Your house is generally your single greatest assets and financial investment that you will make. Any mistake, when purchasing a house could result in a lifetime of problems, financially, emotionally and physically. In order to avoid these problems, complexities and technicalities involved you should hire an attorney to represent your interest.
When to Hire An Attorney
You should hire an attorney, called the buyer’s attorney, as soon as you begin to look at houses or when you hire a Real Estate Broker to show you houses.
A Buyer’s attorney protects your interest. The bank’s attorney, usually only gets involved just prior to closing and has an interest in protecting the lender’s (bank’s) interest rather than your interest.
Offer to Purchase
An offer to purchase contract is a binding contract on both the seller and buyer. It is the first document to secure the property you wish to purchase. The real estate broker will generally assist in completing the contract but cannot given you legal advise as to the complete terms that you are signing and therefore bound to. An attorney will explain each term of the contract and the ramification of each paragraph.
Purchase and Sales Agreement
This is a more thorough contract, and equally as binding as the offer to purchase. The Purchase and Sales Agreement, otherwise known as a P&S, must contain all the same terms of the offer to Purchase contract, but also includes many other provisions not included in the Offer to Purchase Contract.
It is extremely important to have your attorney review the P&S as it further describes the rights and duties of both the buyer and the seller. The rights and duties may be altered or further defined in the P&S. It is the seller’s attorney responsibility to draft the P&S, which of course, generally protects the seller’s interest. Your attorney should propose and make changes to the P&S to protect your interest. In addition, the attorney will draft an addendum (additional provisions) that specifically protects the buyer.
There is no standard P&S and while most attorneys have the same general language the documents wording varies from one attorney to another. Each document must be thoroughly read by the attorney to point out, and/or correct the phases that may be disadvantageous to their client.
General Role of a Buyer’s Attorney
- Confer with client, including issues such as how to take title, information on the type of property to be purchased (single family, duplex, multi-family), and family issues
- Review Offer to purchase agreement
- Draft addendum to P&S, make changes and negotiate the terms of the P&S agreement, including who retains the deposit money
- Advise concerning financing and tailoring of the purchase and sales terms to lender’s requirements
- Review various inspections, including radon, home inspection, lead paint, UFFI, pest inspection, water inspection and Title V (Septic System) results
- Review title report and make sure that title is marketable (clear title that allows the property to be transferred without any outstanding liens) for closing
- Attend closing and review papers that buyer is signing with the Buyer
- Set up escrow and special arrangements to correct Title, complete construction or insure possession
- Arrange Title Insurance protection for Buyer against losses due to title defect, if the Buyer opts for such coverage
- Transfer of security deposits and notices to tenants
Examination of Title
After the P&S has been signed and financing arranged the Buyer’s Attorney will order and/or examine the title of the property you seek to purchase, going back at least fifty (50) years, and up to one hundred (100) years.
Some of the problems that affect title are as follows:
- Mechanics Lien
- Debts of Decedents
- Estate Taxes
- Restriction on use v. Easement
- Estate and Federal Law
- Attachments and Judgments
- Rights of Others to use the premises (Easements)
The Closing and Settlement Costs
The closing must follow the exact provisions as the terms set forth in the P&S agreement, which is why the attorneys’ prior involvement is so important. An attorney reviews and verifies the accuracy of the any adjustments, such as taxes, oil, rents, etc. The Buyer’s Attorney verifies all figures on the HUD Settlement Statement and questions any inaccuracies. Both the Buyer and Seller sign documents at the time of closing.
Closing Cost Expenses
Include: Attorney’s Fees (for Buyer’s attorney and Bank’s Attorney); Title Examination; Recording fees for deed, mortgage and municipal lien certificates; cost to prepare mortgage documents; bank application and loan origination fees; points, finance charges, escrow charges, interest on mortgage; title insurance, appraisal fees, plot plan and survey.
The mortgage company will require that the Buyer obtain lender’s title insurance. The lender will require the Buyer to pay the cost for such coverage. The Buyer, at his option, may purchase Buyer’s title insurance. The Buyer’s title insurance is a one-time premium, which will protect your equity interest in your new home against any title related claims that may arise during the period of time in which you own your home.
This information is intended only to be an introductory guideline because each case is unique and presents different issues. If you have questions please feel free to contact our office.