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Buying your first home: Common legal issues

Buying a home is a big deal, especially if you’ve never done it before. For most people, it’s the most significant one-time transaction you’ll ever make. Because of this, you want to be sure to do it right. While most home sales proceed smoothly, some of them don’t, and the risks to the buyer can be substantial. As with all big decisions, you’re better safe than sorry. Here are some things you’ll want to watch out for.

Insufficient Purchase Agreements

Let’s assume that you’ve found a house and the seller has accepted your offer. At this point the seller will present you with the Agreement of Sale (AOS) contract, which details the exact terms of the transaction you’re agreeing to. The real estate industry makes use of many standard forms, but it’s important to keep in mind that a generic AOS may not address everything it should in your particular situation. Only a real estate attorney can make additions to address issues in a legal contract, which may include:

  • The legality of any property additions or alterations, either existing or proposed
  • Steps to take if a property inspection reveals radon, asbestos, lead-based paint or other hazardous materials
  • Legal consequences for a closing that doesn’t take place, including what happens to the down payment, escrow instructions, payment method and other details
  • A correctly-worded financing clause that makes the sale provisional upon the buyer securing a mortgage

Unfavorable Mortgage Terms

There are many lending institutions that you can choose from as a home-buyer, and understanding all the terms of the loan can be daunting. One thing you want to watch out for are mortgage terms that don’t work for your current financial situation. Sometimes these terms are obvious, but sometimes they aren’t. For instance, you may be attracted to the lower total payment on a mortgage with a shorter payback period, but the monthly payment exceeds your budget allotment. Consulting with an attorney on these and other facets of the loan process can be beneficial.

Title Issues

The title is the legal document that allows you to occupy the property, so you want to be sure that there aren’t any other existing claims on it. Sometimes a property’s title will be defective in some way, either because of past negligence or deliberate action on the part of a previous owner. Sometimes other parties have a distant claim on the property that the current owner doesn’t know about. These and other circumstances can create a so-called “clouded” title, which you need to resolve before you can move forward with the purchase. A real estate attorney can assist you with this process.

Closing Terms

When you’re coming together with the seller to sign the final documentation to close the sale, you want to be sure that the closing terms are equitable and fair. The amounts of money involved in a house purchase can sometimes make it difficult to determine what fairness looks like, so consulting with an experienced attorney is often a good idea.

Buying a house isn’t like buying a car -- the consequences of overlooking certain details can be more troublesome than you might think. In the end, a little diligence can save you a lot of headaches. Your first house is a significant investment. Make sure that you protect it.

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Holsinger, Clark & Armstrong, P.C.
832 Philadelphia Street
Indiana, PA 15701

Phone: 724-471-0129
Fax: 724-463-1921
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