Undertaking a house purchase can be a daunting task; with time and money coming off as the two major deciding factors in this whole pursuit. It is one of the important decisions people make in their lives – hence even the smallest of the complexities involved in home buying require attention. The process becomes all the more complicated owing to several legal hurdles that impede progress on this front.
First-time buyers generally consider these prerequisites as irrelevant requirements; something which exhausts their morale. This notion stems from the fact that real estate has always been considered a contentious topic among the masses – a supposition that has given rise to a number of unwanted, unforeseen conflicts in the property sphere over the years.
This makes it important for the buyers to know about the kind of legal issues prior to commencing with the property purchase process. To obtain a basic (and even advanced) knowledge on this front, one can always avail the facilities provided by real estate portals. Consider the case of Pakistan where local property websites (including Prop) cover the legal aspect of the house purchase process.
Here we have listed down some of the common legal issues (and requirements) a buyer face while purchasing a house:
Brokerage Contract
Most buyers/sellers prefer to contract the services of a real estate agent for commencing with the property sale or purchase. For this purpose, the two parties become signatory to a brokerage agreement. Under this written contract, the broker acts the legally recognized sales representative of the principal (buyer or seller) in return for a commission.
While this process may sound simple, in reality, you should undertake these legally-binding contractual obligations with utmost caution; becoming a signatory without thoroughly vetting the agreement can create serious legal implications for you. A good (and practical) advice on this front is to consult a lawyer before commencing with the process.
Vague Terminologies
Carefully read through the contents of your agreements as these documents contain all the kinds of confusing, vague terminologies. Most people tend to shy away from divulging into the details of the agreement they undertake. This approach needs to be discouraged because individuals who undermine the importance of contractual details end up getting the short end of the stick.
To elaborate on this front, some brokerage agreements may result in you paying a large amount of fee even when the agent actually hasn’t assisted you with the sale – while it is fair that you still pay them for the services they provided apart from the sale, be sure that agreement is fair for you.
To prevent such unforeseen happenings, you can always consult a lawyer who can be of assistance in such legal matters.
Sale Agreement
A sale agreement makes it mandatory for sellers to disclose the details of their property to the buyers. However, in some cases, a seller may intentionally hide such crucial information and offer you an encumbered or mortgaged property; although it’s his legal obligation to inform you about the litigations (including potential boundary disputes).
Some of the sellers tend to bury relevant details about their properties so deep under the legal jargon that you won’t even notice; so be careful to find the following about any house you are buying. Moreover, do not hesitate to communicate your concerns with the seller. It is important to seek answers with regard to the legal status of the property directly from the seller because he knows his property more than you do.
Follow the Murphy’s Law and take your precautions accordingly. Be sure to include stipulation within the agreement about the cases when you find out that property has some incurable defects in construction – it may have design flaws; asbestos may have been used, it may contain hazardous waste or it may have lead-based paint. The agreement must have stipulations about what happens in each of these cases.
Title Search
After finalizing the purchase agreement, it is necessary to establish the state of the seller’s title to the property. Before closing, you (and/or the lender) will want to know what the title exceptions against the property are. These may include easements, rights of access, prohibitions against remodelling, and claims of ownership.
Closing Statement
Once all the details have been finalized and papers checked, the sale deed will be prepared and signed. This will also officially and legally pass the ownership of the property from the seller to the buyer; who, in response, has to make the full payment. A closing statement detailing the debits and credits to the buyer and seller serves as a requisite on this front.
Moreover, it is better to have your attorney by your side before you proceed with the sale deed and mortgage instrument finalization. The process is often legally complicated and usually the seller, as well as the financial institution lending you the money will have their attorneys present. You might want to have a complete legal understanding of the process before you go around signing the papers.
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