|
Buying and Selling a
Home |
 |
What should I watch for
when buying a home?
The purchase of a home is, to most
people, the biggest single investment of their lives. The savings of
years of hard work are invested in this one venture. It is, therefore,
extremely important for a prospective purchaser to use the greatest
caution in selecting a home that will not only provide comfort, but will
cause as little worry as possible, both while it is lived in and when it
is time to sell.
A house may seem to be ideal in
appearance and cost, but it may contain hidden defects that will later
detract from its value. This may be true not only of the appearance of
the house and its construction, but also in regard to the title to the
land on which it is located. For example, there may be a right-of-way
over the land that permits someone to drive across the property, or
zoning regulations may permit the construction of a factory or
commercial building on an adjacent lot, or there may be private
restrictions affecting the use or ownership of the property or impose
monetary assessments. It is possible that a title problem may prevent a
later sale of the property and require a large sum of money to remove.
These are just a few of the difficulties that you may encounter, but
they show the importance of checking every detail before you buy a home. |
|
For
your protection, you should ask the advice of an attorney. An attorney's
training and experience will help you make the purchase and avoid future
troubles.
Here are some things to keep in mind when contracting to buy a
home:
What is a Purchase Agreement?
A Purchase Agreement is a document that is just
as important as the deed itself. It should contain an accurate
description of the property and all of the terms of the sale, including
the price, the terms of payment, the type of deed to be given, the date
of possession, provisions for the furnishing of title evidence,
proration of real estate taxes and casualty losses, and matters on which
the buyer may want to make the purchase contingent, such as financing,
inspections, the sale of an existing residence, etc. In many cases,
provisions for items of personal property or fixtures may be needed.
The important thing to remember is that you
should consult your attorney before you sign the contract. All too
often, a prospective buyer will sign a contract to purchase a home and
then call an attorney for advice. When this happens, the attorney can
only tell the purchaser what rights are covered by the contract; the
purchaser may have signed away many rights. Had the purchaser consulted
an attorney before signing, the attorney could have specified what
rights should be included in the contract. When contracting to purchase
a home to be constructed or which is in the process of being constructed
but is not yet completed, many other important considerations are
involved that should be discussed with an attorney.
Is a Purchase Agreement enforceable?
To be enforceable, a contract to purchase a
home must be in writing and must be signed by both the seller and buyer.
Therefore, you should be sure that the contract you sign is properly
binding on the seller.
What is Indiana's Residential Disclosure Law?
Under Indiana's Residential Disclosure Law, the
seller of a home, except in limited circumstances, is required to
disclose to prospective buyers certain information concerning the
condition of the home. The information must be disclosed on a form
prescribed by Indiana Statute. This form is known as the Residential
Property Disclosure Form. The form must be executed by the seller, and
the buyer is to acknowledge receipt of the form. The seller's disclosure
contained in the form is limited and is not a substitute for a
professional inspection of the home.
The buyer should require the seller to provide
the form prior to the buyer entering into a Purchase Agreement. However,
the form may be given after the agreement is signed by the buyer. If the
form is given after the buyer has entered into the contract or if the
form is not given to the buyer, the buyer, without incurring any
liability to the seller, has the right to rescind the agreement, but the
rescission right must be exercised before closing and within certain
limited time periods. The Residential Disclosure Law establishes other
rights, obligations and limitations for both the seller and buyer. To
fully understand these rights, obligations and limitations, you should
consult an attorney.
What kind of title should I demand?
When purchasing a home, you should demand a
"marketable" title, one which is free of all claims by third
parties that would be objectionable to a prospective buyer. Your
attorney can advise you whether you can obtain such a title.
Should the title be examined or reviewed by an attorney?
Yes. Prior to closing, it is essential that
adequate title evidence be provided to the buyer and reviewed by an
attorney. The type of title evidence and who pays for it are matters of
contract and community custom. In most communities, an Owner's Title
Insurance Commitment and Policy will be provided. A mortgage lender will
probably require a lender's commitment and policy. Obtaining an owner's
policy and a lender's policy at the same time should save on the cost.
