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Real Estate FAQs

Real Estate FAQs

Does my attorney need to review my contract before I sign it?+
Generally, it is not necessary for your attorney to review the contract before you sign it, AS LONG AS the contract is subject to your attorney’s approval. If the contract is subject to attorney approval, this gives your attorney the opportunity to review the contract discuss it with you, and make certain changes or modifications as may be appropriate to properly reflect your agreement. However, if the contract is not subject to attorney approval, you should NOT sign the agreement until your attorney has had the opportunity to review it with you.
What is title insurance and why does my lender make me get it?+
There are various types of title insurance. The type of title insurance required by a mortgage lender is called “mortgagee” insurance. This insures your lender from any financial loss if a problem is discovered in the future with respect to your title to the property. Your lender requires you to get this policy to protect their interest in your home as security or collateral for the money they are lending you to buy the home. This insurance does nothing to protect you or your interest in the property.
Does my real estate agent work for me?+
In most cases, all the real estate agents (both the real estate agent who lists the house for sale and the real estate agent who brings the buyer to the house) are paid a commission for their services by the seller. As such, all the real estate agents in such cases are all legally considered to be working for the seller. This doesn’t mean that a real estate agent who works with a buyer to find a suitable home isn’t helpful or trustworthy—only that their ultimate responsibility is to the seller. A buyer who wants a real estate agent to work for them–and not for the seller–may enter into a specific agreement with the real estate agent to work exclusively for them as a buyer’s agent, and pay them for their services.
Who “negotiates” my contract?+
Although real estate agents often make suggestions and recommendations regarding the terms of a contract, it is ultimately the buyer and seller who determine the agreement. The “negotiation” is done by the prospective buyer making an “offer” to the seller. The seller either agrees to the proposed terms or suggests changes by making a “counteroffer”. This, in turn, is either accepted or “countered” by the buyer, and so on. In the case of a particularly complex or difficult transaction, it is often beneficial to have an attorney handle the negotiation of the contract.
When should I offer the full asking price?+
There is no definite answer to this question and each situation is unique. In making a decision on how much to offer, it is important to have as much information and experience as possible. It is generally advisable to consider the opinion of real estate agents, or other professionals who are familiar with the specific facts and circumstances.
When do I have to accept a purchase offer?+
The decision of whether or not to accept a purchase offer is entirely up to the seller. However, when property is listed for sale with a real estate agent, the seller is “offering to sell” at the terms set forth in the listing. Therefore, if a prospective buyer offers to purchase the property under the exact same terms as set forth in the listing, the seller must accept the offer. However, if the buyer’s offer differs in any way from the listing (such as including any contingencies or conditions), the seller is free to reject the offer.
What is a “private mortgage”?+
A “private mortgage” is a loan, secured by real property, that is obtained from a source not typically in the business of lending money.
What does it mean when the seller “takes back paper”?+
This means that the seller is extending credit to the buyer to buy the property. Rather than taking money for the sale, the seller takes a private note and mortgage, or “paper” for all or a portion of the sale price. Of course, the loan needs to be paid back with interest over time.
How do I decide on a closing date?+
In most types of contracts, dates are critical. This is not the case with real estate contracts where dates tend to be more like “target” or “control” dates and are not necessarily adhered to strictly. As such, the closing date stated in a real estate contract is not necessarily the date on which the closing will occur. For this reason, the closing date as recited is not always critical. Nevertheless, it should be set with sufficient time allowed to accomplish what needs to be done in order to prepare for closing. Your real estate agent is able to suggest an appropriate closing date, subject to confirmation by your attorney. In addition, either party may take appropriate steps, when necessary, to compel the closing to occur on or following the date recited in the contract.
What is a “counteroffer”?+
If a seller receives a purchase offer from a prospective buyer, which is acceptable, the seller simply signs the offer as his/her acceptance and the accepted offer becomes a contract. If, however, the seller requires any changes to the offer in order for it to be acceptable, the seller proposes these changes to the buyer in writing. This is called a “counteroffer”. Since a counteroffer is actually a further proposal, the buyer must accept it before it becomes a contract. Similarly, the buyer may make a counteroffer to the counteroffer, and so on, until both parties agree upon the terms of the transfer. However, at any stage of the process, if either party simply rejects the offer or counteroffer of the other party without making a further counteroffer, the negotiations are terminated and no contract is established.
When should I decide to “walk away” from a possible deal?+
This is another question for which there is no definitive answer and every situation is different. Each party must make this decision based upon his or her unique needs and circumstances. With respect to price, it is a good practice to evaluate one’s circumstances before either listing a home for sale or looking for a home to purchase, and to determine ahead of time the lowest price you would be willing to accept or the highest price you would be willing to offer, as the case may be. In this way, your evaluation of a potential purchase offer won’t be affected by the emotions and the fast pace which inevitably surround negotiations. Always be willing to “walk away” if the deal doesn’t fit your circumstances. A deal that doesn’t fit your circumstances is no deal at all.
