Each piece of real estate is unique, which is part of the beauty of buying a home. However, this uniqueness can also lead the unwary first-time homebuyer into making legal mistakes and increasing costs by thousands of dollars. Here are two legal mistakes to avoid when searching for your first home.
Failing to Read and Understand the Real Estate Contract
The old saying goes that there’s more than one way to skin a cat. This is also true for contracts, including contracts for real estate purchases. Many first-time homebuyers don’t realize that when they make an offer and it is accepted by the seller, they have entered into a binding legal contract even though closing is far off into the future. If the contract is not upheld, regardless if the new homeowner is not aware of its existence, there are stiff financial consequences, often at the discretion of a court. Defending yourself in court is expensive, and you might have to pay thousands more in damages to the seller if they win the case. It is important to be aware of the legalities before placing an offer on a new home.
Buying a Foreclosed Home Without Understanding the Potential Risk
The main risk of buying a foreclosed home is a lack of awareness regarding your state’s law on foreclosure. For example, if you buy a property that has been foreclosed upon, and the foreclosed owner is able to convince a court that the foreclosure was handled improperly by the bank, you will have to hire an attorney to sort your case against the previous owner. The impending lawsuit can be costly, and you may lose a portion of the money you invested into the new home, and still owe on the mortgage you took out even if you lose the property.
When considering a foreclosed home, hiring a competent real estate attorney is advisable. He or she can advise you about whether your state has what is known as a period of “redemption” and how much risk you are undertaking by considering this foreclosed property. Calculating the amount of risk you can handle before jumping in on a foreclosure is the best way to ensure you are covered financially.
How to Protect Yourself from Legal Turmoil
Be sure that you have everything you require built into the contract to reduce your risk, however, you cannot reduce your risk entirely. Attempt to swing the odds a bit to even out the risk between both parties by having competent legal aids assist you in creating your offer. Some states even require this action to be taken. It may be expensive, but it is a kind of insurance policy you cannot afford to skip.
An attorney can build clauses into the contract that release you from any contractual obligation if a specified need is not fulfilled. For example, a properly drafted clause can release you from the contract if the property does not pass inspection, or you do not qualify for a mortgage, or require the seller to maintain insurance on the property until closing. These may seem like basic examples, but there are many individuals who use ready-made online real estate forms that lack clauses to address the uniqueness of their situation. They then find themselves bound into a contract they desperately want out of.
By consulting the proper legal authorities, you can avoid succumbing to common legal missteps that often plague first-time home buyers.
This article was written together with Billy Dunham, an avid blogger who writes about home improvement articles throughout the web. They write this on behalf of riverstone luxury home builders in Texas. If you’re looking to build a new home, make sure to check out their site to see why they should be your number one choice!
