- Why Should I Have an Attorney, if the Bank provides an Attorney?
- What is Private Mortgage Insurance ?
- Do I Need Title Insurance?
- The Real Estate Agent
- Lead Paint
- Title V
- Home Inspection
- The Purchase and Sales Agreement
- Who Pays For….?
Know Before You Buy
If you are considering purchasing a home, there are many things that you should know even before you make an offer. This brochure has some basic information about the agent, lead paint, the purchase and sales agreement, mortgages and the closing. If you would like more information, you may call my office for a free consultation. Buying a home is probably the biggest purchase that you will make, so make the purchase well informed.
Why Should I Have an Attorney, if the Bank provides an Attorney?
The bank attorney represents the bank, not you. Although some of the bank interests are the same as yours, the bank is looking out for its own interests and not your interests. You should have your own attorney to review the bank documents, and to assist you with the purchase and sales agreement and check all the numbers and provisions on your behalf.
What is Private Mortgage Insurance ?
If you place less than 20% down on a home, the bank will require that you have private mortgage insurance (P.M.I.). This insurance pays the bank if you default on your mortgage. It protects the bank, it does not protect you. Nevertheless, you must pay for it if you want a mortgage, and you have less than 20% down. After you have paid that amount towards your mortgage, be sure that it is dropped.
Title Insurance protects you from claims on the title to your home. If anyone claims that the Seller did not have good title (ownership) to the home, the insurance company pays to defend your title. The bank will have title insurance, but it only protects the bank, not you. Although title insurance for yourself is not required, many feel more secure having it.
When you are buying a house, the real estate agent appears to act on your behalf, but you must know that the real estate agent represents the Seller, not you. The Agent cannot lie to you about a home, but they will not try to point out all the problems a home may have or tell you the Seller’s lowest price. Ask questions.
Mass Law requires only that a Seller disclose whether or not they know if a house has lead paint. There is no requirement that they delead a house. If you have children under six ( or plan to), you should find out whether the home you are going to buy has lead paint. If you buy a house with lead paint, you have to pay to have it deleaded.
Title Five regulates septic systems in real estate sales. If a home does not pass title 5, the home may not be sold. Find out if the house you are looking at has passed title 5. If it does not determine who will pay for bringing the septic system up to code. You should also make sure that there is room on the lot for a proper septic system. Some homes can only comply if they have a "tight tank". This type of septic system has to be pumped often and can add significant expense to home ownership.
Whose job is it to look at the home to make sure it is built properly, has no major flaws, no termites, or basement flooding? It is your job. The purchase and sales agreement should give you the right for a home inspection (you pay for it), and a walk through right before the actual closing. Spend the money for a qualified home inspection, and have the right to back out from buying if the home fails. Remember to ask questions about the house. It is illegal to lie.
The Purchase and Sales Agreement
The purchase and sales agreement (or the P&S) is the contract in which you agree to buy and the seller agrees to sell. Once signed by each party, this is a binding contract. The P&S spells out all the terms and conditions of the sale including the names and addresses of the parties and the selling price. The most important thing I can tell you in this brochure is that the P&S is negotiable. You do not have to sign the P&S as it is first given to you. You should review it thoroughly with an attorney, to make sure that your concerns and needs are addressed in the contract and that no provisions are unacceptable to you. I cannot cover every aspect of a typical P&S here, but the following are some typical provisions and why they are important.
Buildings Structures, Improvements & Fixtures: This paragraph is usually on the first page in paragraph 3. It states everything that is included in the sale. Is the beautiful chandelier you saw in the foyer included with the house? How about the washer, the dryer or the refrigerator? Don’t assume that all the appliances or fixtures that you saw are included. Everything included or excluded in the sale should be clearly stated in this paragraph.
Insurance: This clause states what type of insurance must be on the house until the closing. Be sure that the Seller covers it until the closing, and be sure to get an insurance binder so that you are covered from the time of closing. If storm damage strikes, you want to make sure the home is covered.
Buyer’s Default Damages: Since the P&S is an enforceable contract, if you just change your mind, there are consequences. This paragraph usually states that you lose your deposit if you back out. It may also state the Seller can still sue you for additional money. Read it carefully and make sure the P&S contains reasons that you can cancel the deal without losing your deposit.
Mortgage Contingency Clause: This clause gives you a certain amount of time to apply for a mortgage, and should allow you to cancel if you are unable to qualify for a mortgage at prevailing interest rates.
Possession and Condition of Premises: This clause gives you the right to a home inspection and walk through to make sure the home is in good condition.
When you get a purchase and sales agreement, call me for an appointment. I will help you go over the agreement line by line, to insure that your interests are represented. This is not a document that you should sign without careful review.
Stamps: Stamps, the Mass tax on real estate sales are usually paid by the Seller. Stamps are $4.56 per $1,000, so stamps on a $100,000 home would cost $456.00.
Recording Fees: The Buyer usually pays to record the deed ($25.00) and the mortgage ($10.00). If the seller has any liens or mortgages, the seller pays to record the discharges.
Brokers Fee: The seller typically pays the Brokers fee. A normal broker’s fee is 6% of the sales price.
Real Estate Taxes: The real estate taxes are first calculated to determine how much it is a day. Then if the Seller has paid in advance, the Buyer pays the seller back. If the taxes are still due, the Buyer gets a credit.
Closing Costs: The Buyer usually pays for all closing costs, including the bank’s attorney.
Nevertheless, all of the above are negotiable, and the parties may agree to different terms.