When buying a house, there are a number of key legal issues that must be considered. Some of the issues a buyer should determine are:

  • Whether the purchase is contingent on matters such as the buyer obtaining acceptable financing and/or selling a home that the buyer currently owns;
  • What items are included in the sale of the home, such as fixtures;
  • What inspections are required and who pays for them;
  • Who pays for the title exam, title abstract, and title insurance;
  • Whether utilities have been installed and paid for;
  • Whether there are any easements or restrictions on the use of the property;
  • Whether a surveyor should be used and who pays for the surveyor’s services;
  • If a loan from the seller is involved, who will pay the closing costs on the loan;
  • Who are the parties that must sign the purchase contract;
  • Whether a broker is involved and who pays the broker’s fee;
  • What are the remedies if the buyer or seller defaults;
  • Who pays taxes; and
  • Who pays any special assessments.

Purchase Offer

There are certain issues that should be addressed within the purchase offer. Some of these are:

  • Disclosure of the full purchase price;
  • Amount of down payment or deposit;
  • Who the escrow agent is for the deposit;
  • The date the sale of the property will be “closed” or finalized;
  • The property’s legal description;
  • A mortgage contingency provision, meaning that the buyer will be released from the contract if he is unable to obtain a mortgage; and
  • A “liquidated damages clause” which imposes monetary penalties upon the seller for every day the buyer is unable to move in past a certain date.

Financing Options

There are different ways in which to finance the purchase of a house. There are mortgages with varying rates, whether fixed or adjustable, and repayment periods ranging from 15 to 30 years. When a person cannot get a mortgage from a lender for the full amount of the purchase price, sometimes a seller will finance part of the payment himself, or “take back a mortgage” on the house. A buyer may also buy a home on a “land contract” where the seller holds the title until the entire payment price is paid over time.

Title Examination and Insurance

A title examination reveals the previous ownership details of the property. A title examiner, usually an attorney, can determine whether any action should be taken to “clear title” to the property. Title insurance insures the buyer of the property against any defects to title and will cover the costs to have these defects cleared if they arise in the future.

Types of Deeds

There are several types of deeds which represent the way in which property is transferred. Most property is transferred by general warranty deed which guarantees the buyer is receiving good title, clear of claims. The seller in this type of deed guarantees: good title, freedom from encumbrances (other than those disclosed), right of the buyer’s possession against all others. Such a guarantee extends back to the property’s origins.

A special warranty deed guarantees only against claims arising during the seller’s ownership. A quit claim deed makes no guarantees against claims against the title, whenever arising.

Conclusion

There are many issues to be considered when purchasing a home. One must consider the details to be placed in the purchase offer and determine whether the buyer or seller will cover certain costs associated with the purchase.