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Real Estate/Home Purchase

Q. What do real estate agents or brokers do?

A. A suitable home for purchase can be found in different ways. Looking through a desirable neighborhood will often find "for sale" signs posted on lawns. Local Advertisements for homes by geographical location are listed in the classified section of almost every newspaper. Primarily, however, people locate homes through the use of a real estate agent or broker. Real estate agents charge a commission based on a percentage of the sales price of property sold. The percentage will vary widely and can range from as little as 1% to as much as 10% or more. Often, the commissions are negotiable. A real estate broker is almost invariably the agent for the seller; the agent owes a duty to the seller to act with the utmost of good faith. The agent will, therefore, try to receive the highest possible purchase price for his client. A buyer may be able to locate an agent who will work just for him/her; such agents are sometimes called "buyer's brokers. A buyer's broker generally will charge by the hour or on a flat fee basis.

Q. What efforts will the real estate agent make to sell the property?

A. Real estate agents usually will  advertise listed properties in newspapers or specialty journals. In many states, they will post the property with a multiple listing service alerting other agents that the property is available for sale. If a real estate agent other than the broker subsequently sells the property, the commission is shared with the listing broker.

Q. What is a contract for purchase and sale?

A. Once there has been a agreement between buyer and seller on the terms of purchase of property, a contract will be prepared and signed by all of the parties. The contract will specify the purchase price, any applicable conditions such as rights of inspection, financing terms and date and time of closing. A contract for purchase and sale is the final word on the agreement between the parties. Any oral agreements or promises made before the contract is signed are void and unenforceable. The purchase and sale agreement should provide that any earnest money (deposit) will be placed in either the broker's or an attorney's escrow (trust) account to ensure that the buyer will get his money back if the purchase is not completed due to no fault of the buyer.

Q. Can a contract for purchase and sale be contingent (conditional)?

A. Yes, various contingencies and conditions are often contained in real estate contracts. Usually the contract will state that the buyer will make a good faith effort to obtain a mortgage and that if the buyer fails to qualify for a mortgage, the contract is cancelled and all deposit money will be returned. The contract will also generally be conditioned on the seller being able to convey good and marketable title to the purchaser, i.e., that there are no liens or claims against the property and that it is owned by the seller.

Q. What is a mortgage?

A. Unless a purchase will be paying all cash to purchase a home or property, they will have to find a lender willing to finance the purchase. A lot of banks or mortgage lenders can assist in locating lenders and or will actually make the loan. A mortgage is a contract that gives the lender a "secured interest" in real estate. This means that if the borrower fails to make his mortgage payments, the lender can foreclose the mortgage and take the property. Mortgages are accompanied by promissory notes that set out the amount of money owed and how it is to be repaid.

Q. What portion of a monthly mortgage payment actually goes towards reduction of the loan?

A. The amortization (payoff) of mortgages is scheduled so that in the early years, the largest portion of the monthly payment is set a side to interest and only a small portion to principal. This means that after 5 years of payments on a 20 year mortgage, there will be only a small reduction in the principal amount of the loan. In later years, a larger portion of the payment actually is applied to loan reduction.

Q. How does a borrower know what a mortgage loan will cost and what the monthly payments will be?

A. Under federal law, the mortgage lender is required to make full disclosure of the true interest rates, the cost of the loan, any commissions paid and the amount of the monthly payment.

Q. What happens if the buyer defaults on his mortgage loan and fails to make payments?

A. The lender will file a legal proceeding called a foreclosure. In a foreclosure action, the lender will be required to show that payments were not made as agreed. After a foreclosure judgment is obtained, the property is auctioned for sale and the proceeds are used to pay off the mortgage loan.

Q. What should a borrower do if served with a complaint for foreclosure?

A. If the borrower is truly in default, the remedies are somewhat limited. The borrower can seek new mortgage financing for a longer term that will allow for reduced payments.

Q. What happens if a buyer cannot qualify for a mortgage loan?

A. If a mortgage contingency clause (i.e., a provision that makes the contract conditional upon the buyer being able to obtain a mortgage) is contained in the contract for purchase and sale, the buyer will receive a refund of any deposit money advanced toward the purchase. The buyer can also attempt to obtain a purchase money mortgage from the seller.

Q. What rights does a buyer have when applying for a mortgage?

A. The federal Equal Credit Opportunity Act as well as other federal regulations stops lenders from rejecting loan applicants due to race, color, national origin, religion, sex, marital status, age, or handicap. Additionally, a mortgage lender must consider any public assistance funds, alimony, child support or maintenance payments received by the applicant on a regular basis as if such payments were ordinary income.

Q. Do the buyer and seller need to be represented by an attorney in a real estate transaction?

A. It is strongly recommended that a buyer be represented when purchasing real estate property.


Q. What are condominiums and cooperatives?

A. Condominium is the term for a form of ownership of real estate where a buyer acquires title to an apartment or unit in a multiple dwelling building and receives a right to use common areas such as recreational areas.

 

 

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