In an ideal world, the home buying process should be smooth and straightforward. In the real world, however, the process is complex and is filled with a lot of challenges. Challenges that go beyond finding a great real estate agent and finding the perfect home to the legality of the whole process.
While buying a home may be exciting, the process is a legal contract and as such here are some of the legal problem areas in real estate:
Problem with Title.
“Title” as defined by McMullan & Brown is a property owner’s right to own, use or sell a piece of land. A title defect refers to any potential threat to a current owner’s full right or claim to sell a property.
A shared misconception among new homeowners is that after signing all the documents at the closing table, they become outright owners of the homes. There are some circumstances that could threaten their rights as the real state title holder.
A common title defect occurs when the property has a publicly-recorded problem such as a lien, when a property owner fails to pay property tax or a utility bill. Another instance is when a homebuyer takes out a mortgage loan to pay for their home—In which case the lender has a lien on the property and may foreclose on it if the homebuyer fails to make payments.
Other title defects may occur due to errors in the public records, bankruptcies, liens for child support and spousal support, forgeries. Undiscovered wills, missing heirs, illegal deeds, boundary and survey disputes, unknown easements and undiscovered encumbrances.
The good news is that homebuyers can avoid these title defects. The first step a homebuyer should do is a title search—a title agent or real estate attorney will conduct it on their behalf. They will ensure the title has no issue attached to the property the homebuyer wants to purchase and that there exists no break in the chain of title or other important paperwork that leads to any lien.
Alternatively, getting a homeowner’s title insurance policy that covers any future threat to the owner’s right to the property. The policy is far much cheaper than “curing” the tittle, an expensive process of removing lien and other encumbrances attached to the property.
Problems with access.
Road easement is another common problem area for people navigating land ownership and purchasing property. It refers to the legal right of a non-owner to use part of another person’s land for a specific reason.
Road easements often occur when a person needs to access their property but there is no legal pathway between a given parcel of land and public roads—making it difficult to legally use land they’ve purchased. In such cases, road easements or other legal tools are used to remedy the situation.
Unfortunately, easements do not have to be written into the title deed to exist, this may make it difficult for land buyers to know whether a property has easements or not. Some states, however, legally require sellers to disclose easements on their property. In most cases, it is always up to you to do your due diligence
Problems with disclosures.
All sellers of real estate have a duty to disclose to a buyer any defect that a property has. A homebuyer does not have to make inquiries about the conditions of the home so that disclosures are made. It is the affirmative duty of the seller to disclose this information to the seller.
In some states, sellers are only required to disclose any known defects with a real estate property only when asked. However, the rules in California are far more stringent, requiring all sellers to disclose all defects of a home that materially affect the value of a home without being asked. If a seller fails to disclose defects that arise before and during the execution of the contract, they can face significant consequences. The seller is also required to disclose any previous defects even if they have been fixed.
If a buyer is able to prove that a seller knowingly withheld the knowledge of defects, they can sue and are entitled to compensatory damages (out of pocket expenses the buyer incurs), punitive damages, equitable relief (this is non-monetary, includes the court asking the seller to do or not do something.)
However, it is even better that before buying a property that a homebuyer seeks legal assistance to protect their legal right.
Problems with enforcement
Once the seller and buyer sign the Agreement of Purchase of Sale, a legally binding contract is formed. But even after the contract for a real estate transaction has been drawn up, challenges may still exist. For instance, if a buyer or a seller attempts to back out of an agreement if a better offer is made. In some cases, there might be an error in the agreement, while others might agree to have it amended, others may take the error as an opportunity to back out from an agreement. There, however, litigations that enforce these pending contracts and may even provide an incentive to complete the transaction in question.
Buying or selling a home is made out to be simple. The reality of the whole process can be quite complex, more so if you do not know what pitfalls to look out for—and that can cost you. For starters, many homebuyers believe that as soon as they buy a home, they have a right to it. If a property upon purchase has lien, then the authority owed has the tittle right of the property. In other cases, homebuyers are unaware of their legal rights when it comes to defect disclosure. Homebuyers, in general, have to do their due diligence and go a step further to contact a real estate attorney to anticipate and remedy any problems arising from the process.
About the Power Is Now Media
The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com.
Eric Lawrence Frazier, MBA.
President and Founder,
The Power Is Now Media
