The purchase of real property is most often the most complex and largest economic transaction that you will undertake. While there are standard forms that people mistakenly believe cover all issues and that seem straight forward, those forms are not all-encompassing and merely serve as the starting point.
Real estate transactions involve numerous technicalities that can result in significant financial losses. All issues must be considered, including writing the offer, accepting the offer, the real estate condition report, inspection contingencies, survey / use contingencies, deed restrictions and covenants, financial contingencies, and appraisal contingency for the best protection.
Attorney Timothy S. (Tim) Riley was a guest lecturer and teacher for residential real estate at the University of Wisconsin at Madison.
I have represented hundreds of clients in the purchase and sale of homesteads (residential real estate), commercial properties (commercial real estate) and vacant land. I offer a flat fee to represent clients in purchases and sales that includes all services from the offer through closing. My current flat fee is $550 for those services and is detailed in my flat fee retainer.
While the standard form contract is "cookie cutter" in nature, each transaction is unique to the property and the circumstances of the buyer and seller. ?As such, the standard offer with the blanks filled in is not an offer that adequately addresses all concerns and not an offer that protects all the interests of the buyer.
There are any number of issues to consider in writing an offer or in accepting or countering an offer received that will impact the ultimate success of the transaction and satisfaction of the client. ?Even simple contingencies such as the date of closing can become quite significant when a party is involved in purchasing another property while selling their current property. ?If multiple transactions are involved, a seller or buyer must coordinate the contracts and employ safeguard contingencies in the event one of the offers fails.
Wisconsin law requires that a seller of real estate who has occupied
the premises to be sold provide the buyer with a standard Real Estate Condition Report. ?As to sellers, it is wise to err on the side of disclosure if you have a question as to whether a condition affecting the property constitutes a potential defect. ?Buyers should carefully review the disclosure and provide a copy of the disclosure to your inspector.
I strongly recommend that any purchaser engage the services of a certified home inspector as part of the transaction. The standard inspection contingency language does not address additional testing, (i.e., radon/lead in older homes, contamination or asbestos issues). ?The inspection contingency should carefully address the right to have additional tests or inspections as recommended by the initial inspector. These might include a chimney, roof, electrical, or HVAC specialist as examples.
There are occasions where a survey contingency may be an essential part of the Offer to Purchase. Most commonly, this occurs with larger parcels or vacant land. It is important to note that your title insurance will not insure the lot lines or boundaries of your real property in the absence of a current ALTA certified survey. ?If you have a dispute with an adjoining land owner on a lot line after closing, the insurer will have no obligation to defend you in the absence of a survey.
Survey and use contingencies are highly recommended when a purchaser intends to build on a lot or expand on an existing improvement. It is essential to determine whether any setback or ordinance provisions will affect or even prohibit the intended use or improvement. A carefully constructed offer protects the buyer from unintended or adverse consequences once the offer is accepted.
Deed restrictions and covenants are far more common in properties or developments that are newer in nature. However, there are often deed restrictions and covenants attendant to older property. These restrictions and covenants can greatly affect the use of your property. Even something as simple as the desire to construct a fence or paint or re-side your home in a different color can be restricted or prohibited by deed restrictions and covenants. Your offer should always include a contingency for review of deed restrictions and covenants.
It is, of course, always advisable for a prospective purchaser to obtain pre approval from a lender prior to commencing the pursuit of a home purchase. ?This is particularly the case given the current economic climate. The financing contingency is of equal importance to the seller and purchaser. ?Sellers need to pay attention to the terms of the contingency - not only as to the length but also to ascertain that they have a legitimate and serious prospective purchaser.
Buyers want to present this contingency in the terms most favorable to their economic circumstances. ?A buyer can always elect to go with a higher percentage rate or lower loan to value ratio than stated in the contingency. In short, the contingency should reflect reasonable yet favorable terms as to amount, term and interest rates.
Both parties need to pay particular attention to the loan commitment language regarding the satisfaction of the contingency. ?The contractual language often contains caveats whereby the mere issuance of a commitment does not necessarily satisfy the commitment.
While your lender will conduct an appraisal of the home as part of your financing, a separate appraisal contingency affords the purchaser additional protection. ?The financing contingency does not require that the home appraise out at the offer price. ?By inserting a separate appraisal contingency requiring the home appraisal value is at least the purchase price offered, a buyer can avoid any risk of being committed to purchase a home at a price in excess of a certified appraisal.
We offer representation to both sellers and purchasers in for sale by owner transactions. ?
Whether or not a buyer's agent is involved in the offer process, an experienced real estate attorney can offer legal advice beyond the capabilities of a realtor.
Many real estate firms and lenders have relationships with a particular title company. ?As a seller, you have the right to choose the Title Insurance Company to issue the policy to the buyer. ?This is a relevant factor as you will find different companies charge different rates and fees on the same transaction. ?You can save money by making proper inquiry and "shopping" your businesses.
Title Insurance is now a mode by which a purchaser is advised of the status of the title to the property reference ownership, liens, easements, covenants and restrictions of record, etc. ?It then insures the title subject to exceptions to your coverage. ?It is absolutely essential that your attorney review the commitment in advance of the closing to clear any problems with the title in advance of closing. ?A number of standard exceptions to your title coverage can be "marked up" and removed at closing. It is important to have an attorney who can both explain the commitment and ensure you have the broadest title coverage.
Contact Riley Law Office
If Attorney Tim Riley can be of assistance to you with your legal situation, please call Riley Law Office for a free initial consultation at (608) 833-3880 or email Attorney Riley. Attorney Riley will be happy to speak with you with no obligation on your part.