Real Estate Legal Information

OVERVIEW

Real estate law is an extremely large and complicated area of the law.  Real estate lawyers have knowledge in handling real estate transactions and litigation.  These types of lawyers represent property owners in all areas of real estate law.  These areas include the acquisitions and disposition of property, development of property, construction law, commercial and retail leasing, zoning issues, architectural and building plan agreements.  Real estate lawyers can also help home owners who are facing foreclosures on their property, injuries that take place on their property, obnoxious neighbor issues, and issues related to mortgages and deeds.

 

“WHAT ARE THE STEPS IN THE HOME BUYING PROCESS?”

Home buying and selling can be a complicated process that can take several months.  There are many small steps along the way.  Here are some universal steps that occur after your finances are in order and you have decided you would like to purchase a new home.

  1. Get Loan Pre-approval:  this will give you an idea about how much you can afford to pay for a new home.
  2. Look at homes and choose a new home.
  3. Get Funding:  you will need to obtain a loan from a mortgage financing institution in order to pay for you new home.
  4. Make an Offer:  your proposal should include both price and terms and conditions.  This can take into account the state the property is in, as well as cost to repair damages.
  5. Get Insurance:  this is to protect the homeowner in the event of a catastrophe.
  6. Closing:  all the necessary paperwork to complete the transaction is signed.


“WHY WOULD I NEED A LAWYER WHEN I BUY A HOUSE?”

Normally when purchasing a home people will hire a real estate agent to assist them in the process.  An experienced real estate agent will usually have contacts with good inspectors, mortgage loan brokers, and other people who can make the home buying process easier.  However, if a legal issue arises and the real estate agent can’t provide a solution then you need to employ the help of a real estate lawyer.  Real estate agents are good at the negotiating and contracting part of the process but a real estate lawyer is needed when legal questions arise.

Real estate lawyers will have your best interests in mind when it comes to purchasing your new home.  This is not always the case with real estate agents, who make their money based on the sale of a home.  Real estate agents may try to increase their commission by insisting you place a higher bid than necessary to buy a home, putting more money in the real estate agents pocket.  Real estate lawyers serve only your best interests when purchasing a home.

When buying a home, after signing the purchase agreement, a title search will need to be conducted to establish that the seller has the legal right to transfer the property to the buyer.  A lawyer can help review the title search and determine whether the title description is correct or not.  In addition, a lawyer can explain zoning issues related to your property.

Closing costs can also be described by real estate lawyer.  A lawyer can explain to you the nature, amount, and the fairness of your closing costs.

 

“HOW DOES A MORTGAGE WORK?”

A mortgage is a loan you use to pay for your new home.  Your home then is used as collateral for the loan.  This means that if you cannot pay your mortgage, the lender has the right to take back your house and sell it to pay for the loan they gave you.  Your monthly mortgage payment will include the principle, interest, taxes, and insurance.

 The principle is the entire sum of money (less your down payment) you borrowed from the lender in order to pay for you home.

The interest is a percentage rate that the lender charges you to use the money your borrowed.

Taxes are those imposed by the community you live in to help keep the community running.  They are often referred to as property taxes and are used for things like building schools and paving roads.

Lenders will not let you close the deal on your new home unless you have homeowners insurance.  This protects your home and personal property against loss.

 

“WHAT DO I NEED TO KNOW ABOUT HOMEOWNERS’ INSURANCE?”

Home owners insurance is purchased by the homebuyer in the event that the home is damaged or destroyed by fire, smoke, wind, hail, vandalism, etc.  Basic homeowners insurance covers your personal belongings, possessions, and personal liability in case someone is injured on your property.

Most homeowner’s policies do not cover business related equipment, damage caused by natural disasters, or extremely valuable possessions (art or jewelry).  If your home is in a high-risk area for natural disasters or you want to protect valuable property you will want to purchase additional insurance.

Keeping an up-to-date inventory of your home can make it easier to deal with law enforcement and insurance agencies if tragedy strikes your home.  To make your inventory you can simply go through each room in your home, write down the items and photograph each one.  Insurance companies can then supply you with an inventory form for you to formalize your inventory list.

 

“WHAT HAPPENS IF I AM FACING FORCLOSURE ON MY PROPERTY?”

Foreclosure is a process used by the lender when a homeowner cannot keep up with their mortgage paymentsThis process usually results in the lender taking back the property and reselling the house (which is collateral for the borrowed loan) to pay for the initial mortgage and missed payments.

Foreclosure may occur if you fail to make mortgage payments.  Once you fail to make mortgage payments then the lender may repossess your home.  You are then forced to move out of your home.  This process can seriously affect your ability to qualify for future loans.

 

“HOW CAN I AVOID FORECLOSURE ON MY HOME?”

If you are facing foreclosure do not ignore letters from your lender.  You need to contact your lender and explain your situation immediately.  Be prepared to provide them with your financial information because without it, the lender will not be able to help you.

You also need to contact a housing counseling service to get assistance and understand your options.  The U.S. Department of Housing and Urban Development (HUD) has a listing of approved housing counseling agencies you can use.  These services are usually free of charge and can help you avoid foreclosure.

There are alternatives to foreclosure.  You should discuss these with your lender to see if you qualify for any of them and can avoid foreclosure.  Either your lender or a housing counseling agency can tell you whether or not you qualify for any of these alternatives.

