General Information on Buying and Selling Real Estate
Here are the basics that you need to know about buying and selling real estate.
1. First, there are only two kinds of property to own in this life: (1) real estate, (2) anything else. Thus, real estate is unique and the laws that apply to it differ from “anything else” property (more technically, “personalty”). The reason: when you own real estate you own a particular piece of the earth’s surface. That fact has immense legal consequences. Visit any law library and check the shelves and shelves of books written about real estate law and lawsuits. You will be impressed that so much could be written about them.
2. Secondly, everything regarding real estate, to be legally enforceable, must be in writing. Centuries ago some wise jurists in England passed a law, called the Statute of Frauds, that mandated writings in order to eliminate the amount of fraud perpetrated over real estate. In the Virginia Code our version of the Statute of Frauds is the 11th of thousands of laws, and will remain basic law forever.
3. Thirdly, the key to every real estate transaction is the writing called the contract. The contract, or “purchase agreement”, is the road map detailing how the seller’s interest in a property will become the buyer’s interest. You can probably find online a one or two page form contract, which, when properly executed, can be legally enforceable. But the standard contract used in the local residential real estate industry can run to seven, even fifteen, pages of small print. And that form contract is constantly undergoing revision because of both practical and legal necessities. The amazing thing is that every one of the prosivions in all those pages is important in defining the rights and obligations of the parties. Commercial real estate contracts can be the size of a book. Of necessity, one or two page contracts skip many important issues that can lead to stressful, time-consuming disputes between buyers and sellers. That includes key requirements set out in the Code of Virginia which every commercial form we have seen ignores.
4. Fourthly, when you sign a contract you are bound by its terms – whether you read it or not and whether you understand it or not. You cannot increase your rights or reduce your obligations without the consent of the other party – in writing. So there is nothing more important you do than signing the contract. It is up to you to be sure it contains everything you want – if you make a mistake a court will not rewrite the contract for you, even if the court agrees with you that you were a fool to have signed the contract! That is why any good contract will have a provision at the bottom advising you to consult legal counsel before signing. Many folks fail to follow that advice, which is good for trial lawyers since the majority of lawsuits over real estate matters could have been prevented by a carefully worded and understood contract.
Where to Turn for Guidance
Fortunately, there are a number of professionals who you can look to for guidance and assistance through this complicated labyrinth: Attorneys, Real Estate Agents and Mortgage Loan Officers. Here’s what they do.
1. Real Estate Attorney (Closing Agent) There are two parties to a contract, and even though both have the common goal of transferring title to the property, one wants to sell high and the other wants to buy low. Both want the other side to pick up unexpected costs and deal with unexpected problems. Thus, inherently, there is a conflict of interest. Given that situation, only a real estate attorney is trained and licensed to advocate your legal rights and advise you on the law protecting your interests. And, believe us, the law has many gray areas where who has what rights is a close call. The law can vary from state to state and even from court to court within a state. Only a lawyer familiar with the local courts can give highly informed legal advice.
Under Virginia law a non-lawyer title or escrow company, as well as an attorney, can conduct the closing on your contract. There are many of these closing companies and when there is no conflict between the parties, the closings can go smoothly. On the other hand, when a dispute arises, the closing agent cannot provide any legal advice. Since you are involved in a major financial transaction fraught with legal complications, and the difference in fees is small, if any, why increase your risk by not hiring a real estate attorney in the first place? We have had to straighten out sad stories of folks who thought their sale or purchase was so simple an attorney was unnecessary. We advise that you live by the realistic rule that an ounce of prevention is worth a pound of cure. Get legal representation up front.
Virginia law allows you and the other party to employ the same attorney if both sides consent. While this often happens, the pitfall is that if a dispute arises between the contracting parties, the attorney cannot represent either one – observing the biblical injunction that one attorney cannot serve two masters. In that case both sides need to hire other legal counsel.
2. Real Estate Agents Some think a real estate agent has an easy job. We do not. Every agent is licensed by the State of Virginia following hours of training and passing a challenging exam. To keep that license they have to keep taking more training. Most real estate firms have ongoing in-house training as well. To be effective a real estate agent has to be expert in a wide range of issues and spends hours keeping abreast of the changing market of available properties.
As a seller, your agent can help you on pricing your property, giving it the best marketing presentation for potential buyers, locating handymen for quick repairs or fixes, negotiating contract terms, shielding you from folks who only want to intrude on your time, and giving you information on the entire process of selling. As a buyer, your agent can direct you to properties in your price range in desirable locations, make recommendations of people to help from attorneys and loan officers to home inspectors, and negotiate your contract of purchase. They then give support through the sometimes tedious process of confirming your loan and seeing that the deal closes. The importance of this last role cannot be overemphasized. You cannot assume that just because you have a signed contract that everything will go smoothly. Your real estate agent has a vested interest in a successful closing and is your main ally.
3. Mortgage loan officer Without money the deal goes nowhere. In the last few years the number and variety of mortgage loan programs have increased so greatly that your choice of a good mortgage loan officer can translate into big dollar savings. You will likely be ahead of the game if you scout for a loan officer early. She or he can pre-qualify you so you have an idea of a realistic price range to look for in a property. Make sure the officer who pre-qualifies you is emphatic with you that the pre-qualification is not a commitment. Only with a commitment is the loan company obligated to make you a loan.
In selecting a loan officer, you should seek a positive recommendation from a real estate agent or other professional. You will benefit from working with a lender whose office is in the area where you are looking to buy. Working with a lender located in another state, often found by responding to a television ad or the Internet, will unnecessarily complicate and possibly delay the loan process. We find that local loan officers usually offer equal or better loan terms than those doing mass advertising and can give more personal attention to your situation.