Should I have a contract for the sale of my current home before I make an offer to buy another home? Should I have a contract for the purchase of another home before I list my current home for sale?+
Most people are not financially able to purchase a new home without first selling their existing home. As such, both the sale of one’s current home and the purchase of one’s new home must occur at substantially the same time, in order to avoid either being without a home or owning two homes for a period of time. However, which contract should be entered into first is a matter of personal preference and is often determined by one’s own needs and expectations. For example, if you intend to search until you find your dream house, you may be better off finding it first, since it may take quite some time to do so and your existing home may sell before you have found what you are looking for. On the other hand, if there is an abundance of appropriate housing on the market and you anticipate your house may be difficult to sell, you may be better off selling your home first since it may take quite some time to do so and your inability to sell your home would make it impossible for you to perform on any purchase contract you may have entered into.
What if I am unable to schedule the closing of my purchase and sale for substantially the same time?+
Under these circumstances, the buyer and the seller, through their attorneys, will typically reach an agreement that will either allow the seller to stay in the house past closing, or the buyer to move into the house before closing, as the case may be. Since the circumstances of each situation are quite different, the terms of such an agreement will vary from case to case. In any event, any such agreement should be in writing, signed by both parties and structured in such a way as neither party is required to assume any cost or responsibility which should properly be the obligation of the other party. For example, if the seller remains in the house after closing, the seller is typically required to reimburse the buyer for any mortgage, insurance and tax obligation of the buyer during the seller’s extended occupancy. Similarly, if the buyer takes possession early, the buyer would typically offset the seller’s mortgage, tax and insurance expenses. Various other issues, such as utilities, liability, damages and the like, should also be addressed in an occupancy agreement. Therefore, it is important that your attorney handle the preparation of this agreement. However, this is not always possible and it may be necessary to make alternate arrangements for temporary housing or temporary financing, pending the second closing.
If I know that I won’t be able to close my purchase and sale at substantially the same time, should I include something in the contract to address this?+
Yes. Terms of an occupancy agreement can be negotiated at the time of the contract. In this way, both parties are aware of the need for occupancy from the start and potential problems can be avoided in the future. The standard contract form, used by most real estate agents, contains an optional provision regarding occupancy. However, a separate occupancy agreement should still be prepared by your attorney, incorporating all the significant terms and conditions of the occupancy–not just those set forth in the purchase agreement.
If I’m living in an apartment, I don’t have to worry about this since I don’t have anything to sell, right?+
Maybe. Although you don’t need to sell a home in order to purchase a home, you may not be freely able to cancel your lease or rental agreement when you purchase a home. If you are a month-to-month tenant, you are usually required to give your landlord notice of your intention to vacate a full rental-month in advance (i.e. not simply 30 days but a full period of time covered by a monthly rental payment) or you could be obligated for an additional month’s rent. If you have a lease for a period of time (i.e. a number of years), you may remain obligated for the entire balance of the lease, unless other arrangements are made with your landlord.
Does my attorney need to review my contract before I sign it?+
Generally, it is not necessary for your attorney to review the contract before you sign it, AS LONG AS the contract is subject to your attorney’s approval. If the contract is subject to attorney approval, this gives your attorney the opportunity to review the contract, discuss it with you, and make certain changes or modifications as may be appropriate to properly reflect your agreement. However, if the contract is not subject to attorney approval, you should NOT sign the agreement until your attorney has had the opportunity to review it with you.
If I don’t have a real estate agent, how do I have a contract prepared?+
Only a limited number of people are authorized by law to prepare real estate contracts for you, among these are real estate brokers or salespeople (i.e. Real estate agents). If you are not working with a real estate agent, you are entitled to prepare the contract yourself. This is rather risky, however, as there are many issues and concerns that should be addressed in a contract and the failure to do so might well lead to substantial difficulties in the future. Instead, you should contact your attorney to prepare the contract in accordance with the terms and conditions you decide.
Do I need to discuss my contract with my attorney after I sign it?+
Yes. The contract should be made subject to your attorney’s approval before you sign it. It is very important for you to discuss the contract with your attorney after you have signed it. There are a number of things your attorney will need to confirm and/or discuss with you before he/she can approve it on your behalf. To have your attorney approve the contract without first discussing it with you would defeat a good portion of the purpose for requiring the approval in the first place.
How do I get a copy of the contract to my attorney?+
Usually, your real estate agent will assume the responsibility of providing your attorney with a copy of the contract. To assist the real estate agent in doing so, it is helpful to be aware of your attorney’s name, address, telephone number, e-mail address and fax number. If there are no real estate agents involved, it is usually the responsibility of each party to provide his/her attorney with a copy of the contract.
Should I get a copy of the contract?+
Yes. The contract governs most every aspect of your transaction. You need a copy, both to refer to while reviewing it with your attorney and to refer to throughout subsequent stages of the transaction. However, once the transfer has closed, the contract is no longer of great significance.
Can I cancel the contract if I decide not to proceed?+
No, not unless the terms of the contract allow for you to do so (see the answer below regarding “contingencies”). Unlike some other types of contracts, there is no grace period following the signing of the contract when it can be cancelled or “rescinded”. Once the seller has accepted a purchase offer, it becomes a legally binding and enforceable contract. Therefore, before submitting or accepting a purchase offer, it is critical that you are certain that you want to proceed upon the terms and conditions in the agreement.
