REAL ESTATE LAW FAQS
Buying A House
Q. If I contract to buy a house, can I later cancel the deal if I learn the house has major defects?
A. Most contracts to buy a home have “contingency” clauses. These list events that let the buyer out of the deal. Be sure your contract has an “inspection clause.” This will give you the right to cancel the deal if a professional inspector finds serious defects with the property and the seller will not fix them.
Q. There is a house I want to buy. Will I get sued if I cannot get a loan and am unable to complete the deal?
A. Make sure your contract has a “financing” clause. This will let you out of the deal if you cannot get a loan. This will help reduce the risk of a lawsuit if you have to back out of the deal due to a lack of funds.
Q. I need to sell my current home before I complete the purchase of my new home. Is this something I can put in the contract?
A. You should have a "sale of other home" clause put in the sales contract. This will let you cancel the deal if you cannot sell your existing home.
Q. The seller gave me a written list of problems with the home I am buying. Do I really need to pay for an inspection?
A. There can be many more problems the seller does not know about (or does not think are problems). Leaky pipes, a cracked foundation, or rotted wood in the roof are examples. The seller may have lived with these a long time and does not think of them as problems, or may not know about them. Home sellers and their real estate agents are usually not liable for defects if they really were unaware of them. Because of this, you should hire a home inspector to look for defects the seller may not have disclosed.
Q. Should I buy a home warranty?
A. The home will likely have appliances like a dishwasher, air conditioner or heater. If anything breaks, you and the seller could fight over who pays for repairs. A home warranty eliminates this fight because the warranty company agrees to repair any appliances during the warranty period. Buyers and sellers often split the cost of the warranty.
Q. The seller orally agreed to fix something while we were negotiating the sale. He later refused to make the repair. Can I make a claim against him?
A. Probably not. Oral promises concerning the sale of real estate are usually not enforceable in court. So if what you claim the seller agreed to fix was not put in the written contract, it is unlikely you will be able to succeed in making a claim. To help avoid problems like these, buyers and sellers should be sure all promises and agreements from either side are in writing.
Q. If I buy a home, how do I know what items are included in the sale?
A. When you buy real property, you’re buying the land and everything attached to it. Problems can result if the seller takes things you thought would stay with the house, such as light fixtures and appliances. To avoid disputes, be sure the contract states all items you want included in the sale.
Selling A House
Q. If we contract to sell our home but then get a better offer, can we take it?
A. A second offer, received after you have already accepted an offer, can be conditionally accepted as a “back-up offer” in case the first buyer does not complete the deal. A “back-up” offer usually includes words like “this purchase offer is accepted conditioned on the seller being released from a prior agreement to sell.”
Q. The contract to sell my home is long and complicated, but it looks standard. Since I have a real estate agent, do I really need to read the contract?
A. There are many stories of people whose contracts were bad even though they had a real estate agent. In one case, a home seller found out the contract she signed (without reading) made her pay for termite repair, but did not limit how much she had to pay. The contract also made her help pay for the buyer’s loan.
A contract to sell a home is one of the most important documents you will ever sign. It's vital to read it thoroughly even if you have a real estate agent helping you. You should also have your lawyer review the contract before you sign it. Your lawyer can add or correct terms to protect your interests. If you have questions about anything in the contract, ask your lawyer before signing.
Q. I am using a real estate broker to sell my home. If I find the buyer, will I still owe the broker a commission?
A. It depends on the listing agreement you have. There are several different types of listing agreements. An “exclusive right to sell agreement” requires you to pay the broker a commission no matter who finds the buyer. An “open listing agreement” gives the broker a commission only if he or she finds a buyer. You can have open listing agreements with more than one broker, and you can still sell the property yourself without having to pay a commission. Finally, with an “exclusive agency listing,” one listing broker is employed. In most states, the broker gets no commission if the owner finds the buyer. If a different broker finds the buyer, only the listing broker receives the commission.
Q. What is the best way to avoid legal problems when selling a home?
A. Most disputes arise from problems the buyer later discovers with the home. To help prevent this, disclose defects in writing. In most states, sellers are required by law to make full disclosure about the property to buyers. Though rules for which problems must be disclosed vary between states, generally what must be disclosed are "material problems" the seller knows about that affect the value of the home or its desirability — things a reasonable home buyer would want to know. If there is a question about whether a problem is serious enough to warrant disclosure, it's usually best to be safe and disclose it. This helps shield you from future liability and also shows the buyer you are fair in dealing with him or her.
Another good way to help avoid legal problems is to make repairs before selling. This includes plumbing, electrical and other problems that will need to be fixed in any event.
Q. If I sell my home “as is”, does this mean I don't have to tell the buyer about problems?
A. Selling your home “as is” generally means you are selling the home in its current condition and will not pay for repairs. In most states, this does not eliminate your duty to disclose defects you know about.
