The purchase of a home, is quite often, the first real exposure most people have to complex loan and purchase contracts. The process while simple on its surface seems fairly straightforward, we consistently receive calls from individuals that have questions concerning the purchase, funding, or closing process. Please see below some of the common concerns of other home buyers:
- Purchase contract – in Tennessee most residential purchase contracts are based on a form approved and vetted by the Tennessee Association of Realtors (tnrealtors.com) to be used by licensed brokers and sales agents across the state. The form provides a solid foundation for the purchase of residential real estate and creates a “fill in the blank” approach which helps to avoid common drafting errors. Most of the purchases that we see are based on some version of this form. I see two common problems when reviewing these documents – a) the party does not reach out to us until after they have executed the contract and then they have a question about “what happens if” or they are unclear about the timing requirements under the contract, or b) there is something atypical about their purchase and the parties struggled, generally through their sales agent, to articulate how to handle the unique terms and conditions of their purchase.
As a former real estate broker I can say with all sincerity and respect that most real estate agents do a very good job advising their clients, BUT, they are not attorneys and they should not advise clients on interpretations of the contract or its terms (the unlicensed practice of law) nor should clients rely upon the information provided by a sales agent as it relates to subtle changes in the form contract. The penalties for failure to perform under a sales contract can be quite severe. Visiting with an attorney, often for just an hour, can help to prevent bigger problems later especially if you consult with the attorney prior to signing the contract.
- Loan Documents – Because of the way that closings occur now, most people never read their loan documents. The first time that they seem the 40+ pages of documents is the first time they sit down at Closing (see below). Typically, you are sitting there at your schedule appointment with a notary waiting on you to sign so that they can get to their next appointment and most people feel uncomfortable reading the documents while someone is waiting. Truth is, that loan documents are difficult reading even if you have time to review them. You are bound by the terms of the loan, and subject to the rights of the lender – including foreclosure – for up to thirty years. When we advise clients on the purchase and closing process, we will go over their loan documents with them generally the day before Closing and discuss any concerning provisions and provide them an opportunity to talk about the document that they are getting ready to sign the next day.
- Closing Documents – at closing, which the moment that both parties sit down and sign all of the documents required for the sale, purchase, transfer, and loans for the transaction, the Seller and Buyer will have a variety of documents to sign including but not limited to the Deed, Deed of Trust (mortgage), waivers, loan documents, and the Closing Statement. The Closing Statement is an accounting of the funds transfer between the parties and lender(s) and the pro-ration of taxes, fees, etc. Most buyers and their lenders will require a title policy be instituted as well. Most Buyers do not see this policy, and more importantly what is not covered by this policy until the moment of Closing. Like the Loan Documents above, we will sit down with our clients and go through the Closing Documents the day before Closing so that they can attend closing and sign the various documents with confidence.
I have found that clients that have sat down with us during the purchase process to go over the various documents feel much more confident about the closing process and have less issues concerning disagreements around the purchase. We strive to be a resource to them and to provide peace of mind at what should be an exciting new chapter in their lives. We help to accomplish this by providing a flat fee approach to the review of the documents and consultation with the client and we will work directly with the Closing office, brokers, and lenders to help facilitate the process.
We look forward to providing the same peace of mind to you.
Post Authored by R. Keith Gordon