Buying Your Home:
Settlement Costs and Information
II. Buying and Financing a Home
Terms of the Agreement of Sale
If you
receive this Booklet before you sign an agreement of sale, here are some
important points to consider. The real estate broker probably will give
you a preprinted form of agreement of sale. You may make changes or additions
to the form agreement, but the seller must agree to every change you make.
You should also agree with the seller on when you will move in and what
appliances and personal property will be sold with the home.
Sales Price. For most home purchasers, the sales price
is the most important term. Recognize that other non-monetary terms of
the agreement are also important.
Title. "Title" refers to the legal ownership of your
new home. The seller should provide title, free and clear of all claims
by others against your new home. Claims by others against your new home
are sometimes known as "liens" or "encumbrances." You may negotiate who
will pay for the title search which will tell you whether the title is "clear."
Mortgage Clause. The agreement of sale should
provide that your deposit will be refunded if the sale has to be canceled
because you are unable to get a mortgage loan. For example, your agreement
of sale could allow the purchase to be canceled if you cannot obtain mortgage
financing at an interest rate at or below a rate you specify in the agreement.
Pests. Your lender will require a certificate
from a qualified inspector stating that the home is free from termites
and other pests and pest damage. You may want to reserve the right to cancel
the agreement or seek immediate treatment and repairs by the seller if
pest damage is found.
Home Inspection. It is a good idea to have the home inspected.
An inspection should determine the condition of the plumbing, heating,
cooling and electrical systems. The structure should also be examined to
assure it is sound and to determine the condition of the roof, siding,
windows and doors. The lot should be graded away from the house so that
water does not drain toward the house and into the basement.
Most buyers
prefer to pay for these inspections so that the inspector is working for
them, not the seller. You may wish to include in your agreement of sale
the right to cancel, if you are not satisfied with the inspection results.
In that case, you may want to re-negotiate for a lower sale price or require
the seller to make repairs.
Lead-Based Paint Hazards in Housing Built Before 1978.
If you buy a home built before 1978, you have certain rights concerning
lead-based paint and lead poisoning hazards. The seller or sales agent
must give you the EPA pamphlet "Protect Your Family From Lead in Your Home" or
other EPA-approved lead hazard information. The seller or sales agent must
tell you what the seller actually knows about the home's lead-based paint
or lead-based paint hazards and give you any relevant records or reports.
You have
at least ten (10) days to do an inspection or risk assessment for lead-based
paint or lead-based paint hazards. However, to have the right to cancel
the sale based on the results of an inspection or risk assessment, you
will need to negotiate this condition with the seller.
Finally,
the seller must attach a disclosure form to the agreement of sale which
will include a Lead Warning Statement. You, the seller, and the sales agent
will sign an acknowledgment that these notification requirements have been
satisfied.
Other Environmental Concerns. Your city or state
may have laws requiring buyers or sellers to test for environmental hazards
such as leaking underground oil tanks, the presence of radon or asbestos,
lead water pipes, and other such hazards, and to take the steps to clean-up
any such hazards. You may negotiate who will pay for the costs of any required
testing and/or clean-up.
Sharing of Expenses. You need to agree with the seller
about how expenses related to the property such as taxes, water and sewer
charges, condominium fees, and utility bills, are to be divided on the
date of settlement. Unless you agree otherwise, you should only be responsible
for the portion of these expenses owed after the date of sale.
Settlement Agent/Escrow Agent. Depending on local practices,
you may have an option to select the settlement agent or escrow agent or
company. For states where an escrow agent or company will handle the settlement,
the buyer, seller and lender will provide instructions.
Settlement Costs. You can negotiate which settlement
costs you will pay and which will be paid by the seller.
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