Buying a home will probably be the most important financial decision most Pennsylvanians will make in their lifetime. It should be a happy and rewarding experience. This page will provide a prospective home-buyer with general information about the basics of buying a home and will help understand how a lawyer can assist them with the complicated legal matters involved in the transaction from beginning to end.

The main rule in approaching the purchase of a home is that a prospective home-buyer should not sign anything until an attorney, a person trained to advise them as to their legal rights and responsibilities and the meaning of the terms of the real estate contract, has explained these matters.

WHO WILL BE INVOLVED IN THE TRANSACTION?

When purchasing a home, the prospective home-buyer will come in contact with a variety of specially trained people. In most cases, a real estate agent will be their first contact, then a lawyer, a banker and in some cases, a title or closing officer. It is important to understand the functions of these people so the buyer can determine whether they are being treated fairly and properly.

WHAT IS THE REAL ESTATE AGENT'S ROLE?

Unless a home is purchased directly from the owner, the first person a prospective home-buyer will come in contact with will be the real estate agent, who is trained to help them find a home. They should remember that the agent is a professional salesperson, who receives a commission from the seller. Therefore, although the buyer is an important part of the transaction, the agent is representing the seller. The circumstances do not change even if there is more than one agent involved, because agents still receive their commission from the seller, and they will earn it only if the home is actually purchased. Under certain circumstances, a buyer can retain a buyer's agent, who is not the agent of the seller. However, this agent will also earn a commission only from the sale and purchase of a home.

The real estate agent should be aware of the disclosures made by the seller and point out any problems which the home has. Sellers are required by law to disclose defects in their home of which they are aware, and this disclosure report should be reviewed carefully. A home inspection is often required by buyers; it is the best way to protect against hidden defects of which the sellers may not be aware. Real estate agents are usually good sources of information about pest inspectors and home inspectors.

WHY DO I NEED A LAWYER?

A lawyer should participate in all phases of the transaction to help prospective home-buyer in dealing with the other people who are involved. He or she can explain the different phases of the transaction. There are many times when legal documents are prepared by the real estate agent, and it is important to remember, the agent does not represent the buyer. Any document in a home purchase transaction requiring a signature should be reviewed by an attorney. This is true regardless of what the document is or how it is described to prospective home-buyer. In some instances, the lawyer may also provide additional services.

WHEN WILL I DEAL WITH A BANK OR OTHER FINANCIAL INSTITUTIONS?

Unless the buyer plans to buy the home for cash, a financial institution will help obtain a mortgage and explain what the buyer will actually pay for the home over the term of the mortgage.

WHAT DOES A TITLE OFFICER DO?

In many parts of Pennsylvania, the title officer, who works for a title insurance company, is the person who will conduct the closing or settlement for the purchase of the home. Buyers should be aware, however, that it is the practice in some places for their attorney to handle the settlement, if they are approved by the lender.

WHAT IS THE AGREEMENT OF SALES?

The foundation of the purchase of a home is a document called the AGREEMENT OF SALE. It is the most important document the buyer will sign, because it sets forth all of the terms and conditions of the purchase. Generally a preprinted form is used for the agreement, and the precise terms are added by completing blanks on the form. Agreements of sale contain detailed legal language, which is often hard to understand. Although the real estate agent may claim that it is not necessary, only a lawyer is trained to explain the far-reaching legal implications of the agreement to prospective home-buyer. A lawyer is specially trained to provide prospective home-buyers with the explanation they need, and will also be able to point out other factors they should consider.

Certain parts of the agreement are very important. For example, buyers should be aware of the type of DEED they will receive. A deed is the evidence of their title to the property. A buyer will also want to be sure that their obligation to buy is conditioned upon the type of financing they plan to get, with terms they are sure they can afford. A lawyer may also work to eliminate unnecessary charges from the transaction. In addition a lawyer may be able to help a buyer to avoid the problem of having to move out of their present residence before they can move into the new one. Other terms which a lawyer can assist buyers in providing for in the agreement include:

• The dates and amount of payments required.
• The settlement date
• A list of household items to be included in the sale.
• A statement about what happens if the property is damaged or destroyed before settlement.
• Damages to be paid if the agreement is broken by either party.

This list is not complete, but it does show how important it is to be thorough before the agreement is signed. Remember, once a party signs a contract, it is too late to negotiate terms.

Unfortunately, many times a buyer will sign sales documents without an attorney's advice, and without fully understanding the terms of the agreement. If a problem arises thereafter, it may be extremely difficult or expensive to resolve.

HOW SHOULD I OBTAIN A MORTGAGE?

A MORTGAGE is a loan, which is usually made by a bank, savings and loan association or other financial institutions. Lawyers can assist buyers in obtaining a mortgage to fit their needs. In general, the mortgage market is competitive. This means that by shopping around for a mortgage, a buyer may be able to save money. A lawyer will be able to explain the procedures for obtaining a mortgage, as well as the legal documents involved. A buyer may want to ask their lawyer about alternative means of financing. These include seller financing, retaining existing financing, as well as other nonresidential alternatives. There are usually time elements involved in obtaining a mortgage, once an agreement of sale has been signed, and a buyer must follow the time limits set forth in the sales agreement, to avoid losing the purchase and their hand money.

WHY IS A TITLE EXAMINATION NECESSARY?

Before settlement, the TITLE should be examined to determine the existence of any liens, encumbrances or other potential clouds on the title. Also, most institutions providing a mortgage will require that buyers purchase title insurance at the time of final settlement. In some areas, the title examination or title search is done by the lawyer. In other areas, the search is done by a title insurance company. The buyer pays for the title search and for the title insurance. The lawyer will examine it before closing to determine that the buyer will receive proper and legal title to the property. Only a lawyer is qualified to evaluate the legal implications which may arise as a result of the title examination.

WHEN DO I RECEIVE TITLE TO THE PROPERTY?

The final stage in the purchase of property is called the closing or settlement. The closing may be held in the office of the title insurance company, in the buyers' attorney's office, or at the bank or financial institution which provided the mortgage. At closing, the terms of the agreement of sale will be completed, the mortgage documents will be signed and the title, in the form of a deed, will be transferred to the buyer. There are many documents to be signed, and many others to be reviewed. It is always advisable to bring a lawyer to the settlement to help understand exactly what takes place and to protect their client's interests should any problems arise prior to or at the settlement.

WHAT EXPENSES ARE INVOLVED IN BUYING A HOME?

A lawyer will carefully explain to buyers what expenses are involved, in addition to the purchase price. Among them are:

• Cost of title examination and insurance.
• State and local transfer taxes.
• Adjustments for property taxes and other items already paid for by the seller.
• Lawyer's fees.
• Charges imposed by the institution providing the mortgage, including "points" and fire and homeowner's insurance.
• If a real estate agent is involved in the transaction, the "Good Faith Estimate" of the costs involved should have been provided to the buyer and the seller when the agreement of sale was signed.