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Q:  Should the Seller and Buyer sign a contract prepared by the real estate agents?

A:  It depends on whether you have had your attorney review it and discuss it with you first.  It is easy to get caught up in the excitement of buying or selling a house and signing a contract on the spot.  The problem is, however, that it often results in the parties signing a contract without having an attorney review it.  Once a contract is signed by both parties, the Buyer and Seller are legally bound to its terms and it may be too late to use any of the good counsel and advice of your attorney. If time does not permit for this review before signing a contract, then at least include in the contract a provision that it is “subject to Buyer’s / Seller’s attorney review and approval” within some agreed time period.  This will provide the parties with additional time to allow their respective attorneys to review the contract with their client’s needs in mind and negotiate the terms if necessary.

 Q:  Does each party to a real estate transaction pay their own Realtor?

 A:  Usually not.  Typically, it is the Seller’s responsibility to pay both the listing agent as well as the selling agent, who may be the same party.  Accordingly, pursuant to common agency law, both of these agents work for the Seller.  There are occasions, however, in which a party will hire – and pay for – the services of a Realtor working exclusively for that party.  Realtor commissions are usually 6% of the sales price, but may be negotiable.  Also, Buyers and Sellers must review the contract carefully to determine whether the Realtor is charging either party an additional administrative or processing fee (which generally ranges between $150.00 to $400.00).

 Q:  Why hire a real estate attorney for a closing if the parties are represented by real estate agents and can use a title company instead?

 A:  The real questions ought to be:  Why wouldn’t I hire an attorney?  Buying or selling a home is often the biggest transaction in a person’s life, with much money involved and risks incurred.  While it is true that a real estate agent often prepares a real estate contract and a title company can act as closing agent, the attorney is the only party that can advocate a position and give its client legal advice.  Buying and selling real estate is an important transaction and to do so without legal representation can be dangerous.  We always recommend hiring an attorney before signing a real estate contract (see above).  Attorneys are trained, have the experience to know what issues can arise during a real estate transaction and can protect a Buyer or Seller by helping to negotiate the contract.  Attorneys may also be able to advise their clients on issues ranging from title, zoning, financing, inspections, taxes, and other contract contingencies that title companies cannot. 

 Q:  How early should a Buyer apply for a mortgage when looking for a house?

 A:  It doesn’t hurt to meet with lenders, whether it is a bank, mortgage broker or mortgage banker, before you enter into a real estate contract.  In fact, educating yourself about the costs of financing a home often may help you determine how much of a house you can afford.  Pre-qualifying for a mortgage is also a good idea because (i) Seller’s will be more comfortable entering into a contract with a pre-approved Buyer (which may be the “clincher” that “gets you the deal” over a competing buyer) and (ii) standard residential contracts only afford the Buyer approximately 5 days following the execution of the contract in which to apply for a loan and 30 days in which to receive final approval and/or loan commitment from the lender. Often your real estate attorney can refer to you lenders who can help meet your financial needs as well as the deadlines under the contract.

 Q:  Does a Seller have to make all the repairs listed under the Buyer’s Inspection Report?

 A:  The terms of the Contract will provide the answer. The Buyer should employ a licensed inspection company to inspect the property and prepare a written inspection report for the parties, and such report must be delivered to the Seller under the time guidelines set in the Contract.  Once the Seller receives the inspection report, they are customarily obligated to make non-cosmetic repairs as set forth under the contract.  Also,  depending on the contract, the Seller may only have to make repairs up to a specific monetary limit and, if the repairs exceed that amount, the Contract will control the parties’ rights.

 Q:  How does a Buyer know if the Seller really has title to the property being sold?

 A:  A search in the public records of the title to the subject property is prepared and analyzed by the Buyer’s attorney to determine who holds title.  Often, the contract will provide for one party to prepare a title insurance commitment and, after the closing, a title insurance policy, on the subject property. 

 Q:  What happens if the parties are not able to close by the closing date in the contract?

A:  If the contract includes a “time is of the essence” provision, the contract’s closing date is a firm one; if not, then a “reasonable” time will be applied.  Of course, there are other contract terms that may affect the occurrence and timing of the closing date.

 Q:  How does a closing take place if any of the parties are out of town on the closing date?

 A:  Closing real estate transactions can be done either in person or by mail away.  If either the Buyer or Seller will be out of town on the date of closing, they will need to notify the closing agent as soon as possible so that the closing agent can coordinate any of (i) a pre-closing signing, or (ii) a mail away of the closing documents (including the loan documents).

 Q:  How can the Seller protect itself and ensure that the Buyer is acting in good faith?

 A:  By taking certain measures at the time the contract is executed.  If the Buyer does not need financing to close the transaction, then the contract should not provide a way for the Buyer to opt out for lack of financing.  If the Buyer needs a loan, then the Contract should provide that Buyer make application for the loan promptly, provide Seller with proof of application immediately, and diligently pursue the financing.  The Contract should require that Buyer place in Deposit an adequate amount of money, and that the Buyer conduct its inspections promptly.

 Q:  What exactly happens at closing? 

 A:  Closing is the process in which title is actually transferred from Seller to Buyer.  Seller executes all documents transferring title to the property to Buyer and Buyer signs loan documents, if applicable.  Parties should always bring photo identification with them to the closing.  Seller must bring all keys, garage door openers and other pertinent information for the Buyer.  Buyer must bring the funds necessary to close the transaction, either in the form of a cashier’s check or wire funds prior to closing.  

 Q: Who pays what at closing?

 A:  The Contract will control who pays costs at closing.  However, typically, Buyer is responsible for all costs related to the loan, including bank fees, escrow, if applicable, title insurance for the lender and Buyer (depending on location of property), survey, recording fees for the mortgage and taxes on the mortgage/note, and attorney’s fees.  Seller is generally responsible for realtor commissions, title searches, transfer taxes on the deed, and its attorneys’ fees.  Who pays the Buyer’s title insurance premiums is often determined by the county in which the property is located. 

 For answers to any other questions, or for more detailed answers to these questions, please contact our offices to schedule an appointment.