Q. The person who said he would buy my house backed out of the deal. Can I make a claim based on his oral promise?
A. Contracts to buy real estate usually must be in writing or they cannot be enforced. But if the person knew his or her oral promise would lead you to take some other action (like buying another house), then a claim might still be possible. Talk to a lawyer about this.
General Home Buying Questions
Q. What is “closing?”
A. Buying and selling a home is complex. Documents must be signed. The seller's home loan and liens must be paid and released. The buyer's new loan must be funded by a bank, and the bank's new lien recorded. Most important, title must pass from the seller to the buyer. To protect everyone in the process, all these steps need to happen at the same time. "Closing" is the moment when all these things happen. At the closing, final agreements are signed and money is transferred. It’s the meeting where the buyer and the seller complete the sale.
Q. Do I need an advisor, like a lawyer, when I buy or sell a home?
A. With real estate disclosures, loans and long contracts, having a lawyer's help is wise. In some states, a lawyer is required to supervise or handle certain parts of a real estate transaction. Even in states that don't require this, a lawyer is necessary to guide you through the process and reduce the risk of bad surprises. A lawyer can help you in many ways when you buy or sell a home, including writing and/or reviewing the broker's agreement and purchase contract, adding or correcting terms to protect your interests, answering legal questions and resolving problems while the transaction is being consummated, reviewing closing documents to make sure everything is in order, and representing you at the closing to make sure it goes smoothly.
Even if you have a real estate agent, it is still important to also have a lawyer. A real estate agent gets a commission only if you buy and therefore may have more of an interest in getting the deal done than in protecting you. In contrast, a lawyer has no conflict of interest and has loyalty only to you, with the goal of making sure you are protected as best as possible.
Q. What is title insurance and why is it important?
A. Title insurance is an insurance policy assuring that the buyer receives good title from the seller. Buyers will want to be sure they really own the property, rather than finding out later the seller did not have the power to sell, liens are still on the property, or the boundaries differ from what was told. The title insurer checks the property's history and public records to find out who owned it, its boundaries, and who has liens on it. Later, if any error appears in the title, the insurer must pay for a lawyer to fix it, or to defend the buyer's title, or must pay the buyer.
Q. How should I hold title to my home?
A. There are several different ways to hold title to property. They include:
- Sole ownership. This is how an individual holds title to property. This ownership form does not apply to property bought by married couples. However, if a married couple wants to put title in the name of one spouse, the deed could say the spouse is taking title as his or her "sole and separate property.”
Community property. For husbands and wives in “community property” states, this is one of the main ways the couple can hold property. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
When a spouse dies, his or her half interest passes by will to heirs. The other half belongs to the surviving spouse.
Some community property states now allow an ownership form called “community property with right of survivorship.” In this way of holding title, when a spouse dies, the other spouse becomes owner of the entire property.
Joint tenancy. Available in almost every state, this ownership form is an option when two or more co-owners each have an equal share of the property. The most important characteristic of joint tenancy is that when a co-owner dies, his or her ownership interest automatically goes to the other co-owners.
If a co-owner of property wants to be able to give away his or her interest by a will, joint tenancy would not be a good way to hold title.
- Tenants in common. Tenants in common are also co-owners of property. Interests of tenants in common need not be equal. Unlike joint tenants, tenants in common can pass their interest by a will to whomever they want. If two or more people own property and each wants to be able to give away his or her interest by will, they should consider holding title as tenants in common.
Tenants by the entireties. Many non-community property states let couples hold title as “tenants by the entireties” (in most states, the couple must be married). Like "community property with right of survivorship,” if a spouse dies the surviving spouse becomes sole owner of the entire property.
How you hold title to property has important tax and legal consequences. Our firm can advise you which is the best way to hold title to property in light of your personal and financial situation.
Q. The new home we bought has leaks and other problems. Can we make a claim against the seller?
A. It depends on the facts. Your legal remedies vary based on several factors, including whether you bought the home from the original builder or a later owner, the contract you have with the seller of the home, how long the problem has existed and when you discovered it. Generally, home buyers can recover compensation for problems under different legal theories, including breach of contract, breach of a warranty that the home would be built properly, or the negligence of someone who worked on the home. Because home defect claims are often complex, you should talk to your lawyer and find out about your rights.
Q. What kinds of things can we be compensated for with a construction defects claim?
A. Each construction defects claim is different, and the compensation you can recover depends on the facts of your case. However, some common types of damages buyers can often receive include costs of repairing the problems, costs of hiring inspectors and other experts to investigate the problem, costs of temporary housing in case you must move out of your home while it's being repaired and the loss in value of the home.
Q. If we want to make a claim for construction defects, how long do we have?
A. There are deadlines for making construction defect claims. The time limits vary between states, and they can also vary depending on whether or not the problem is readily visible. Because of these deadlines, and because the longer you wait after discovering a problem the more likely memories will fade and evidence will get lost or deteriorate, it is advisable to seek legal help promptly.