General Information on Buying and Selling Real Estate

Here’s the basics of what you need to understand about buying and selling real estate.

       1.  First, there are only two kinds of property to own in this life: (1) real estate, (2) everything else. Ergo, real estate is unique and the laws that apply to it differ from “everything else” property ( more technically, “personalty”). The reason: when you own real estate you own a particular piece of the earth’s surface. That fact has immense legal consequences. Go to any law library and check the shelves and shelves of books written about real estate law and you’ll become a believer.

       2.   Secondly, everything regarding real estate, to be legally enforceable, has to be in writing. Centuries ago some wise jurists in England passed a law, called the Statute of Frauds, that mandated writings in order to eliminate the amount of fraud perpetrated over real estate. In the Virginia Code our version of the Statute of Frauds is the 11th of thousands of laws, and will remain basic law forever.

       3.   Thirdly, the key to every real estate transaction is the writing called the contract. The contract, or “purchase agreement”, is the road map detailing how the seller’s interest in a property will become the buyer’s interest. You can probably find in a stationery store a one page form contract, which, when properly executed, can be legally enforceable. But the standard contract used in the local residential real estate industry can run to seven, even ten, pages of pretty small print. And that form contract is constantly undergoing revision because of both practical and legal necessities. The amazing thing is that every one of the prosivions in all those pages is important in defining the rights and obligations of the parties. Commercial real estate contracts can be the size of a book. Of necessity, one page contracts skip many important issues that can lead to disputes between buyer and sellers.

       4,   Fourthly, when you sign a contract you are bound by its terms – whether you read it or not and whether you understand it or not. You can not increase your rights or reduce your obligations without the consent of the other party – in writing. So there is nothing more important you do than signing the contract. It’s up to you to be sure it contains everything you want – if you make a mistake a court will not rewrite the contract for you, even if the court agrees with you that you were a fool to have signed it. That’s why any good contract will have a provision at the bottom advising you to consult legal counsel before signing. It seems many folks fail to follow that advice, which is good for trial lawyers since the majority of law suits over real estate matters could have been prevented by a carefully worded contract.

Where to turn for guidance.

Fortunately, there are a number of professionals who you can look to for guidance and assistance through this complicated labyrinth: Attorneys, Real Estate Agents and Mortgage Loan Officers. Here’s what they do.

     1.   Real Estate Attorney (Closing Agent)

There are two parties to a contract, and even though both have the common goal of transferring title to the property, one wants to sell high and the other wants to buy low. Both want the other side to pick up unexpected costs and deal with unexpected problems. Thus, inherently, there is a conflict of interest. Giving that situation, only a real estate attorney is trained and licensed to advocate your legal rights and advise you on the law protecting your interests. And, believe us, the law has a lot of gray areas where just who has what rights is a close call. The law can vary from state to state and even from court to court within a state. Only a lawyer familiar with the local courts can give highly informed counsel.

Under Virginia law a title or escrow company, as well as an attorney, can conduct the closing on your contract. There are many of these closing agents and when there is no conflict between the parties the closings, without an attorney, can go smoothly. On the other hand, when a dispute arises, the closing agent cannot provide legal advice, and for that you need to hire an attorney anyway. Since you’re involved in a major financial transaction fraught with legal complications, and the difference in fees is small, if any, why increase your risk by not hiring a real estate attorney in the first place? We have many stories of saddened folks who thought their sale or purchase was just a piece of cake and an attorney unnecessary. We advise that you live by the sound rule that an ounce of prevention is worth a pound of cure. Get legal representation up front.

Virginia law allows you and the other party to employ the same attorney if both sides consent. While this often happens, the pitfall is that if a dispute arises between the contracting parties, the attorney cannot represent either one – observing the biblical injunction an attorney cannot serve two masters. In that case both sides need to hire other counsel.

       2.   Real Estate Agents

Some think a real estate agent has an easy job. We don’t. Every agent is licensed by the State of Virginia following hours of training and passing a challenging exam. To keep that license they have to keep taking more training. Most real estate firms have ongoing training as well. To be effective a real estate agent has to be expert in a wide range of issues and spends hours keeping abreast of the changing market of available properties. And that’s just for starters.

As a seller, your agent can help you on pricing your property, giving it the best marketing and presentation for potentials buyers, locating handymen for quick repairs or fixups, negotiating contract terms, shielding you from folks who only want to intrude on your time, and giving you information on the entire process of selling. As a buyer, your agent can direct you to properties in your price range in desirable locations, make recommendations of people to help from attorneys and loan officers to home inspectors, and negotiate your contract of purchase. They then give support through the sometimes tedious process of confirming your loan and seeing that the deal closes. The importance of this last role cannot be overemphasized. You can’t assume that just because you have a signed contract and everything is supposed to go smoothly, that it will. Your real estate agent has a vested interest in a successful closing and is your main ally. The difference between top agents and others is often the way they play this follow-up role.

If you are a buyer you should consider a Buyer-Broker contract with a real estate agent. This is comparable to a Seller’s Listing Agreement in that it guarantees that the agent is working strictly for you. Otherwise, under the law, the agent is technically working for the Seller because that is the party who pays the commission. Virginia has recently modified agency law to allow for buyer-broker contracts. Ask your real estate agent about this.

       3.   Mortgage loan officer

Without money the deal goes nowhere. In the last few years the number and variety of mortgage loan programs have increased so greatly that your choice of a good mortgage loan officer can translate into big dollar savings. You’ll likely be ahead of the game if you scout for a loan officer you like early. She or he can pre-qualify you so you have an idea of a realistic price range to look for in a property. Make sure the officer who pre-qualifies you is emphatic with you that the pre-qualification is not a commitment – only with a commitment is the loan company obligated to make you a loan.