If you’re like most, real estate is the single greatest purchase you will make in your lifetime. After all, a home or business is not only a significant financial investment—it is also the place you will spend the majority of your time. It is where you will create memories, form relationships and carry out the bulk of your daily duties. Therefore, it is a purchase that requires detailed research and prudent planning. However, real estate is not simply a “buyer beware” domain. Sellers can easily encounter pitfalls, too. Unfortunately, a small oversight in a real estate transaction may put a damper on your plans and land you in legal trouble.
Common Problems for Buyers
Financing, purchase agreements and latent defects are the largest sources of frustration when purchasing real estate. First, you must obtain a loan. This can be challenging for those with even a moderate credit score. If you cannot qualify for a loan at the time of purchase, an attorney may be able to help you enter into a land contract with the seller. A land contract allows you to pay the seller in installments and states that the seller must transfer the title to you when you make the last payment. However, even if you do obtain a traditional mortgage and purchase agreement, you must read over them carefully. Some may incorporate balloon interest rates or list clauses which state that the seller may retain the property and keep your earnest money if you postpone the closing date by even one day. Worse yet, some properties contain hidden problems that are not easily identified during a routine inspection. You must consider what plan of action you will take if latent defects are found, or if the seller does not complete agreed upon repairs.
Title searches, liens and zoning regulations may also pose trouble for buyers. Although the process of finding and verifying the validity of a seller’s title is generally a relatively simple step in a real estate transaction, it does require the assistance of a professional. A title company may be able to serve up the necessary document, but you should consult an attorney to ensure that it is legally valid. Those looking to acquire land must also be aware of liens and zoning laws. Liens give an entity the right to maintain possession of the seller’s property until a debt is settled, and zoning regulations govern the kinds of structures and activities allowed on the lot of land you’re seeking to obtain.
Common Problems for Sellers
For sellers, tax liability and brokerage contracts are often two of the biggest worries. When you sell a property, the amount of income tax you’ll owe that year may increase dramatically. Fortunately, there are certain tax provisions that can potentially hedge against these costs. An accountant or attorney can help you identify whether or not you meet the criteria for such provisions. Furthermore, he or she will verify that the brokerage contract is written to protect you in case a sale does not occur. In some cases, brokerage contacts originally state that a brokerage fee must be paid even if a buyer is not found. An attorney will ensure that this does not happen to you