It is critical to understand that the lender’s closing attorney — and this includes our office if we are representing your lender — represents the interests of the mortgage lender.
It is not the responsibility of lender’s counsel to advise you on your rights and obligations regarding your new home purchase. Accordingly, we highly recommend that you retain your own attorney to represent your interests in this process. Our office can be engaged to represent you even if we are handling the closing for your lender. There are certain very limited circumstances where a conflict can arise due to this “dual representation,” and we will review this with you prior to being engaged. Following is a general discussion of the role of the buyer’s attorney in the process of purchasing a home.
The Offer is the “kickoff” document. It is generally prepared in concert with your realtor and presents the terms under which you propose to purchase a home. It includes basic matters such as the price and the closing date, and contains “contingencies,” which are conditions that allow you to withdraw if the conditions are not satisfied. We encourage clients to consult us before signing an offer. Once an offer is accepted, you have entered an enforceable contract that defines many aspects of the process. As your personal counsel, we will make sure contingencies are properly worded and included in the offer document. Typical contingencies are mortgage financing approval and satisfactory home inspection. Less typical –but equally critical depending on personal needs –are contingencies particular to a transaction. These may include the sale of your present home before completing the purchase of your new home, and due diligence depending on the type of property being purchased (condominium, multi-family, etc.). Contingencies are often complicated, which is why involving an attorney at this stage is important. For discussion of due diligence for different types of property, see “Special Situation Purchases” below.
The Purchase and Sale Agreement (P&S)
After the offer is accepted and generally after the home inspection is completed, you will be required to enter a “Purchase and Sales” (P&S) agreement. This is the detailed contract for the purchase of the home. It governs the responsibilities of the parties and defines exact conditions relating to the purchase. It is far more detailed and specific than the offer. If there are bumps later in the process, this document will dictate how they are handled, and the incident legal consequences. The seller’s realtor or counsel commonly submits the initial draft. As your attorney, we will review the P&S with you and make sure the terms are accurate and reflect all agreements of the parties. We will almost always insert several clauses that add critical protections. There is often negotiation back and forth during this process, and we will be your point person for this critical time. Some of the matters that a P&S govern are: a) what happens if there is a title problem; b) what happens if there is an issue with your financing; and c) what happens if there is a casualty loss at the house (fire, storm damage). As you can imagine, the intricacies of purchasing a home are many. Hiring an attorney to protect your interests is a wise if not essential choice.
“Title” refers to a bundle of rights to a piece of property. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document, such as a deed, that serves as evidence of ownership.
When purchasing a property, it is vital to understand its current and past title conditions. Like everything in life, title to real estate is often neither “good” nor “bad.” Gray exists, and as your counsel, we will advise you when matters affecting title are present and need to be analyzed and explained. We discussed the “title abstract” in the earlier sections (see Role of Closing Attorney). The title abstract may show easements (rights of others to use a portion of your property); restrictions (e.g., limitations on building an addition without a building committee’s consent); covenants (e.g., obligations to share the cost of driveway maintenance); and the like. We will make every effort to be sure you are familiar with these matters if they are anything but typical. There are instances in which there may be a minor title issue, but you may still close on the sale because title insurance is offered and available. As Buyer’s counsel, we will make sure you are informed and understand what matters affect your title.
Methods of Taking Title.
If you are buying your home with a spouse, partner, friend, or relative, a decision must be made. The deed will list your names as the new owners, and will specify the manner in which you take title. The three most common ways two or more persons may hold title to real estate are:
- Tenants in Common;
- Joint Tenants (for unmarried persons); or
- Tenants by the Entirety (for married persons).
When title is held as Tenants in Common (which is the default tenancy if no other is specified), you and your “co-tenant” own separate interests in the property. If a co-tenant dies, then that person’s ownership interest passes through his or her “estate.” It will be necessary to probate the estate of the deceased before the real estate may be sold or mortgaged. Conversely, if the owners are Joint Tenants or Tenants by the Entirety (used when purchasers are married), the ownership interest of the deceased automatically passes to the surviving title holder, and the expense and time delay created by a probate is avoided. We will explain these options to you so you fully understand.
Special Situation Transactions
Even though we believe it is always critical to engage buyer’s counsel, certain transactions increase that need further. If you are purchasing a condominium unit, have you read the master deed (does it limit rentals or pets)? Have you spoken with the association trustees (are there charges about to be billed to unit owners for major improvements)? How about pending litigation that will impact your ability to re-sell)? If you are purchasing a home under construction, are there detailed construction specifications which address every aspect of the newly-built home? Do you know what model of appliances the builder is providing? Are closets being built out with shelving, do bathrooms have towel holders? How far back will the landscape be loamed and seeded, what are the number and type of shrubs? If you are purchasing a two-family home, do you know whether the two family is a legal use, whether a remaining tenant has been late with rent? — Buyer’s counsel helps define your inquiries and identify potential sticking points. The more you know, the less the chance for what may be costly and frustrating surprises.
Troubleshooting Throughout the Process
Each aspect of the buying and closing process can present challenges.Some of the more common are: a) encroachments of improvements such as a shed or a driveway on the neighbor’s property; b) mortgage commitments not issued by the date required in the purchase and sales agreement, or a commitment issued but with major conditions still outstanding; c) property condition issues discovered at your walk-through the day of your closing, (ie. repairs not completed or poorly completed, newly broken windows or damaged floors or walls); d) the seller or a tenant not moved out of the house by the date required.
The situations that can arise in a real estate transaction are many,often unique, and best met with an experienced real estate attorney. The last thing any new homeowner wants is to inherit a problem.