If you are at all involved in the residential real estate market you are aware that residential real estate market is now the strongest it has been in the past few years. Houses are listed on the market and under agreement for sale in just a few days at or above the asking price. With this strong real estate market it is important to know and understand the legal considerations when purchasing real property. Whether it is a home for your family or commercial property to operate a business, the points to consider are largely the same. Below are several important points you should review before purchasing real estate.
- Work with a good Realtor. When you are trying to find real estate to purchase working with a good real estate agent is very important. This is true if you are trying to identify a new home for your family or a new commercial property for your business. Most real estate agents are very good. However, just like any profession, some are not as good. If you have never worked with a real estate agent ask your friends, your co-workers or your attorney for a recommendation. A good real estate agent earns his or her commission.
- The Terms of an Offer are Important. After you locate the property you want to purchase the first step in the process is to submit an offer to the seller. The offer contains the key terms which will form the basis of the formal purchase and sale agreement. The offer includes such key terms as the price you agree to pay, the proposed closing date, if there is a financing contingency (or a cash offer) and any other key provisions such as the condition that you have to sell your home before you can purchase this new home. The seller can either accept your offer or make a counter-offer to reach an agreement. Once the terms of an offer are accepted then a more complete purchase and sale agreement is prepared and signed. It is important that you carefully consider the terms set forth in the offer because once they terms are accepted it may not be possible for them to be changed.
- Get an Inspection. Once you identify a property to buy you should get it inspected to make sure that you are aware of any issues that may go unnoticed by an untrained eye.
- The purchase and sale agreement – read it and understand it! If you put in an offer and it is accepted by the seller, you will need to enter into a purchase and sale agreement. The terms of the purchase and sale agreement are very important because they will control the ultimate transfer of the property from the seller to the buyer. If you don’t know what the terms mean and don’t know if any important terms to protect your interest are missing you should consult with an attorney.
- What are your escape options? The most important provisions of the purchase and sale agreement are the terms that allow you to walk away from the transaction and get your deposit (which is typically thousands of dollars) back under specific circumstances. Make sure the terms which allow you to get your deposit back are clear.
- How will you take title? If the inspection looks good and the purchase and sale agreement is signed you then have to decide how you will take title at the closing. Simply put, you need to determine whose name will be on the deed. Will it be you and your spouse? Will it be you and your business partner if you are buying this for your business? Should you set up a corporation or limited liability company to own the real estate? If you don’t understand all the implications resulting from how title to the property is held you should discuss this with your attorney.
- Look out for unique issues – e.g. Easements. Does the property you are buying have the benefit of an easement over the neighbor’s property or does your neighbor have an easement over the property you are buying? Easement disputes can be very frustrating to land owners and you need to fully understand the benefits or burdens of any easement BEFORE you complete the purchase.
- Are there limitations on future use? If you are buying the property with a specific purpose in mind, make sure you investigate whether that use is possible before you buy the property. If you want to operate a business on the property make sure the zoning allows for such use. If you want to put in a pool you need to make sure there are no restrictions to prevent you from installing a pool. The time to learn about any limitations which my impact you is BEFORE you buy the property.
The above list is not meant to be exhaustive but rather address some of the more important issues to consider when purchasing real estate. If you are considering the purchase of real estate, talk to your attorney. If you don’t have an attorney, give me a call to set up a no cost consultation to review the issues to make sure your interests are protected.