Buying the House with a White Picket Fence, Dream or Nightmare?
Buying a new home can be an exciting experience. But it can also be very stressful because it is a “life event” (like getting married or having a baby) and it is more complicated than it appears, and, when so much money is at stake, there isn’t a lot of room for error. So, you really need to have a clear idea of the steps involved in order to avoid any critical errors.
At the outset, however, it is comforting to know that based on statistics, almost every residential sale closes once the buyer’s mortgage loan is approved. And, equally comforting is the fact that almost every closing that occurs, is finalized despite the occurrence of a least one or more last-minute crisis. Indeed, like birthing a baby, the outcome is wonderful despite all the noise and discomfort that is predictably part of the process.
In general, the home buying process has three different stages:
- The Negotiation Stage;
- The Mortgage Loan Approval Stage; and
- The Deal Closing Stage.
This particular post will concentrate on the negotiating phase, which has three fundamental parts:
- Negotiating contract terms;
- Performing the inspection; and
- Attorney approval.
Negotiating Contract Terms
The Negotiating Stage begins once you find a house that you want to purchase. Usually, your realtor will play a key role in negotiating the contract terms with the seller’s agent. As an attorney, I don’t participate in this phase for the most part. However, I’ve found that it doesn’t hurt to consult a lawyer during this phase, especially if you have questions that your real estate agent hasn’t addressed.
But in the majority of cases, you and your realtor will work together to develop the terms and conditions that are realistic for the purchase of the home. A form contract then needs to be filled out. This can be done either by you or your real estate broker.
The contract identifies the home’s agreed upon price and all of the personal property that is included with the purchase. From light fixtures to appliances to lawnmowers, for example, every item must be specified in the contract. The contract also has other specific terms, such as real estate tax pro-rations, title exceptions and other legal issues that will be initially completed by you and your real estate broker but will alter be approved by your attorney as part of the Attorney Approval Phase.
Performing the Inspection
After you and the seller have agreed on the terms for the sale, it’s time to move to the next phase: “Property Inspection.” In most circumstances, you’re given a designated period of time to have a licensed, third party inspector examine the home in detail and to decide if you are willing to accept it. This time period is outlined in the contract that you and the seller previously signed. The procedure for accepting, rejecting or conditionally approving the home is also detailed in the contract.
Attorney Approval
Now that you’ve completed a contract and hired an inspector to look closely at the home you plan to purchase, it’s time for the attorneys to analyze the agreement between both parties. My role as your attorney is to make sure the contract represents your interests fairly and doesn’t expose you to any liability when you take possession of the home.
During the attorney modification stage, it is important to keep in mind that the lawyers from each side of the transaction often go back and forth to make any necessary changes to the contract. With the exception of the sale price, there are many areas of the contract that can be altered between the two attorneys.
When both attorneys reach an agreement, they then sign a letter outlining any additional terms or revisions. This letter agreement does not need to be signed by the buyer or the seller. But it is officially included in the real estate contract as an addendum. Therefore, the changes made by the attorneys are considered to be part of the contract for the purchase of the home.
Coming Soon
In this overview blog, I’ve provided you with the basics of the Negotiation Stage of a residential real estate transaction. In my next post, I will expand on this foundation and take you through the negotiation process in greater depth so that you better understand the procedure.