Recent statistics indicate that the housing market is slowly starting to rebound in Michigan, and with the spring home buying season not too far away, I thought it would be a good idea to offer some tips to anyone buying a home.
Whether you are using a real estate agent during the purchase process or not, it is vital that you protect yourself by having a purchase agreement for the home that will ensure you will get what you expect when the deal closes.
Generally, the purchaser’s real estate agent will prepare the Agreement. Unfortunately, too many people sign a purchase agreement that is drafted by their agent and come to regret that decision later. A real estate agent is not as knowledgeable of the law as an attorney and may not always be looking out for your best interests. That’s why I always recommend that the buyer have a qualified real estate attorney review the purchase agreement before they sign on the dotted line and commit to a home purchase. Remember, the purchase agreement is a binding contract, so once you sign it you may not be able to get out of purchasing the home.
One of the important things a well-drafted purchase agreement can provide the buyer is peace of mind in the event an issue arises during the sale process. That’s why the purchase agreement needs to spell out all the transaction details as well as any contingencies where the buyer can renege their offer.
Probably the most important contingency is to make certain the purchaser qualifies for a mortgage in the amount necessary to purchase the home. In the event the purchaser cannot obtain a mortgage he or she does not want to be legally committed to purchasing a home when they don’t have available assets. Another important contingency is that the purchaser should have an inspection of the property by a qualified home inspector. The inspection contingency provides that in the event the inspector finds material problems with the property, the purchaser may opt out of purchasing the property. Of course the parties may still come to an understanding regarding the problems. This may consist of the seller correcting the problem or a reduction in the purchase price. However, the inspection contingency is a negotiated item and the standard inspection language in the Agreement may not be beneficial to the buyer. An attorney may assist you with this language to protect you in the event the inspection is not satisfactory.
The purchase agreement should also include all the provisions that you have agreed upon with the seller regarding the purchase. For example, if there is a child’s play set on the property and the purchaser has children he or she may want to include the play set in the items being purchased. If this is not provided for in the Agreement the purchaser will not receive the play set. You should also specify the date that the seller must vacant the property, or even the “rent” the seller will pay if they stay over the time limit.
Having an attorney involved in the purchase process from the beginning is the best way to protect the purchaser when they are buying an owner-occupied home, but it is even more important when someone is buying a foreclosed home that is unoccupied because these homes are often vacant for months and can have serious issues (such as water leaks) that have damaged the property. That’s why it is important to have a purchase agreement with contingencies that ensures the purchaser doesn’t have to buy the home if any damage issues are discovered during the home inspection.
Because there are not a lot of homes for sale on the market these days, I have also heard about bidding wars between buyers for particular homes. That too can be a dangerous purchase strategy that could lead to serious consequences if you are in a hurry to buy and don’t take the time to have an attorney involved in the purchase process or a home inspector go over the home before you make an offer.
Even though you should have a lawyer involved from the beginning, a contingency provision should provide for an attorney to review the Agreement in the event there a changes to the original offer.
Purchasing a home can be an exciting time for anyone. But remember, getting an attorney and home inspector involved in the process can ensure you are getting the home of your dreams instead of a money pit!
If you would like assistance in reviewing or drafting a purchase agreement, please give me at call at (248) 932-5200.