Submitted by Jessica Jensen
It’s a buyer’s market and a great time to buy real estate! But we are a “buyer beware” state when it comes to residential real estate purchases. Here are 8 tips to help you be a savvy buyer:
- Choose an experienced broker to represent you. If you are looking for investment property, select a broker who is also an investor. When you find a property you like, ask who the listing broker is. If your broker is also the listing broker, recognize the broker has duties to both of you so you will not want to lay all of your cards on the table as easily as you would if the broker represented just you.
- Give yourself enough time to complete your due diligence. The Purchase and Sale Agreement has very short default timeframes and these timeframes are absolutely negotiable. Give yourself plenty of time to complete inspections and meet contingencies.
- Walk the boundaries of the property. Read the property legal description and get a copy of any plat for the property from the real estate broker or title company. Do not rely on tax maps or verbal statements from the seller or broker. Walk the boundaries to see if you find boundary markers. Look for encroachments such as fences, garages, walkways and landscaping. If you find a suspected encroachment or have any doubt about where the boundaries are, pay for a survey. You can save money on a survey by surveying just the questionable boundary rather than the entire parcel.
- Read the Seller’s Disclosure. A seller is required to give you a Seller’s Disclosure typically within 5 days of mutual acceptance of the Purchase and Sale Agreement. Note the date you received the Seller’s Disclosure and read it immediately. You generally only have 3 business days to back out of a purchase without losing your deposit if the seller discloses something unacceptable to you. Ask questions about anything that seems odd or inconsistent with your observations or with statements made by the seller or broker. Investigate further or hire a professional to fully evaluate any issues identified in the Seller’s Disclosure.
- Attend the Building Inspection and Read the Inspection Report. Most lenders require a building inspection and this is a good idea even if you are paying cash or doing owner financing. Attend the building inspection and ask questions. Read the inspection report. Understand that a building inspection can only identify obvious problems, not hidden defects. If the report suggests there’s a problem, investigate further. The inspector’s liability for missing something is often limited to the cost of the report.
- Check for permits. Check with city or county offices to ensure permits have been obtained for all buildings, additions, wells, septic and other improvements. If permits were not obtained, make it a requirement of the purchase that the seller obtain necessary permits. If permits were not obtained, you risk being fined for being out of compliance and could be prevented from using the improvement.
- Read the Preliminary Title Commitment. You should receive the Preliminary Commitment no later than 10 days after mutual acceptance of the Purchase and Sale Agreement. If you don’t receive it, ask for it. Read the Exceptions (Schedule B). Ask for copies of the documents that reference any easements, covenants, agreements or anything else that impacts the property. Read each document to be sure you understand what is required. Read the exclusions. These items are not covered by the policy. You can request extended coverage to cover some or all of these items for an additional fee. A survey may be required for extended coverage.
- Review the terms of your financing before you sign. When you go to your closing, review your financing documents to ensure the interest rate is correct, whether the rate is adjustable, and whether there are prepayment penalties. Do not rely on verbal statements of your lender that terms will or will not be changed. Once you close, it is too late to change the terms.
The time to identify and resolve problems is before you buy. If you find issues, you can require the seller to resolve them or negotiate a reduction in the purchase price. Your remedies against a seller after you purchase are extremely limited. It’s better to walk away (and even lose a deposit) than to purchase a problem that you will spend thousands of dollars fixing.
Jessica Jensen is the senior attorney with Jessica Jensen Law of Olympia. Her holistic, general practice firm focuses on business, real estate and land use, wills, trusts and estates, family law and alternative dispute resolution. She may be contacted at 360-705-1335 or www.jessicajensenlaw.com.
