Real Estate Transactions often involve several steps and numerous legal documents. On top of that, the purchase of a home is often one of the most significant financial undertakings a person partakes in during their life. For these reasons, it is important for you to have an attorney involved in the process, drafting contracts (or at least reviewing them) and giving you advice about your legal rights and responsibilities.
The purchase of residential real estate initially involves finding the right property. Once the right property is found, a contract is entered into for the sale called the Purchase Contract. Generally, this contract should have certain contingencies, such as a financing, inspection, and a closing contingency on your old home (unless you were renting). These contingencies allow you as the buyer to be released from your obligation to purchase the home if you are unable to achieve certain results, such as proper financing from the bank. One of the most important contingencies is the one for the sale and closing on your current home. For example, if you were to fail to provide for this contingency in the Purchase Contract, you may be obligated to purchase a home without having previously sold your own home. You do not want to be caught in a situation where you are required to make two mortgage payments; consequently, it is important for an attorney to review your contract to make sure that you are adequately protected and understand your rights and obligations.
It is important to understand that unless otherwise provided in the Purchase Contract, the rights and obligations set forth in the contract will be extinguished when the deed is signed. The contract is said to merge with the deed, and all rights and obligations under the contract terminate. Therefore, if there are obligations set forth in the contract that you wish to “survive” the deed, then a provision must be added that specifically states that the right or obligation survives the deed.
In addition to the purchase contract, a residential real estate transaction will involve obtaining title insurance. An attorney can help connect you with a title company that will protect you in case it turns out that someone claims an interest in your property. Title insurance can be complicated and your attorney can help ensure that you receive the right policy for your situation and answer many of the questions you may have. In addition to title insurance, a property inspection and environmental inspection are generally a good idea. The level of the environmental inspection will depend on the nature of the property and its location. Your realtor or attorney can help you find a qualified inspector. Many times, for environmental inspections, a simple evaluation of the chain of title for possible environmental issues and a physical inspection (called a Phase One Environmental) is all that is required of you. Circumstances, however, may justify a further investigation.
After all contingencies have been met (financing, home inspection, old house sold) a closing on the home will occur. At the closing, the Title Insurance Company will generally assist in transferring all funds and assure that all documents are signed. You may wish to have your attorney attend the closing to assure that no surprises arise and that all documents reflect what you have agreed. It is important to negotiate ahead of time who will pay real estate taxes, filing fees, transfer costs, and broker’s fees, and to assure that these obligations are properly reflected in the documents at closing.
The last step in the process is generally recording the new deed transferring property in your name. An attorney can also draft and file Deeds on your behalf, and prepare the forms necessary for paying real estate transfer taxes with the Auditor. Before the new Deed can be recorded, all taxes must be paid and the description in the Deed approved by the County Engineer. The proper process must be followed and forms filed to avoid rejection of the Deed. It is important that the Deed is filed to put other individuals on notice that you claim ownership to the property, so that the same property cannot be sold to another person or mortgaged. Such situations are rare, but should be avoided by promptly recording the deed.