The process of buying or selling a house is a major financial and legal transaction. When a person decides to buy a house, it is probably financially the most important decision that he/she will make. Selling a home also comes with its set of challenges, ranging from listing the property to finding a buyer. Both these transactions can be overwhelming given the financial and legal considerations. But one has to make sure that they do not violate any provision of law. There are some important legal requirements that a homebuyer or a seller must keep in mind.
Buying a house- Legal requirements
When buying a home, keep the following points in mind:
- Real estate agent: If you decide to take the services of a real estate agent to help you buy a home, make sure to consult a lawyer and draw up a broker agreement. A real estate agent gets a commission out of the selling price of the house. A higher price would be more beneficial for the agent. He is legally answerable to the seller. So there is a chance that he might not necessarily act in your best interest as far as the price of the property is concerned. Hence, it is important to list down all the terms, including the agent’s obligations in an agreement. It will protect your rights and interests.
- Offer: After finding a home of your choice, you have to make an offer. It is an important document as once it is accepted by the seller, it becomes the purchase agreement for sale. It should include details such as legal description of the property, the sale price and downpayment, date of possession and inspection of the property by professionals. To ensure that it covers all the points, it is advisable to consult a lawyer.
- Home inspection: You can ask in your offer for a home inspection before anything is finalized. This ensures that you know the exact condition of the house and whether anything in the house needs repairs. It is carried out by licensed inspectors who prepare a report at the end of the inspection.
- Mortgage: You can get pre-approved mortgage before making an offer. It does not guarantee a loan but states that you are eligible for one. It speeds up the process when you apply for a loan. You can also apply for a loan after your offer is accepted. The lender will check your credit score and inspect the property. You will have to pay a certain percentage of the sale price in cash and cover the rest with the loan amount.
- Inspection of title: Before lending you the money, the lender will require you to carry out a title search on the property with the help of a title company. It examines if there are any claims on the house that will prevent you from legally owning it. For example, there may be a claim by a legal heir which the seller has not told you about.
The last stage is the closing stage. Here, all the parties are present- buyer, seller, a representative of the lender and title company and real estate agent. When finalizing the purchase, you will be required to sign a settlement statement. It covers all areas of the transaction. You must inspect the seller’s documents such as the sale deed and his sworn statements that there is no lien on the property. You are also required to sign the mortgage documents. After signing the required documents, the title in the property passes to the buyer. The documents have to be filed with the authorities in the county to conclude the transaction.
Legal requirements for selling a house
As a seller, one must pay attention to the following points:
- Before starting the process, make sure you have the necessary legal documents in place such as a survey of your property and the most recent real estate tax bill. If your house has a mortgage, you will have to show the mortgage deed as well.
- Real estate agent: You may choose to hire a licensed real estate agent to sell your house by entering into a listing agreement. He will charge a commission on the selling price of the house as his fees. While it is not mandatory to have a real estate agent, they do have experience in the real estate market and can help ready the property to show to potential buyers and prepare the required paperwork. They must comply with the local state laws while keeping your best interests at the centre of the transaction.
- Listing the house: The real estate agent will examine the property- such as its size, location, proximity to amenities- and then calculate a price. After this, you can list the property for sale.
- Disclosures: Laws of most states mandate the seller to disclose in writing certain information regarding the property that may affect its value. This includes any physical, legal or other defect in the property such as cracks in foundation, basement prone to flooding, presence of lead-based paint (for houses built before 1978) or legal dispute with neighbors. For example, in the state of California, sellers must give buyers a disclosure form with all the disclosures about the state of the property. You can get a house inspection conducted to see if anything needs to be repaired. It will help in preparing the disclosure list. You can check with your state real estate department for disclosures to be made in the state.
- Receiving/accepting offers: An offer from a buyer is a legal document. It takes the form of a purchase agreement and becomes a binding contract if you sign it. Therefore, it is important to understand all the terms of the offer. It contains terms such as purchase price, downpayment, conditions relating to buyer’s mortgage and home inspection and closing. Consult your lawyer before taking a final call. You may present a counter-offer with a few changes in the terms. However, if you sign the buyer’s offer as it is, it will become a contract.
- Seller’s obligations: After accepting the offer, the escrow period begins, which is when the buyer and seller choose an escrow or title agency to handle the closing and prepare necessary documentation. During this time, if any issue arises, you (the seller) will be obligated to respond to it and allow an inspection of the home if required by the agency.
- Closing: It take place on the date mentioned in the offer. Here, you will review and sign all the documents. The title in the property will pass to the buyer and you will get your payment after making necessary deductions such as fees of the real estate agent. You will have to provide the buyer with keys and security codes and any other item that they may require for moving into the home.
Real estate laws differ from state to state. It is important to comply with not only the state law but also local ordinances. The transaction, being a contract, must be according to principles of contract law. Federal law, such as the Fair Housing Act, must also be complied with. It prevents discrimination based on color, sex, race, religion or national origin. The buyer must ensure that the purchase agreement complies with all real estate laws. Similarly, the seller also has to see that he meets all the requirements applicable to him. Any transaction found to violate any applicable law will be void.
Roxana, a writer by calling and an academic has created scintillating and remarkable content for dozens of websites in the purview of the Business Sector. She has a fair understanding of the inner workings of several business establishments, making her the foremost expert in this field.