Legal Issues When Buying a Home—Part 2

Once the offer has been accepted by the seller (or the contract has been signed, depending on your state), you will want to conduct an inspection of the property to determine the condition of the property, including electrical, plumbing, heating/cooling systems, and more. 

Although a seller is legally required to disclose any known, material defects with the property to you, and failure to do so may be grounds for a lawsuit later, each state has its own definition of what constitutes a “material defect” in the property requiring disclosure. In addition, in many cases, the burden will be on you as the buyer to prove that the seller actually knew about the problem, which may be difficult to do. As a result, it is important to conduct an independent inspection of the property, even with new construction, to avoid this problem before the closing.

The inspection should include both an inspection of the building and the property itself to identify defects that may not be easily seen by the naked eye, and a pest inspection to reveal the existence of termites or other pests in the home. A thorough inspection should include the home’s roof, foundation, drainage, basement (i.e. water intrusion issues), heating, cooling, electrical, plumbing and other systems, and should identify any other problems with the property and repairs that need to be made. 

The inspection report may lead to further negotiation with the seller to lower the purchase price or to require the seller to make repairs. Alternatively, problems identified during the inspection may allow you to legally walk away from the purchase. 

You should hire a title company to conduct a title search to determine whether there are any liens or restrictions on the property, and whether the seller is legally entitled to sell all rights to the property. If a third party has rights to the property, it may interfere with your ability to obtain clear title to the property. This may occur where there is a lien or judgment against the property, or where the seller is not the sole owner of the property. 

Other issues that you may be unaware of without a title search and survey of the property include: utility easements or setbacks that may interfere with your right to make improvements to the property, a property line located other than where the placement of a fence may indicate, or the absence of required certificates of occupancy for improvements such as a deck, finished basement or additional buildings on the property. 

If the title search reveals problems and your offer or contract contains a contingency clause that requires the seller to transfer clear title to the property, you can either walk away from the deal or require the seller to address the issues as a condition to closing.

You should also consider purchasing a title insurance policy to protect you if someone challenges your title to the property after you close. Many ties, your lender will require you to purchase title insurance as a condition of obtaining the mortgage.

Once the contract has been signed, inspections and title searches have been performed, you and the seller have agreed on how you will resolve any issues that have surfaced as a result, and you have received your mortgage commitment from your lender, it is time for the closing. 

The closing is where the title to the property is exchanged, your mortgage documents are signed, the keys are turned over to you, and the seller receives the purchase price for the home. The time, date, and place of the closing will be arranged in advance between your attorney, the seller’s attorney and the bank, and you will be advised how much money you need to bring to the closing to complete the purchase. Typically, just before the closing, you will be given a detailed statement and summary of the financials for the transaction—usually in the form of “HUD Statement.” Occasionally, there are last minute disputes or negotiations at the closing about the sale, which can seem alarming but are not unusual. After the closing, your attorney will prepare a closing statement showing how the funds were disbursed at closing, and the deed of transfer will be filed, establishing your ownership of the property. 

If you are buying a house, find a real estate lawyer to help guide you through the process by quickly posting a short summary of your legal needs on www.legalserviceslink.com, and let the perfect attorney come to you!