are an essential element in purchasing property, providing accurate depictions of its boundaries, easements on the land, possible encroachments onto neighboring properties and evidence that your purchase complies with zoning regulations.
Surveying is the practice of conducting an in-depth examination and measurement of property to create an specialized map. A survey creates an image that depicts its boundaries as well as buildings, physical features and other items found within its boundaries. A survey also helps ensure compliance with local zoning regulations and any registration processes related to land registration.
Homebuyers need to be certain they know where the boundary lines of their property lie so as to avoid problems like building fences across neighboring yards or expanding too near to the curb. A survey will protect both rights and obligations as well as provide essential data for title insurance coverage; one should obtain one during their initial meeting with real estate professionals.
7. Obtaining a Property Condition Disclosure Statement
Home buyers often want to know everything possible about the house they’re purchasing, including any hidden issues. Home listings and walkthroughs can provide insight, while many states mandate sellers provide a Property Condition Disclosure Statement (PCDS).
The Property Disclosure and Condition Survey (PDCS) contains 48 questions which the seller must respond to based on their knowledge of the property, covering areas like environmental, structural, mechanical and statutory requirements like lead-based paint disclosure. If they fail to respond or complete one or more questions correctly on time, buyers may be eligible for their earnest money back.
However, the PCDS makes clear that it should not serve as a replacement for inspections or investigations of property or public records and requires buyers to conduct their own due diligence before purchasing. Furthermore, this form does not constitute any warranties provided by sellers. If you are thinking about selling your home and using PCDS as a tool to do it, it would be prudent to consult an experienced real estate attorney first.
8. Obtaining Automatic Warranties
Once the contract is in place, your attorney will start preparing for closing by ordering a title report and assessing whether there are any outstanding mortgage loans or other liens against the purchaser that need to be addressed prior to closing. They’ll also calculate any outstanding amounts.
Closing involves many individuals, such as the seller, buyer, their attorneys, mortgage lender and escrow agent. Your attorney will explain all of the documents and processes surrounding closing day as well as attend with you so they can ensure all numbers match up accurately at closing table.
Purchase of a home comes with certain legal warranties unless specifically excluded in your contract, and your lawyer can help explain them and their effects when buying a house. They could also protect against fraud during this process: for instance, someone posing as the seller could send all necessary paperwork with cashier’s checks for several thousand more than what is agreed to in your contract.
