Legal on 4: Real estate contract

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Posted 4:27 PM 4/24/2012 : Legal on 4: Selling or Buying a Home Basic Legal Issues, Part 2

TUCSON - Today on "Legal on 4," Craig Wisnom returned to continue his discussion on the basic legal issues surrounding buying or selling a home.

Craig says: "Real estate purchasing is on the rise again, and last time we covered some of the critical legal issues for sellers and buyers. We talked about sellers protecting themselves from future liability by full disclosure, and buyers protecting themselves with a thorough inspection of the home during the inspection period. Today were going finish talking about what you need to know about the real estate contract."

Below are some of the talking points from his discussion with Allison. For complete details, watch the video above.
A. Title Insurance - This is the legal protection that states when you buy a home you actually own the land!
1. Title companies not only insure your ownership, but as part of the process, they research the legal ownership to the land to make sure the seller really owns it and can legally sell it.
2. Title companies will provide the Buyer with a copy of their report, and the buyer has (5) days after he or she gets the title report to object to any issues in the report.
3. While it does tend to be written in legalese, its important for a buyer to review the report to make sure he or she getting what they're paying for.

B. Both sellers and buyers should understand how all costs are allocated when selling or buying a home.
1. The standard form contract outlines a lot of defaults for who pays for what, but those can be changed.
2. It is important to know who is going to pay for costs, such as:
The realtors commission
The title insurance for the buyer
The title insurance for a lender, if there is a mortgage
The escrow fee, which is the charge for the title company to do the paperwork and transfer the money and property
3. Sellers and buyers should get a draft of the settlement sheet in advance, which will outline how all costs are divided and how much they will be.

C. It is also important to make sure any language for provisions, either as an addendum or a counteroffer, is clear.
1. The contract is so lengthy because its intended to clearly spell out what happens in any given situation, if there is disagreement.
2. When people write in an addition to the standard language, there is a risk of ambiguity.
3. Jotting down a few words isnt always enough because later, the seller and buyer could argue about exactly what certain language means or how a provision should be handled.
4. Normally there are no magic legal words, but there should be a clear description of whatever is being agreed upon.
5. The simple test is to ask the question, Will people argue about what this means later on?
6. If in doubt, ask the realtor or title company, or consult with a lawyer.

Whether youre a buyer or a seller, being aware of these issues will avoid any nasty surprises in the future.