Title insurance is the best protection for a buyer. In a few
communities, abstracts of title or an attorney's title report may be
acceptable title evidence. Those require an examination of various
public records and a review of the documents searched. Because the
review involves technical knowledge of the law, it should only be done
by an attorney.
Should you employ the attorney who examines your title?
To be sure that a title will be examined with
your best interests in mind, hire your own attorney. Mortgage lenders
may have their own agents examine the title to property on which they
intend to lend money. Buyers sometimes assume that this examination
frees them from the need for an independent title examination. It does
not! A mortgage lender's interest in the property differs from the
purchaser's interest. The lender demands a margin of value above the
amount of the loan. If foreclosure becomes necessary, some expense in
clearing the title would not harm the lender. The mortgage lender knows
that most mortgages are paid and that small title defects in those cases
will not cost any money; therefore, the lender may be satisfied with a
title that still contains some possibility of trouble for the buyer. The
buyer should have an independent examination to warn of any possible
further cost involved in clearing the title so that it will not cause
trouble while the buyer owns the land, require expense at the time of
sale, or cause expense and trouble to heirs.
Is a warranty deed a substitute for a title examination?
No. In a warranty deed, the seller warrants the
title against the claims of all other persons. If the warranty is
broken, it may have to be enforced by a lawsuit. There is always the
possibility that the seller may die or go bankrupt before a defect in
the title is discovered. Should this happen, the buyer may not receive
any benefit from the warranty or from a lawsuit. Although a warranty
deed is desirable, and the buyer should insist on this type of
protection, the deed alone is not enough. To be safe, the buyer should
insist on proper title evidence and have the title reviewed and approved
by an attorney.
What is title insurance?
If a title insurance policy is provided, it is
a contract between you and an insurance company. Under the terms of the
policy, the company ensures that you hold a marketable title to the real
estate described in the policy. Most policies cover you against all
defects of title whether in or outside the record; however, exceptions
to coverage may be contained in the policy, and you and your attorney
should check carefully the meaning of these exceptions. The policy
provides the maximum amount that the company will pay. This amount, as
well as the amount of the premium, is usually based on the purchase
price of the real estate.
What does closing involve?
Extreme care should be taken in closing a real
estate sale. At the closing session, a final check should be made of all
papers to see that the intent of the parties has been carried out. For
protection, you should consult with your attorney to determine if you
need legal representation at the closing.
12 Steps to Closing
1.
Sign a
contract and put down and small deposit (usually $500.00 to
$1,000.00). The deposit may be refundable if the contract
doesn’t pass attorney review, but it may be lost if the
contract is thereafter breached.
2. Contact
an attorney IMMEDIATELY. You only have 3 business days for
an attorney to review the contract.
3. Apply
for a mortgage, once a contract that is acceptable to both
parties is reached.
4. Your
mortgage lender should sit down with you and help you complete
the application. Plan on spending at least 2 hours with
him/her. Remember to bring your last 2 paychecks, last 2
years tax returns, last bank statements, and your
checkbook-you’ll probably need to give him/her an application
fee.
5. Contact
a GOOD home inspector and get an organized detailed report (not
a rambling sprawl of handwriting). *Be aware of Contract
Deadlines*
6. Discuss
this report IMMEDIATELY with your attorney. Decide if the
inspection is acceptable, or if other action should be taken.
7. Get
follow-up information to your mortgage company, such as:
negative credit item explanations, proof of savings account
deposits, gift letters.
8. Call a
good moving company. Give them the ball-park moving
date. Have them come to your house and give you a good
faith estimate.
9. Start
packing. Oh, Joy!! Actually, you can organize this feat (e.g.
color coding the boxes, throwing away lots of old, unwanted
items) to make the unpacking process smoother.
10. Your
mortgage company sends an appraiser to your new home.
11. You
receive your mortgage commitment letter. Get a copy to
your attorney IMMEDIATELY, and review it with him/her.
After discussing it with your attorney and signing it, your
attorney usually notifies the sellers of this event.
12. Your
attorney confirms the closing date. It will, of course, depend
on whether you must sell your existing house first, and if the
seller has established certain time restraints, among other
considerations. |
|
|
Has
the seller given you, either prior to or after your execution of
the Purchase Agreement, the Residential Property Disclosure Form
prescribed by Indiana Statute?