Overview of the Buying and Selling Process
Sponsored by fghlaw.com - Fessel, Goldman & Hirsch, Inc.

Buying or selling your home can be one of the most important financial decisions of your life. We hope this article will assist you throughout the transaction and guide you through the various and sometimes troublesome stages of “getting to the closing table”.

Real Estate Broker

You will probably be dealing with a Realtor, whether you are a buyer or a seller. As you would choose a doctor or lawyer, a referral from a reputable, informed and trusted source is strongly recommended.

Listing Agent / Selling Agent - Represents the seller.

If you are selling your home and have entered into an agreement with a listing agent, the agent will explain to you that he or she is representing you, the services that will be provided and how much commission or fee you will be charged.

Buyer’s Agent - Represents the buyer.

If you are a buyer, you may have walked into a Realtor’s office, answered a print ad or inquired about a property through the Internet. The Realtor you are talking to is probably a listing agent or sub agent of the listing agent. Sub agents are commonly referred to as selling agents. The listing and/or selling agent should inform you, as soon as you begin your discussions, that they represent the seller. Why is this so important? Because if you tell a listing or selling agent how much you are ultimately willing to pay for the house or how badly you want to buy, the agent is duty bound to tell this to the seller. A buyer’s agent, on the other hand, represents you. The buyer’s agent is duty bound to keep your confidences and act on your behalf, not the least of which is to negotiate the lowest price possible for the home. Therefore, before you begin the home buying process it is essential for you to decide whether or not you wish to hire an agent to represent you as your buyer’s agent. These two types of agents may be paid differently, from either the seller alone, buyer alone or participation fee splits with the listing agent. The most important thing is to put the relationship in writing and to seek legal advice if you have any questions. Do not proceed without appropriate agency contracts.

Disclosure

The seller must provide the buyer with a disclosure of all property defects he or she knows about. If you are a seller, you can be liable for property defects you knew about but did not disclose. The listing agent should provide the seller with the proper form to fill out for this purpose. If you are the buyer, you must receive this form before you make an offer. However, the disclosure form is no substitute for making your own investigation. Be sure you know what you are buying before you make an offer, conditioned only upon a home inspection, pest inspection, radon inspection or other matters you have discussed as a part of the offer.

Offer and Negotiations

This is the most critical time for you to have proper and effective representation. This is when the seller and buyer have the opportunity to obtain the best terms for themselves. It is also extremely important to discuss issues at this stage so that they do not become a crisis or even deal-breakers later in the process. It is vitally important to realize all the issues even if they are not readily apparent. Finally, beware of signing any document before the sales agreement. Unless properly drafted, a signed writing could constitute a sales agreement itself even if you do not intend it to be.

Sales Agreement

Real estate agents customarily use preprinted forms for the sales agreement.. However, this does not mean that the form cannot be changed or added to so as to reflect the transaction as you want it. The wording used is important as it will dictate how future disputes are resolved. It is recommended that you have a skilled real estate attorney review your agreement before you sign it, not after. Once both parties sign the agreement, it generally cannot be changed without both of you agreeing to do so. The sales agreement should contain all provisions of concern to you. At a bare minimum, it should give the names and addresses of the seller and buyer and correctly identify the property being bought and sold. The agreement must state the purchase price and should describe how the money is to be paid. The buyer may need a mortgage contingency clause that is tailored to the type of mortgage he or she hopes to receive. The parties will want to specify when the closing is to take place and what happens if it does not. Also, the contract should contain a section which describes all the conditions of the sale such as a home inspection, pest inspection or radon test. Note, these contingencies will have time limits after which the buyer can no longer object to any defects that may be found. These are just a few of the issues to be addressed. Sit down with your agent and attorney to discuss the matters that concern you, whether you are a buyer or seller. After the agreement is signed, the parties have “said their peace”. It is very difficult for an attorney to get you out of a contract you have already entered into. Therefore, seek competent consul beforehand.

Financing

If you are a buyer, your Realtor and/or Attorney will be happy to recommend a lender or mortgage broker who can effectively meet your needs. It is recommended that you be pre-approved for a mortgage loan at the very beginning of the home buying process, i.e., before you look at your first prospective home. This will allow you to know how much home you can afford, and it will enhance your negotiating position. Knowing how much home you can afford is very important in narrowing down your search. When applying for a mortgage your lender or mortgage broker will furnish you with a “Good Faith Estimate” of closing costs. The Estimate will include all of the fees which you can reasonably expect to pay. However, it will not include any adjustments to be made between the buyer & seller which will not be known until a few days before closing. Please know that this is only an estimate. Your Realtor and/or Attorney will be happy to review your “Good Faith Estimate” in order to ensure that everything is in order.

Title Examination

One of the things your sales agreement must provide for is an examination of the title, typically conducted by the buyer’s attorney. If title insurance is required by your lender, then under Rhode Island law you have the right to select your own title attorney. In most cases the title and closing attorneys should be one and the same. There are significant benefits in using the same attorney to provide title and closing services, not the least of which is a reduction in duplicity of services and fees. Further, when obtaining financing from lenders whom the attorney regularly works with, you will benefit from well-established avenues of communication that are likely to save you time and money. The title examination will disclose who is the current owner, any recorded easements or restrictions on the property and whether there is a good "chain of title” back through time. Your designated title attorney should work to be sure any problems in the title are resolved. Upon closing the attorney will issue a title insurance policy to the lender and one to the buyer. Title insurance protects the insured lender and buyer against certain enumerated title defects and claims to the property. Whereas, the lender’s title insurance policy is in force only for as long as the mortgage remains. The owner’s policy is good forever, even after the property is sold, and it can be passed on to your estate.

Closing

When the time has come for the closing, the most important question on everyone’s mind is whether the correct amount of money is being paid to you or by you. Your closing attorney or closing agent should review all of the expenses with you - lender fees, title fees, legal fees, tax adjustments and transactional costs. If you are the buyer and have obtained a mortgage the closing agent or attorney should explain all of your rights and liabilities under the loan documents. This is the time to ask all the questions you need to.

Copyright 1999 fghlaw.com