Buying, Selling & Mortgaging Your Home – Part 2
[See our Disclaimers page about relying on this website’s contents.]
Business owners hire attorneys to help them establish their businesses and sensible people hire attorneys to prepare their estate plans. Unfortunately, home buyers often rely solely on the advice of non-lawyers to protect them from real estate transaction risks. For most people, a home is a person’s most valuable asset. Why not protect it carefully? This article concludes a two-part series about protecting your real estate investment.
It Can Be Worse Than You Imagine
Very few real estate deals involve perfect conditions. Almost every real estate sale makes the title of the real estate subject to the rights of towns, cities, counties, or states to maintain roadways and drainage ditches along property lines. Waterlines, electric power lines, sewer lines, gas lines, and many other utility systems often pass from one point to another through easements that prior landowners have granted to utility companies. Although it is almost impossible to eliminate such pre-existing conditions, and many of those conditions may be tolerable, you never know when a seemingly simple title issue could become your worst nightmare. Such is the case of more than 100 landowners in Vigo County, Indiana, whose homes are now jeopardized by a plan by Duke Energy to construct high tension power lines through their subdivision in the case of Duke Energy Indiana v. Klinge Et Al. The original electric line easements in that case were probably intended to allow public service Indiana to install ordinary power lines, but the relatively simple language of the recorded easements may authorize the electric company to demolish houses built after the easements were granted without having to pay the homeowners for the damage.
Professional Investment Protection
Reputable bankers and realtors work hard to protect their clients from bad real estate transactions. Unfortunately, just because a realtor or a banker works with a nationally recognized real estate franchise or mortgage company does not mean that the person is willing to kill a commission and pull a customer out of a bad deal. Generally, if a real estate customer does not understand a part of a real estate transaction, he or she should discuss the matter with a reputable attorney before committing to a transaction.
A buyer should become suspicious immediately if anyone says the buyer doesn’t need an attorney. The deal may be legitimate, but a legitimate lender or realtor with nothing to hide would never discourage someone from consulting a lawyer.
Purchase Agreement Mortgage Contingency
Mortgage loan applications are subject to bank approval. If a buyer expects to borrow part of the purchase price, the purchase agreement should be conditional upon the buyer’s loan package terms. A conditional purchase agreement releases the buyer from the deal if the buyer’s lender will not finance the buyer’s purchase price on favorable terms. For example, the purchase agreement conditions could require 80% financing at 3.5% for 30 years with total closing and financial service charges not to exceed 3% of the purchase price. A reputable realtor will usually insist on conditions for a buyer in a mortgage loan-financed deal. An attorney should double check the conditions.
Double Check Before You Sign
Problems arise sometimes when loan terms change at the last minute for a buyer. Sometimes such changes arise because sloppy lenders promise better loan terms than they can deliver. The buyer should always have the loan package previewed by an attorney before closing.
A buyer should never be forced to close a bad deal. If the purchase agreement contains appropriate conditions for the buyer, a closing can be postponed until loan problems are solved. If anyone tells a buyer that he must close on the particular day or be sued, the buyer should speak with an attorney before signing anything. Too many buyers are pressured into closing deals that can bankrupt them.
Protecting your investment requires time to study and understand every aspect of the home buying experience. A little bit of care and attention can be the difference between a home being a man’s castle or his prison.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association.
Find more information about these and other topics at www.HawkinsLaw.com, add us to your Google+ circles, like us on Facebook, follow us on Twitter @HawkinsLawPC or call us at 812-268-8777. © Copyright 2015 Hawkins Law PC. All rights reserved.
