Lawyers know more about the legal rules of engagement than most of us. Our legal system is complicated. The IRS tax code changes all the time. This article is about your real estate."Real Estate and You: The Basics"
by Anna Dancy-Foster, Esq. Enjoy it!!
INTRODUCTION
Investing in real estate is a major financial commitment. However, there are ways to avoid mistakes that are costly, and keep your frustration level as minimal as possible. For those of you who have already decided to venture out and are selling or buying a home, this article contains information to help you do so successfully.
BUYER – “CAVEAT EMPTOR”
Generally, Buyers have no clue what to expect in real estate transactions. One fallacy is that the real estate agent works for the Buyer. Not long into the transaction, Buyers realize this is not the case. Be advised that normally there is no fiduciary duty between the Buyer and the Real Estate Broker, unless the Broker is working in the capacity of a dual agent. If this is the case, the Broker must inform both the Seller and the Buyer in writing and the consent to operate in a dual capacity, must be obtained prior to executing any documents.
Buyers should proceed with caution and perform due diligence by choosing and using a reputable real estate agent, finding a reputable lender, considering the housing market in the potential area, making sure the home is affordable and having money on hand to cover the closing costs.
SELLER – “CARPE DIEM”
Selling a home is a business transaction; it definitely can be more, but should be nothing less. The Offer and the Purchase & Sale Agreement are binding contracts and every line and term in the contract is meaningful. If you are savvy enough to enter into the real estate market, be savvy enough to utilize an expert in the area.
If you are the Seller in the transaction, the issues generally are delivering “clear and marketable title”, selling investment or rental property (“1031 Like-Kind” Tax Deferred Exchange), or dealing with Extensions from the Buyer on inspections, mortgage commitments or closing dates.
BUYER, SELLER & THE REAL ESTATE BROKER
If you decide to let a real estate broker sell your home, keep in mind that the Broker’s fee is negotiable. Most Sellers who utilize Brokers, need to sell fast or do not want to be inconvenienced by showing the property to potential Buyers. As the Seller, you want to be realistic in your goals for the sale.
Upon choosing a real estate broker, make sure the person has a strong record of selling homes in your areas and also seek referrals. A Broker with a lot of years of experience is ideal, however; Brokers that are new may devote more energy to you and be willing to accept a lower commission.
If you are wise in choosing your Broker, the process will be smoother.BUYER, SELLER & THE ATTORNEY
An Attorney will help through the process, if you are the Buyer, by preparing, negotiating and facilitating the Purchase and Sale Agreement. The Purchase & Sale Agreement is normally a template document, an Attorney will be able to add language to this document to protect you throughout the transaction, especially in safeguarding your deposit or when the purchase of the property is contingent upon the sale of your present home. You should always utilize a real estate attorney and have a consultation prior to signing any documents, including the listing agreement from the real estate broker. The last thing you want is to undergo a lawsuit, they are expensive and it is best to attempt to resolve issues upfront.
Not knowing your legal rights will lead to frustration. Frustration leads to acting hasty and possibly relinquishing your legal rights in the process. It is true that we all sign contracts often without reading them thoroughly. However, take note, standard contracts do not exist. An Attorney can make changes to the contract, which could save you tens of thousands of dollars.
Ultimately, utilizing a real estate attorney when buying or selling your home, gives you an advantage. The following list comprises some of the transactional issues that an Attorney will assist in:
- Appraisal of the property; Access and Road Issues which may occur; Closing Documents; Condominium issues; Construction Agreements; Contingences; Commitments; Deeds; Default; Easements; Environmental Issues; Escrow Agreements; Financing; HUD Statement; Inspections; Leaseback Agreements; Liens; Use & Occupancy Agreements; Septic Issues; Title Insurance; Transfer Taxes; Home Warranties; Zoning; 1031 Exchanges and the list goes on.
BUYER, SELLER & THE IRS
If you have questions regarding the tax implications, contact an Accountant (at least prior to the sell). The IRS also provides information via their website, www.irs.gov. and offers a free publication entitled “Selling Your Home”. There are important tax ramifications, especially if you own or are buying the property with another or you have lived in your primary residence for less than two (2) years (or a total of 730 days). Therefore, consult with a tax specialist and your Attorney, take advantage of all tax rulings and prepare yourself for any taxes you may owe.
“LEGALLY SPEAKING”
Buying or selling a home is the biggest financial transaction of most people’s life and can be a valuable investment. It will save you time, frustration and ultimately money by proceeding carefully to avoid pitfalls. Work not only hard, but smart to complete the transaction and you’ll notice the difference.
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