  1. Special forbearance:  If your financial situation has dramatically changed you may be able to work with your lender and receive temporarily reduced or suspended payments.
  2. Mortgage Modification:  You may be able to refinance your mortgage and extend the term of your loan.  This can result in lower monthly payments.
  3. Partial Claim:  If you have missed payments but are prepared to begin making full payments again, you may be able to work with your lender to make a one time payment from the FHA-Insurance fund to bring your mortgage up to date.
  4. Pre-foreclosure Sale:  You avoid foreclosure by selling your property for less than the amount necessary to pay off your mortgage loan.
  5. Deed-in-lieu of Foreclosure:  You may be able to give back your property to the lender.  This will not save your home but will not be as damaging to your credit score as a foreclosure.

 

“CAN I GET MY PROPERTY BACK AFTER A FORECLOSURE?”

There is a process called Statutory Redemption that allows a homeowner to regain ownership of their property after a foreclosure.  In general the owner has 6 months to one year to regain their property by:

  1. Paying the foreclosure sale price
  2. Paying a statutory rate of interest to the sale purchaser


 “WHAT DO I NEED TO DO BEFORE I CLOSE THE DEAL ON MY NEW HOME?”

Before closing on the purchase of your new home you should hire a professional home inspector to walk through the house with you.  During the walk through you should identify any problem areas with your new home so you can fix them before finalizing the deal.  This step can prevent future problems with your property.

You should make sure the builder of the home provides you with a list of all the subcontractors and suppliers that worked on the house, copies of all product warranties, the builder’s warranty and drawings with the stamp of the architect and engineers, and a description of the maintenance that should be done on the house.  This documentation will make sure you are protected if a defect occurs in the future.

 

 “HOW DO I KNOW IF MY NEW HOME HAS A CONSTRUCTION DEFECT?”

Construction defects are legally defined by 4 categories:

  1. Design Deficiencies:  These can occur when a design professional such as an architects or engineer, build outside the specified code.  An example is building a roof that results in poor drainage, inadequate structural support, or water penetration.
  2. Material Deficiencies:  These can occur when inferior building material causes significant damage.  An example would be leaking windows even though they have been properly installed.
  3. Construction Deficiencies:  These can occur from poor craftsmanship.  Examples are cracks in foundations or walls, rotting wood, electrical problems, and plumbing leaks.
  4. Subsurface Deficiencies:  These can occur when houses are built on hills and areas were providing a stable foundation is difficult.  An example would be the structure moving or shifting.

If you believe your home has a construction defect you should have it inspected right away.  When it is determined you have a defect you may need to hire a real estate lawyer who specializes in construction defect litigation.  They can determine who is responsible and how they are going to remedy the situation.  Construction defect litigation if very complex and may involve several people who are at fault and several legal theories as to why you have a construction defect.  Using a real estate lawyer in this situation can protect your rights as a home owner.

 

“WHY WOULD I NEED A LAWYER WHEN I SELL MY HOUSE?”

Normally when selling their home people hire a real estate agent to assist them during the course of negotiations.  Consulting with a lawyer during the sale of your home can help you with the tax consequences of the transaction.  A lawyer can advise the seller about taking advantage of tax provisions during the sell of their home, thus saving the seller money.

For both the home buyer and the home seller, the purchase agreement is the most important document in the transaction.  This form is usually standard, but a lawyer can help explain the form and make any necessary changes and additions to reflect the desires’ of the buyer or seller.  A lawyer can ensure that any changes made to the standardized forms, such as the purchase agreement form, will be valid in a court of law.

 

“WHAT AM I REQUIRED TO DISCLOSE DURING MY REAL ESTATE SALE?”

It is illegal to conceal major defects in your property to potential buyers.  As a result the seller needs to take a proactive role in disclosing problems that could affect the property’s value.  In general the seller is required to disclose information about the home that they have personal knowledge about.  If you are in doubt about whether or not to disclose information, you should always do so in order to avoid the potential for liability later on.  If you do not disclose information you knew about you could have legal problems later and pay for damages suffered by the buyer.

Some sellers hire a general contractor to inspect their property and write a report.  This can be useful for pricing your house and negotiating with buyers.  Just because you disclose a problem to buyers does not mean you need to fix it, it can be a negotiating point in the sale of the real estate.

 

“HOW DOES THE TRANSFER OF PROPERTY WORK?”

A deed is the document that transfers the ownership of real estate.  It identifies the buyer, seller, describes the property in legal terms, and is signed by the person who transfers the property from seller to buyer.  The seller’s signature must be notarized.  During this process a lawyer will take the desires of both the buyer and the seller and will translate it into legal reality by drafting the appropriate documents.

 

“MY NEIGHBOR IS OUT OF CONTROL, WHAT CAN I DO ABOUT IT?”

If your neighbor is acting in a manner that is not allowing you to use or enjoy your own property then you may be able to use the Law of Nuisance to stop your neighbor’s behavior.  There are two types of nuisance suits, private and public.  In both cases the interference with property must be substantial and continuous.

A private nuisance occurs when you are unable to use or enjoy your property because of your neighbor’s actions, but they have not physically done anything to your property.  Unpleasant odors or a very visible, yet unsightly mess are two examples.

A public nuisance occurs on a much larger scale.  This occurs when the health, safety, welfare, or comfort of the public in general is affected by the actions of another person.  Examples include a factory emitting bad odors or a baseball stadium that is extremely loud and the lights keep the neighborhood up at night.

If you believe you have a nuisance problem then a lawyer experienced in property disputes can help ease the strain of your dispute and help you negotiate a solution with your neighbors.  A lawyer will also be able to make sure your rights are adequately protected during any nuisance lawsuits that might arise.

 

PAYMENT

Real estate lawyers usually charge an hourly fee.  Some lawyers may charge flat fees for specific services, such as preparing real estate closing documents.

Unlike real estate lawyers, who work for an hourly fee, real estate agents normally work on commission.  They receive their money only after you have bought or sold your home.  Typically the seller pays the commission when the house is sold.