buyer guarantee

What guarantees are there in real estate?

This month, The Wall Street Journal reported that the U.S. housing market is improving as median home prices increase and inventory decreases. Homes are also selling faster which may be due, in part, to a rise in foreclosure numbers (up 6% in July according to the Associated Press). In an up-swinging market, potential home buyers are looking to cash in on the shrinking number of great real estate deals.

But in that hurry to catch good value, some homebuyers may find that their dream home is nothing more than a money pit.

Real estate investments are protected as well as possible with inspections, purchase agreements, limited warranties, disclosure agreements but sometimes problems still arise. To protect your new home and your investment, it’s important to understand what avenues are available when a house isn’t all it’s cracked up to be.

Disclosure

Disclosure ensures that the buyer is aware of any existing or potential problems with a house they are about to buy. Before signing any final paperwork, buyers should receive a property disclosure form. These forms vary from state to state and include a myriad of questions about the property which a seller must answer truthfully. If problems should arise after the purchase is made, buyers can check them against the disclosure statement to make sure that they were made aware of the issue.

Connie Carr advises,

There are a lot of factors that come into play in determining whether the seller or realtor can be held liable. However, if either failed to comply with disclosure laws, or intentionally misrepresented information to the buyer, then the buyer may have a basis for action against that seller or realtor.”

Foreclosures, short-sales, defaults and other loan agreement problems are classic examples of residential transactions that are benefited by the presence of a lawyer. Commercial real estate transactions are often extremely detailed because of the amount of money that is changing hands. Multiple banks and buyers want to make sure that all paperwork involved is clear and complete.

Estate Planning

Oftentimes, real estate and estate planning go hand in hand. Correspondingly, this means that both a realtor and real estate attorney are usually needed to make the planning go smoothly for those dividing their estate.

Connie Carr notes,

There are a lot of factors that come into play in determining whether the seller or realtor can be held liable. However, if either failed to comply with disclosure laws, or intentionally misrepresented information to the buyer, then the buyer may have a basis for action against that seller or realtor.”

If something goes wrong with the house that should have been included in the disclosure, buyers may have the ability to seek damages from the seller.

Warranties

It’s every home buyers dream to get a house with a warranty against any and all repair issues, but that simply isn’t realistic. However, there are some warranties that you may be able to benefit from when buying a new house. If the seller has warranties on large appliances or HVAC systems, they may transfer to you when buying the home.

Attorney Doug McIntyre shares,

Many states require that all new homes also carry statutory warranties which generally cover defects arising out of poor workmanship (for example, doors that do not close properly), defects arising out of the mechanical systems (plumbing, heating, air conditioning, etc.), and defects arising out of major structural items.”

On new homes, you may be entitled to and protected by implied, statutory, and express warranties that offer limited coverage of major structural and mechanical systems like roofs, sidewalks, landscaping and support structures.

Inspections

The best way to avoid future problems is to have the home evaluated by a qualified inspector. Inspectors check everything from the bottom of the foundation to the top of the chimney. They can diagnose existing problems and help predict issues that may arise later on.

In some cases, new homeowners will find a problem with their home that a qualified inspector should have noticed. If an inspector made a mistake or missed an issue, a homeowner may have the opportunity to seek damages from them. However, inspectors often protect their work by requiring that homeowners sign a waiver before the inspection takes place which absolves them of any liability.

Purchase Agreement

A purchase agreement helps buyers and sellers agree to resolution strategies for future issues. For example, if an inspector locates a small crack that turns into a major foundation flaw after the home is signed over, a purchase agreement can help determine how the issues are resolved.

Realtor Chantay Bridges comments,

Your purchase agreement should mandate warranties and clearly spell out what to do in the case of questionable discoveries, such as if that small leak is really a massive one.”

Most purchase agreements come down to the issue of binding arbitration. If the buyer and seller agree to binding arbitration, a neutral third party makes a decision on the issue and there is very little chance for an appeal process. If the purchase agreement specifies that both parties wish to opt out of a binding arbitration, then they reserve the right to use legal counsel and take the issue to court.