Buying a new home is an exciting life event, but it can also be confusing. There are a number of legal issues that must be addressed throughout the home buying process that complicate things, though those stipulations are mostly established to protect both the buyer and the seller. By familiarizing yourself with the process, you’ll be better prepared, making it a more positive experience.
Get Pre-Approved
It’s much easier to buy a home, if you first get pre-approved for a mortgage. Sellers and real estate agents know that pre-approval means you’ve already been approved for a loan, so they’re much more likely to accept your offer. The process is simple and usually speedy. You’ll provide the lender with details, such as your income and personal information, which will be used to run a credit report. Once the bank makes a decision, you’ll receive an official letter from the bank specifying the amount for which you have been pre-approved.
Be Specific in the Purchase Agreement
The law doesn’t interpret documents, but takes them at face value. In terms of the purchase agreement, this means that the phrase “conditional on financing” will mean any financing offer from the lender. So, when the lender offers a 6% interest rate instead of the expected 3% rate, the buyer typically can’t opt out of the deal. Instead, ensure that the purchase agreement specifies that the offer is only good under the condition that you, as the buyer, gets the terms you are expecting.
Watch for Loopholes in Buying New Constructions
Specifically, this refers to special offers made by developers. Often, they will offer something like two years worth of free maintenance, but it’s important to read the fine print on such a deal. What the developer really means in most cases is that they will offer a rebate against the purchase price. this rebate will be equivalent to the amount that the developer believes maintenance fees will cost over the next two years. If the property develops a number of problems, this could end up costing the buyer more out of pocket.
Request a Cap on Closing Costs
Suppose you agreed on a price of $300,000 for your new home. Once the closing costs are finalized and calculated, you could be paying significantly more. Instead, request a cap on closing costs to keep your final purchase price from exceeding your budget. Warranty protections, education levies, water meter and hydro installation, and development fees are just some of the hidden costs involved in buying a home.
Make Sure the Sales Contract Includes a Provision for a Home Inspection
Typically, this is considered a standard step in the selling and buying of a property, but you should make sure the contract of sale specifies a home inspection. It should state that the sale is contingent upon the results of the home inspection. The inspector and buyer will tour the home and examine it for problems. If the inspector finds any issues, the buyer might be compelled to complete repairs, before the sale can be finalized.
A Contingent Sale Can Affect the Purchase
If you already own a home and want to buy a new one, you’ll likely be seeking a contingent sale. This means the purchase of your new home is contingent upon your being able to sell the home you currently own. This is common, because it saves homeowners from having to sell their homes first and from having to find a temporary place to live, while they look for their next home. While this will protect you as the buyer, sellers tend to view this kind of sale as a last resort. They would much rather sell to a first time buyer, someone who can go through with the sale unconditionally.
Make Sure You Buy Your Own Title Insurance Policy
The lender will require you to pay for title insurance on its behalf, but that only protects the bank’s interests. It’s advisable to pay for a title insurance policy for yourself, as well. This will protect you against any property claims that may arise, after the sale has been finalized. While it is rare, an inheritance claim, unpaid taxes, or an unresolved lien can result in claims against your property. Title insurance can protect you against such eventualities to ensure you won’t lose the money you’ve already invested into the property.
Do You Really Need an Attorney?
If you’re thinking this seems pretty complex, you’re beginning to realize why it’s important to have an experienced real estate lawyer working for you. While this isn’t a requirement in buying a home, an attorney can protect you in a number of ways. Primarily, as your legal advocate, an attorney can ensure all of your documents have been completed with all accurate information. Mistakes in filling out forms or supplying information may lead to a lawsuit against you, even though you didn’t intentionally withhold information.
Additionally, your attorney can help in successfully fulfilling your obligations at every phase of the sale and to ensure you’re protected as much as possible. For instance, a misfiled deed can result in additional taxes being charged to you, to the buyer, or to both parties. The attorney will also perform his own research into the title history of the property to provide greater assurances that the property is free of previous claims. While an attorney can’t make any guarantees, this type of legal advocate can use his experience and knowledge to reduce the risks of a property purchase resulting in legal actions against you.
From making an offer to finalizing the sale, an experienced real estate lawyer has valuable skills and input to offer at every phase. He can make sure your offer is fair in relation to the property and that you won’t be unwittingly buying into a money pit, while also taking care of the legal documents to make sure your rights are safeguarded. For these reasons, the smartest decision you can make in buying a home is to hire an attorney to assist you.
Sources:
https://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/home-buying/when-it-comes-to-home-buying-what-should-your-real-estate-lawyer-do/article11892290/
https://www.investopedia.com/articles/mortgages-real-estate/08/real-estate-attorney.asp
