You may be looking to buy a new home. A common mistake many people make after finding a home they like, is to sign a purchase agreement, also called an offer to purchase, and then bring the signed agreement to their attorney for review.
Once the purchase agreement is signed by the buyer and seller, it is binding upon both parties. There is little that an attorney can do to revise or amend the terms and conditions of the signed agreement other than make sure that the purchase goes in accordance with that agreement. The real estate purchase agreement is the single most important document in the purchase of real estate. All of the terms and conditions that govern the purchase are in that agreement. The time to have a real estate purchase agreement reviewed by your attorney is before you sign it. The following are some issues to address when considering the purchase of a home:
Know what you are buying.
Make sure you know exactly what you are buying. The address and/or legal description should be clearly marked in the purchase agreement. All movable property such as appliances, window treatments and light fixtures that are being sold in the house should be specifically listed. The purchase should be subject to review of a stake survey of the property. A mortgage survey is usually not enough to determine the exact property lines. Make sure that you know where the four corners of the property are. I have seen discrepancies between fence lines and the surveyed property lines from nine feet on a forty foot lot to over one hundred fifty feet on a ten acre parcel. Look for encroachments of the neighbors’ buildings or improvements onto the property. All buildings and improvements of the home you are buying should be within the boundaries of the surveyed lot. For your protection, the purchase agreement should be subject to a favorable review of the title to the property, including deed restrictions, by an attorney.
The purchase should be subject to inspections.
The home should be inspected by a qualified inspector to uncover any problems or issues there may be with the home. A thorough review of the Seller’s Disclosure Statement would be helpful in this matter. You may also want to do environmental testing if you have concerns that there may have been underground fuel tanks or have a suspicion of other contamination. You should also have the home’s basement or crawl space tested for radon, a toxic gas. If you are purchasing vacant land not serviced by water and sewer and plan on building, the purchase agreement should be contingent upon a successful perk test for a septic field and the successful flow of water with a well.
Know how much it is going to cost you.
The purchase price is not the only cost in the purchase of a home. There are many closing costs. Most closing costs can be paid either by the buyer or seller. If you are the buyer, you want most of these costs to be paid for by the seller. Title insurance and real estate transfer taxes are usually paid by the seller. You may put in the purchase agreement that the seller pay the title company closing fees and recording fees. If you are the buyer, you may want the seller to pay all real estate taxes that are due and have no proration of taxes. If there is going to be a proration of taxes, make sure that the taxes are going to be prorated appropriately. Also, make sure that all special assessments have to be paid in advance by the seller before closing.
Make sure that you have appropriate advisors assisting you with the purchase of your home. Happy house hunting.
By: Matthew M. Wallace CPA, JD
Published edited September 14, 2008 in The Times Herald newspaper, Port Huron, Michigan as: Buyers beware of binding purchase agreements