Buying a Home

Buying a home may well be the largest financial transaction in which you will be involved. It is wise to proceed with caution and be aware of the legal importance of the basic steps involved in buying a home.

Once you have found the home you want to purchase, but before a contract is entered, the Pennsylvania Real Estate Seller Disclosure Act obligates the seller to give a specific and detailed written disclosure to the buyer regarding any known material defects concerning the property. A "material defect" is a problem with the property or any portion of it that would have a significant adverse impact on the value of the property or involves an unreasonable risk to people on the land. This disclosure is limited to material defects to which the seller has actual knowledge. Therefore, it is not a substitute for a close and careful inspection of the home and its many components.

If the home was built prior to 1978, another preliminary step needs to be taken prior to the execution of the Contract. Regulations issued by the Federal Environmental Protection Agency require specific and detailed disclosures which must be made by the seller to the buyer before the buyer is obligated to purchase. The buyer must be given a pamphlet providing information on the risks and dangers of lead-based paint. Additionally, the seller must disclose to the buyer the presence of lead-based paint that the seller has actual knowledge of and provide the buyer with copies of any lead hazard evaluation reports on the property available to the seller. The buyer also has the right to conduct an inspection of the property for lead-based paint prior to becoming obligated to purchase, unless that right is waived in writing. The regulations also require that the sales agreement contain certain warnings and certifications regarding lead-based paint.

After obtaining this important information, the next step is to enter into a written contract which legally binds you to purchase the home. The Contract also legally binds the seller to sell the home. This written document is known by several names including Agreement of Sale, Agreement of Purchase, Articles of Agreement, Purchase Contract or Sale Contract.

This contract is one of the most important documents you will sign in the entire process of buying a home. It sets forth the entire agreement between the buyer and the seller including the terms and conditions of the transaction such as the purchase price, the amount of the initial deposit or earnest money you will pay, what items of personal property are to be included or excluded (such as carpeting, gas grills, drapes, etc.), when the closing is to take place, which party will pay the realty transfer taxes, when possession to the property will be given, the remedies if either party defaults and the contingencies involved in the transaction.

It is essential that all important terms be set forth in the written contract. If something you have agreed to orally before you signed the contract is not set forth in the written contract you may not be able to enforce that oral promise.

The word "contingency" was mentioned earlier. A contingency is a condition or event that must occur after the contract is signed by all parties, or the parties will be released from their obligation under the contract. For example, as a buyer you may not be familiar or comfortable with inspecting the roof, wiring, plumbing or other components of the home. You might include a contingency in the contract stating that you will be released from your obligation to purchase the home if a home inspector you hire fords a serious problem with the home's condition.

Another similar contingency relates to testing the home for Radon (an invisible and non-odorous gas that causes illness if found in high quantities). Also, if a home is not serviced by municipal water and sewer, a contingency may relate to the purity and quantity of well water as well as the condition of a septic system.

The most common contingency relates to a buyer obtaining mortgage financing. You should carefully compare the various loans offered by banks and savings institutions in your area to determine what is best for your needs. If after you have made your formal application for financing, you cannot obtain the loan you requested, you can receive a refund of your deposit money and be released from your obligation under the contract when the mortgage contingency is in place.

However, if the loan is approved, and all other contingencies in the contract are met, you are legally obligated to purchase the home. The formal occasion in which you meet with the sellers to sign the loan documents and pay the sellers the purchase price is called the "closing" or "settlement". At the closing you will review and approve all the financial aspects of the transaction and sign all the necessary documents.

It is becoming more common for real estate agents to offer "buyer agency." That is, rather than working for and representing the seller, the real estate agent works for and represents the buyer. It can be advantageous for a buyer to employ an experienced and knowledgeable agent to represent them in the buying of a home. The buyer's agent can provide valuable information as to the value of a home, neighborhood conditions, the condition of the home, and can actually assist in the negotiation of the purchase. The amount of compensation to the buyer's real estate agent, how they are paid and who pays them are all negotiable. It is quite possible to employ a buyer's real estate agent, but have the agent paid by the seller.

Because of the importance of this process, financial and otherwise, it is important that you retain the services of an attorney. In most transactions, a Realtor will prepare the written contract. This Realtor is often employed by and paid by the seller. Thus, as a buyer, you may wish to review the terms and conditions of the contract with your attorney before signing a contract to purchase. You have that right.

Your attorney will examine the title to the property you are purchasing to make certain that there are no liens or outstanding claims on the title that would affect your ownership of the property. Your attorney will also prepare or review the documents necessary for the closing and will attend the closing with you to protect your interest and answer any questions you may have.  5/11

If you need an attorney and don't have one, the Lawyer Referral and Information Service can help.

Call Us Monday - Friday from 8:30 AM - Noon and 1:15 PM - 3:00 PM at (814) 459-4411.