Real Estate Facts Line
Fact sheet No. 111

Beau Brincefield, an Alexandria attorney, has seen people make a lot of mistakes buying homes during his 25 years of practicing real estate law. Now he’s packaged that experience and knowledge into a 75-page booklet: “Brincefield’s Guide to Buying a Home: How To Avoid the 21 Biggest Mistakes People Make When Buying A Home.” Brincefield offers many valuable tips and covers a host of important homebuying topics, including those described briefly below.

The Homebuying Process. The homebuying process is actually quite complex and full of hidden risks. It is easy to make a “Big Mistake” without realizing it until it is too late to do anything about it. For example, unless you hire a real estate agent to represent your interests and your interests exclusively, all of the agents you work with are required by law to represent only the interests of the seller whenever the seller’s interests are in conflict with yours. That includes negotiating the price of the home, the terms of sale, who pays what financing and closing costs, etc.

Only an experienced real estate attorney retained by you to represent only you can have the comprehensive knowledge and the absence of conflicting interests that are essential to protecting you. Among other things, your attorney can help you negotiate a purchase contract that will protect your interests instead of compromising them. And, even if you have not retained an experienced real estate attorney at the contract stage, you can (and should) at least get your own attorney for settlement. Good, independent legal advice will almost always save you many times what it costs.

The Purchase Contract. The “standard form” printed contracts that are used by most real estate offfices are drafted primarily to protect the interests of the sellers and their real estate agents. This fact is manifested in every important section of the typical form contract. If you are not able to consult with an attorney before signing a purchase contract, at least put a provision in the contract that makes it contingent upon review and approval by your attorney.

Home Inspections. If you are not a professional home inspector, hire one. Make sure that the inspector considers all of the potential problems. Also, make sure that the termite clause in the contract requires the seller to treat and repair both present infestation and prior damage in the house as well as in additional structures, like garages.

Land Use Regulations. There are many types of public and private land use regulations that may affect the property you are considering buying as well as other properties nearby. Don’t assume that sellers or real estate agents will tell you about them. Learning about them at or after settlement may be too late.

Financing. The typical contract forms used by real estate agents contain a blank for filling in the interest rate that the buyer expects to pay on the acquisition loan. Almost always, however, the printed contract form then says “or market rate available” at the time of settlement. What this means is that, once you sign the contract, you have to accept whatever interest rate is available at the time of settlement, even if interest rates have gone through the roof since you signed the contract!

When comparing financing, what else do you need to consider besides the interest rate and points? How do you avoid unexpected additional lender charges at settlement? Should you pay to “lock in” your interest rate? When, if ever, is a loan “commitment” really a commitment?

Title Insurance. Your lender will require you to obtain a tender’s title insurance policy to protect the lender. Owner’s title insurance is almost always a good thing to obtain, also, provided it covers what it should. Do you know how to tell? This problem is especially acute with respect to mechanics’ and materialmen’s liens (which may arise even after settlement).

Penalties For Breaching The Purchase Contract. Default provisions in the typical real estate purchase contract are almost always heavily weighted in favor of the seller. It would probably breach the real estate agent’s duty to the seller to even tell the buyer about them since these provisions shift the risk of loss under the contract from the seller to the buyer. Your attorney can help you modify these provisions to make them fairer to you.

Additional Risks In Buying A New Home From A Builder. The typical contract forms used by builders are even worse for purchasers than the typical contract forms used by real estate brokerage firms in the resale of previously owned homes. They always contain major hidden risks for buyers.

Buying Special Types Of Properties Or Using Unusual Financing Techniques. There are many special issues to consider when you think about buying a condominium, a co-op or any type of home subject to a homeowners’ or property owners’ association.

There are also many special issues to consider whenever someone suggests using “creative financing” plans for the purchase of a home. Unusual financing techniques almost always involve increased risks for a buyer.

The Settlement On Your Home. Especially where a buyer has not had the benefit of legal advice at the contract stage, he needs legal representation by his own attorney to protect his interests and only his interests at settlement. Are the settlement costs charged to the buyer proper and correctly computed? Does the title report reveal any potential problems? Does the title insurance binder cover everything it should? Has the deed been prepared properly? Do the lender’s note and deed of trust accurately reflect the terms of the loan that the buyer is supposed to get?

These are only a few of the important questions that a buyer needs to make sure are answered properly at settlement. Unless you get your own attorney to protect your interests and only your interests when everyone sits down around that settlement table, there will be no one else there who has any obligation to you to make sure that you get the right answers.

(To talk to Beau Brincefield or order his booklet for $19.95, call 703-836-2880.)