Real Estate and Home Ownership Legal FAQs

You may want to take a look at the surroundings and get a general sense of the real estate market in your target area before you retain an agent. However, you will want to hire a real estate agent before you make an offer on a home and probably before you start looking seriously. After getting recommendations from people whom you know, you should meet with a few different agents. Your agent should diligently represent your interests throughout the transaction, so you should choose an agent in whom you have confidence.

Generally, you do not need to hire a real estate agent or attorney, but you may not want to handle this time-consuming process on your own. If you sell your house independently, you will need to advertise it in various forums, show it to potential buyers, and conduct negotiations once you receive an offer. Hiring an agent gives you the benefit of their professional experience and reassurance that you are not overlooking something important. If you would prefer not to pay the standard commission to an agent, which is usually 5-6 percent of the sale price, you might be able to hire an agent or an attorney to handle specific tasks. You might only hire an agent to handle advertising, while you might only hire an attorney to review the closing documents.

This depends largely on whether you can get approved for a reasonable mortgage by a lender, based on your financial circumstances. (If you can pay the entire price without taking out a loan, clearly you can afford a house.) In addition, you may want to account for costs related to being a homeowner, such as repairs, maintenance, property taxes, insurance, and any improvements that you will want to make. You will benefit from tax deductions as a homeowner, so this may be a factor to consider if the price of buying a house seems daunting. Some people believe that you should buy the most expensive house that you can afford, but this is only true if the real estate market is strong and causing home values to appreciate rapidly. The priority is making sure that you can keep up with your mortgage payments and other expenses so that you do not incur debts or face foreclosure.

Some homeowners have more flexibility than others in the timing of putting their home on the market. Real estate trends vary according to the specific locality, so you should review the strength of the market in your area rather than relying on national trends. If there are many fewer homes on the market than buyers seeking homes, this likely is a good time to sell. In general, a good economy in your area also will encourage people to buy homes. The spring can be a more favorable season than others. However, some people suddenly find that they need to sell because of a certain event, such as a divorce or a relocation for a job. You will need to sell your home promptly rather than waiting for the ideal time if you are in this situation.

You should evaluate the real estate market in the area to determine whether it favors sellers or buyers. A hot real estate market favors sellers because houses are selling quickly for prices near or above listing prices. A cold real estate market favors buyers because houses are staying on the market for a long time or dropping sharply in price. You can consult a real estate agent to get their impression of market trends. If you are in a cold market, you may want to make an offer on a house that is priced higher than what you can afford, since the seller may have overpriced it. If you are in a hot market, on the other hand, this may not be worthwhile.

Most homeowners tend to prefer moving into a house that does not require a lot of work to be livable. You should fix any clear defects or hazards, such as leaks, broken stairs, or cracked tiles. If you have grown accustomed to living with a problem, you may need to take a more objective look at the situation to see whether a buyer might be turned off by it. Repainting the house and making small cosmetic improvements can go a long way in making it more appealing. On the other hand, substantial remodeling might not be worth the price and might even turn off some potential buyers.

You do not need to pay the full price of the house in a single lump sum. The down payment probably will consist of about 20 percent of the purchase price. You may be able to get a loan with a lower down payment, but this may result in high interest rates that become onerous over time. Some sellers may be reluctant to sell to a buyer who makes a very low down payment.

An earnest money deposit is a gesture of good faith that a prospective home buyer makes together with the offer. It amounts to about 1 or 2 percent of the purchase price. The seller can keep the earnest money deposit if the buyer backs out of the deal for a reason not permitted by the purchase and sale contract. However, the check for the earnest money deposit will be made out to the escrow company rather than the seller. This means that the seller will not get the money unless the buyer agrees to it.

This may depend on how eager the seller is to complete the sale and how close your offer is to the listed price, as well as how much interest the seller has received in the house. The seller and the buyer often go back and forth with several counteroffers during the negotiations. A counteroffer may simply relate to the price, but it may also involve other conditions in the contract. (For example, a seller may be willing to take a lower price in exchange for a contingency that the sale will depend on their buying another house first.) Once you have finalized the purchase and sale contract, the closing might take place one or two months later. The contract will provide the specific date. All of the parties involved have incentives to make the process finish on time, but the deal likely can survive a minor delay if it arises.

The closing is the official name for the event in which the seller of a house transfers the house to the buyer. This does not happen until and unless both sides have resolved any contingencies and complied with the requirements of the contract, and the deed has been recorded. The buyer and the seller each will sign certain documents, although they often will not be in the same place at the same time. In theory, this is the date on which the buyer will make the down payment to the seller, but a buyer often will make this payment slightly ahead of the closing.

Closing costs are paid at the very end of the purchase process. They are often divided between the buyer and the seller, although sometimes the buyer will pay all of them. Some types of closing costs include escrow fees, title company fees, property inspection fees, homeowners’ insurance, and the buyer’s share of property taxes for that year. While many of these items individually are minor, they can add up to a substantial amount. You can expect the closing costs to amount to about 3 percent of the home’s price.

You will need to leave behind any fixtures, but you can take away other items. Generally, a fixture is something that is not always straightforward, but basically it is something that is physically attached to the house or serves as an integral part of it. Kitchen appliances, bookshelves in a home library, and trees or bushes on the lawn are common examples of fixtures. (You can avoid turning them over to the buyer by replacing them before putting the house on the market if you prefer.) Sometimes an item that is not technically a fixture may be important to a buyer. The purchase and sale contract may address this item, or a buyer may mistakenly assume that it is a fixture. You should decide which items you plan to take with you and assess whether you should move them before putting the house on sale to avoid this confusion.

Many homeowners are intimidated by the federal capital gains tax attached to selling a house. However, you will not need to pay tax if you received $250,000 or less in profits from the sale, assuming that you lived in the house for at least two of the previous five years. If you are filing taxes as a married couple, you will not need to pay tax if you received $500,000 or less in profits from the sale. Even if you receive more than the threshold amount, you will be taxed only on the excess and may not be taxed on all of the excess. Taxes may not apply to increases in value based on home improvements, among other things. You can consult a real estate attorney for guidance on how the tax laws may apply to your home sale.