Buying a Home
Buying a home may not only be the most significant and largest purchase you will make, it also involves the law of real property, which is unique and has special problems. A lawyer is trained to deal with these problems and often has the most experience to deal with them. This applies to people selling a home or buying a home.
In the typical home purchase transaction the seller enters into a brokerage contract with a real estate agent, which is usually in writing. When the broker finds a potential buyer, negotiations are conducted through the broker, most often acting as an intermediary. Once an informal agreement is reached, buyer and seller enter into a formal written agreement. The buyer than obtains a commitment for financing. Title is searched to satisfy the lender and the buyer. And finally, the property is transferred from the seller to the buyer and the seller receives the purchase price bargained for in the contract. Seems simple and uncomplicated but, without a lawyer, the consequences may be more disastrous than purchasing a car that turns out to be a lemon, or a stock investment that was unwise.
Dealing with tax consequences and other issues
The buyer and seller each may have to consult with a lawyer to answer important questions, such as the tax consequences of the purchase or sale. To a seller, the tax consequences may be of critical importance. For example, what are the income tax consequences of a sale, particularly if the seller has a large profit . . . will the seller be able to take advantage of the tax provisions allowing for exclusion of capital gains in certain circumstances?
Aside from the tax consequences, the buyer and seller may have questions about the date set for closing, the date of occupancy, the condition of the property, arranging for an inspection and what personal property is included in the sale. These are some of the many questions that may need to be considered during the negotiation stage in order to avoid disputes when a written contract is prepared.
Dealing with the contract of sale
The formal written contract for the sale and purchase of a home is the single most important piece of paper in the transaction. Its importance cannot be overestimated. Although printed forms are useful, a lawyer is once again necessary to explain the form and make changes and additions for a particular transaction to reflect the understanding of the buyer and the seller. There are many issues that may need to be addressed in the written contract. For example, how should title be taken: individually, as tenants in common, joint tenants or tenants by the entirety. What happens if someone dies before title is transferred? The answers to these questions require the training and knowledge of a lawyer.
There are numerous other legal questions that must be addressed in the contract, including the following: If the property has been altered or there has been an addition to the property, was it done lawfully or may what is planned for the property by the buyer be done lawfully? What happens if a buyer has an engineer or architect inspect the property who finds termites, asbestos, radon or lead based paint? What if the property is proximate to a hazardous waste dump site? What are the legal consequences if the closing does not take place and what happens to the down payment? Will the down payment be held in escrow by a lawyer in accordance with appropriately worded escrow instructions? How is payment to be made? Is the closing appropriately conditions upon the buyer obtaining financing? These are only a few of the many questions that arise with respect to a contract.
Searching and insuring title
After the contract is signed it is necessary to establish the state of the seller's title to the property to the satisfaction of the buyer as spelled out in the contract. Generally, a title search is ordered from an acceptable abstract or title insurance company. However, in some areas of New York State, title insurance is not obtained. In such cases an attorney is essential to review the status of title and render an opinion of title in lieu of a title policy. Assuming you are in an area where title insurance is customary, who will review the title search and explain the title exceptions as to what is not insured? Is the legal description correct? Are there problems with adjoining owners or prior owners? What is the effect of easements and agreements or restrictions imposed by a prior owner? Can I build a swimming pool or tennis court? Can I conduct a business in a spare room? Will there be any legal restrictions that will impair my ability to sell the property? Can the utility company build a high tension transmitter in the back yard? It should be clear that the guidance and advice of a lawyer can avoid a very costly mistake.
Checking out the zoning
The title search does not tell the buyer or seller anything about existing and prospective zoning. Does zoning prohibit a two family home? Does the deck you are planning violate zoning ordinances? There are invariably some questions that will require you to call upon a lawyer for the most direct and efficient response to your inquiry.
Reviewing the survey
Finally, there is the necessity of having a survey map of the property, which is a necessary adjunct to a title search. A lawyer is trained to review this survey, which may give rise to future problems. For example, your neighbors' fence or driveway may encroach upon your property or vice versa. A garage may have been built on a municipal street. Should you accept title? Will a lender give you a mortgage with these encroachments?
Conducting the closing
The closing is the event which is the "moment of truth" of the purchase and sale transaction. The deed and other closing papers must be prepared. Title passes from seller to buyer who pays the balance of the purchase price. Frequently, this balance is paid in part from the proceeds of a mortgage loan. A closing statement should be prepared prior to the closing indicating the debits and credits to buyer and seller. An attorney is helpful in explaining the nature and amount of closing costs. Final documents including the deed and mortgage instruments are signed. An attorney is necessary to assure that these documents are appropriately executed and explained to the various parties.
The closing process can be confusing and complex to the buyer and seller. Those present at the closing often include the buyer and seller, their respective attorneys, the title closer (representative of the title company), attorney for lending institution and real estate broker. Documents need to be recorded; various transfer taxes need to be paid, and provisions for insurance and other incidents of ownership need to be concluded. There may also be last minute disputes about delivering possession and personal property or the adjustment of various costs, such as fuel and taxes. Here a lawyer's advice and guidance is essential.
A lawyer's advice and guidance is essential from the time you decide to sell or to buy a home until the actual closing. That's why you need a lawyer.
Permission to reprint granted. Copyright 2001, New York State Bar Association.
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