If I want to back out of the contract, can I just refuse to cooperate with my lender since then they won’t give me a mortgage commitment?+
No. By entering into a contract containing a mortgage contingency, you are agreeing to use your best efforts to obtain a mortgage commitment. Your refusal to cooperate with your lender, in good faith, would be deemed a breach of your contractual obligations.
What if the other party backs out?+
The other party is also bound by the terms of the contract. The refusal to proceed according to the terms of the contract constitutes a breach of contract, which would entitle you to seek to require the other party to perform under the terms of the contract and/or to pay money damages as a result of the breach. It is essential that you discuss your options and alternatives with your attorney should this occur.
What if the buyer and seller make verbal agreements, either before or after the contract is signed? Are these agreements part of the contract?+
No. The written contract is considered to reflect the entire agreement between the parties and no discussions or oral agreements will be considered to be part of the deal. Any such discussions should either be written into the contract, added to the contract as a written addendum which is signed by both parties or added to the contract as part of your attorney’s approval.
What is a contract “contingency”?+
A “contingency” is a provision contained in a contract which makes it necessary for a specified event to occur in order for the contract to remain in effect. If the event doesn’t occur within the required timeframe, the contract may be terminated. Typical contingencies include an Attorney Approval Contingency (i.e. if my attorney doesn’t approve the contract, I can cancel it), a Mortgage Contingency (i.e. if I don’t qualify for a mortgage, I can cancel the contract); a Purchase Contingency (i.e. if I don’t find another house to buy, I can cancel my contract to sell); a Sale Contingency (i.e. if I can’t sell my house, I can cancel my contract to buy); an Inspection Contingency (i.e. if an inspection of the property by an expert discloses problems I wasn’t aware of, I can cancel the contract), etc.
Who works on satisfying these contingencies?+
This depends on the specific contingency. Usually the party who benefits from the contingency, or their attorney or real estate agent, is responsible for taking the steps necessary to try to satisfy the contingency.
What happens if a contingency can’t be met?+
If a good faith effort is made to satisfy a contingency and it can’t be done in the required timeframe, either the parties can agree to extend the timeframe or either party can elect to terminate the contract without further obligation to either party.
What is the purpose of a deposit and how much should it be?+
The deposit made by the buyer at the time of the signing of the contract is intended as a good faith showing of the buyer’s sincerity and commitment to the proposed transfer by committing funds which the buyer could forfeit if he/she backs out. As such, the size of the deposit is directly related to the purchase price, the ability of the buyer and the resources available to the buyer. The size of the deposit has no material bearing on the substantive terms of the contract itself. Of course, the larger the deposit, the less likely it is that a buyer would back out and risk forfeiting the deposit.
What happens to the deposit when the deal closes?+
The seller receives the deposit and the buyer gets a “credit” or a reduction of the purchase price in the amount of the deposit. In other words, it is as if the deposit were returned to the buyer who then uses it to help pay for the purchase of the property.
If the transfer doesn’t close, what happens to the deposit?+
If the transfer fails to close because a contingency cannot be satisfied, it gets returned to the buyer. Similarly, the deposit is returned to the buyer if the transfer fails to close as a result of the fault or breach of the seller, in addition to which the buyer may be entitled to sue the seller for any damages sustained as a result of this breach of contract. However, if the transfer fails to close as a result of the fault or breach of the buyer, the buyer may be required to forfeit the deposit to the seller. In addition, the seller may also be entitled to sue the buyer for further damages sustained as a result of the breach of contract.
Who has the deposit until the deal closes?+
Typically, the deposit is held in escrow by one of the real estate agents or, in the absence of real estate agents, by the seller’s attorney.
Who gets the interest accrued on the deposit prior to closing?+
There is no interest accrued on the deposit. By law, the real estate agent or attorney must hold the deposit in an escrow account for the benefit of the parties and such escrow accounts do not generate interest to either the real estate agent, the attorney or the parties.
What is the “Property Condition Disclosure Statement”?+
This is a form the seller is required to complete and provide to a prospective buyer before the buyer makes a purchase offer. It is intended to communicate certain information to a prospective buyer regarding the seller’s knowledge of the condition of the property. The seller is not expected to investigate or research any of the questions raised in this form. However, the seller is obligated to fully and completely disclose any requested information to the best of his/her knowledge. As such, it is important for the seller to be truthful and as accurate as possible. Nevertheless, while this statement can give a buyer a better understanding of the property, it should not be relied upon as a complete, accurate or definitive statement. In the event the seller fails to provide a completed Property Condition Disclosure Statement, the buyer may be entitled to receive a $500.00 credit at closing from the seller.
What does it mean to transfer the property “as is”?+
This means that the property will be transferred to the buyer in the same condition as when he/she inspected it prior to submitting the purchase offer, subject to normal wear and deterioration. The seller is not making any specific representations as to the condition of any property transferred “as is”. In other words, “what you see is what you get” and “buyer beware”. This does not permit a seller, however, to make false statements or misrepresentations about the condition of the property or to hide or conceal the condition of the property.
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