A home is most people s biggest and most important investment. It is therefore essential to pay careful attention to all aspects of buying or selling a home. Here are some legal rules and tips.

Tips For Buyers

The Purchase Agreement

Contracts to buy and sell real estate are valid only if in writing and signed. In seeking to buy a house, you will be asked to put your offer in writing. If accepted, it becomes the contract.

The offer may be on a pre-printed form which can be hard to understand. So get a lawyer s help and remember that pre printed terms can be negotiated. Some rights your lawyer can put in the contract to protect you are:

• A right to have your inspector check the house and to cancel the deal if the inspection reveals major problems;
• A right to cancel if you cannot get a loan or sell your own house;
  Assurance of no overdue taxes or liens on the house;
• A refund of your deposit if the sale falls through; and
• Arrangements to share fees for items like escrow costs, title insurance and a first year s homebuyer s insurance policy.
  

Title Insurance

The "title" to real estate is the owner s right to use the property free from claims of others. Often, however, this right is limited. Some rights (called "easements") are held by utility companies so they can run lines and pipes to your house. Zoning laws also limit how you can use your property. Most land is subject to property taxes which, if not paid, can result in loss of title. If anyone else claims an interest in the property, you will want this resolved.

Before you buy a home, consult your lawyer to be sure you are getting clear title so you can use the home without interference. To protect against financial loss and the cost of defending your title if a claim is made, obtain a title insurance policy.

How To Hold Title

Another issue for people buying a home is how to hold title. For married couples and others, how title is held has significant consequences.

It determines who may sign documents affecting the property. It also affects income taxes, estate planning and even exposure to creditor s claims.

Meanings of different ownership forms can be confusing. Here are some common ways to own real property, and what they mean.

Joint Tenancy. Joint tenancy is an ownership form for two or more co-owners. In joint tenancy, each person has an undivided interest in the property. This means each person has the right to use the entire property and none can separate out what he or she owns.

When a joint tenant dies, his or her interest passes automatically to the other joint tenants. Joint tenancy property cannot be disposed of by will. As such, if you own a home in joint tenancy, be sure you want that person to get your share when you die. If you do not, then change the way title is held.

Tenancy in Common. Tenancy in common is another form of ownership where two or more parties own undivided interests in property. However, tenants in common can pass their interests by will.

Tenant By Entirety. Tenant By Entirety is how husbands and wives hold property during their marriage. It is a form of joint tenancy by between husbands and wives.

Tips For Sellers

The Broker's Agreement

Most people hire a real estate broker to help sell their home. The broker wants a written contract to protect his or her right to a commission. This is normal, but the seller can seek protection too, by having a lawyer review the contract to make sure its terms are clear on matters like the deadline for selling, when the broker will be entitled to a commission, and the commission amount.

There are different kinds of broker agreements. An "exclusive right to sell" agreement means the broker gets a commission if the house is sold, no matter whose efforts result in the sale. An "exclusive agreement" is the same with one key exception - there is no commission if the house is sold due to the owner's efforts.

In an "open listing" agreement, the broker gets a commission only if he or she finds a ready, willing and able buyer. In a "net listing" agreement, the seller accepts a set price and the broker's commission is everything above it.

The Purchase Agreement

After placing your house on the market you will receive offers from potential buyers. The offers will contain many terms such as purchase price and a length of time before the "closing" occurs. Have your lawyer review any offer you are interested in accepting. Your lawyer may suggest making a counteroffer to protect you in such areas as:

• Keeping the buyer s deposit or an agreed amount of "liquidated damages" if the buyer backs out of the deal;
  
• Being able to accept a second offer (called a "backup offer") so you can sell to someone else if the buyer does not perform;
  
• Adding provisions to protect you in case of "buyer s remorse" causing the buyer to later try to undo the purchase; and
  
• Terms to protect you if you let the buyer finance the purchase by accepting some of the purchase price over time.
  

The Closing

The "closing" is the transaction where the parties complete the sale. Here, documents are reviewed for the final time to make sure all terms and conditions have been met. Also, the balance of the purchase price is paid to the seller, the seller delivers a deed transferring title to the buyer, and the buyer receives the keys to the home.

Financial aspects of a closing involve making adjustments to determine how much money the buyer must pay. The seller receives credit for items it has prepaid but that benefit the buyer (like taxes), and the buyer is credited for items the seller owes but has not paid.

Conclusion

Buying or selling a home is a complex event. You should use care and obtain legal help to assure that you get the best deal possible and that your rights are protected. It s best to seek legal help at the start of the transaction, when it is much easier to take steps to prevent problems.

This article is published for the clients and friends of this firm. It provides general information. Due to complexities and constant changes in the law, exceptions to general principles of law, and variations of state laws, one should seek professional legal advice before acting on any matter.