Basics of Buying a Home
Buying or selling a home can seem complicated, even scary, considering the amount of money involved. But if you view it one step at a time, it becomes simpler. While real estate laws differ from state to state, there are several common steps related to buying a home anywhere, and all of them involve the law.
Under the law, who does the buyer's real estate agent work for?
Oddly enough, for the seller—unless you make arrangements to the contrary. A buyer's real estate agent can help you choose a home. But the typical real estate agent does not work for you, but for the seller. That's because the agent's fee is a percentage of the selling price of the home, and the agent has a legal duty to the seller, not the buyer. The higher the price, the more money he or she earns. Therefore, don't expect the agent to necessarily represent your interests. If you want an agent to work only on your behalf, arrange to pay for a buyer's agent directly.
Whether you work with an agent or not, it's best to talk to an attorney before you sign any documents, starting with your agreement with your agent if you decide to go that route. The terms of a broker agreement are negotiable, and you'll want to be sure to protect your rights.
What is an offer?
Once you find a home you want to buy, you make an offer. The offer is a detailed document that becomes the contract for the sale if it is accepted by the owner. Therefore, it is important that it covers all the essential details of the sale.
An offer should include:
- legal description of the property
- purchase price and amount of down payment
- closing and possession dates
- a statement that you expect clear title to the property
- a mortgage contingency clause that cancels the contract if you can't get a mortgage
- a description of items included in the sale such as appliances, curtains and fixtures
Include an inspection clause that cancels the contract if the building fails to pass a professional inspection covering:
- radon gas
- structural soundness
- electrical systems
If your attorney can't review the offer before you present it, include an "attorney approval clause." That allows your lawyer to be sure it is in your interest before it becomes final.
How do I get a mortgage?
- Once the offer has been accepted, you'll apply for financing. Typically, the buyer pays 10 or 20 percent of the purchase price in cash and takes a loan for the balance.
- Banks and other institutions offer a wide range of mortgages with a variety of interest rates and terms. It pays to shop around and compare. You will probably be charged a "loan application fee" of a few hundred dollars.
- Some people "pre-qualify" for a mortgage before they make an offer. That speeds up the process.
What is the title search?
Prior to the closing, your lender will arrange for a title insurance company to look for any "title exceptions" against the property, which may include:
- easements that give utility companies the right to enter the property to service gas, electric or phone lines
- right of access by neighbors
- prohibitions against exterior remodeling
- any liens or claims of ownership
Your attorney should review the report of the title insurance company to make sure that there are no complications. In most cases, you'll want to obtain title insurance.
What Happens at the closing?
This is the final stage of the purchase. A settlement statement covers all aspects of the sale.
You and your attorney will examine the seller's documents:
- bill of sale
- sworn statement that there are no liens against the property
You will sign the documents necessary to obtain your mortgage.
You and your attorney will also review closing costs:
- survey fees
- title charges
- fees for recording documents with the proper government bodies
- state and local taxes on property transfers
- real estate taxes
The buyer, seller and their attorneys usually attend the closing, which often takes place at the office of the title company. Your loan company will set up the date and location of the closing. Plan to spend several hours there. In most cases, you can move in that day.