3 Common Issues in Real Estate Transactions: the Home Inspection, Earnest Money, and Party Wall Agreements.
Are you buying or selling a home in colorado? Have you gone through this process before? Are you aware of the common issues that can arise during the home buying or selling process? GLO offers consultations on three of the most common issues in buying a home: the home inspection, earnest money, and negotiating party wall agreements.
What is the first step in buying a home?
Purchasing a home is often the largest acquisition a person makes in their lifetime, and it involves a complicated process and adherence to a variety of state and federal laws. The process typically begins with a buyer pre-qualifying for a mortgage with a lender. This isn’t a guarantee of the loan, but it allows the buyer to move forward with assurances that they can put an offer on a home with the confidence of being able to finance it.
GLO specializes in simplifying the home buying process and ensuring you are protected at every step. Jerome is an experienced real estate attorney who can review your contract and negotiate any red flags so you can move forward risk-free with the purchase of your Colorado dream home.
What is Earnest Money? Do I need to pay it?
If the seller accepts the buyer’s offer, then the buyer will pay a deposit, or earnest money, to an escrow agent or broker and sign a contract to purchase the home. Earnest money is also known as a good faith deposit. A homebuyer will put down earnest money to show the seller that they are serious about purchasing the home.
The earnest money the buyer puts down is usually 1-3% of the total sale price. It is held in an escrow account until the deal is complete. If the sale goes as planned, the earnest money is applied to the buyer’s down payment or their closing costs. If the sale falls through, however, the buyer may still get the earnest money back.
Earnest money is not always required. When buying a home in a highly contested market, however, earnest money can be the only way to demonstrate to the seller that the buyer is serious, and that the sale will not fall through.
What is the Inspection Process?
Next, the seller will disclose to the buyer known flaws, property damage, prior repairs, and potential hazards. A home inspector will perform an inspection of the property and any mandated tests and surveys. Inspections are a hassle, anything that is revealed gives the buyer more leverage to either negotiate down the price or request that the seller fix the issue.
An important part of purchase or sale of your future home is the inspection objection. The inspection objection is a contingency that protects the buyer when purchasing a home. After the home has been inspected, the buyer describes what they find unsatisfactory about the home. The inspection objection is the official notice to the seller of things the buyer would like corrected.
The seller, who usually has a few days to respond, will give the buyer a document that addresses how they will correct the items they have agreed to fix. Typically, a dollar amount will be negotiated between the sellers and buyers. This will be credited at closing, and many times these amounts are based on quotes or bids from contractors.
What is a Party Wall Agreement?
If you are buying a home with a shared wall, you will also want to consider creating or understanding any existing party wall agreements. A party wall is a shared wall that separates two units. A party wall agreement is a contract between shared wall owners that spells out the responsibilities of each party as to how decisions are made, how impasses are resolved, and how repair and maintenance costs are shared.
The builder of a shared property is usually the one who creates the party wall agreement and records it with the county. The agreements run with the land, meaning they will exist on the property no matter who owns it. Therefore, if the home you are buying has a party wall agreement, you want to understand the terms. For more on Party Wall Agreements, click the link to check out our blog.
How can GLO help?
These are three common example of problems that can happen in residential real estate transactions, GLO has the expertise to ensure that your transaction goes smoothly.
Please fill out an Intake Form to inquire about working with GLO.
GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO does not guarantee any results. Engagements are subject to specific fee arrangements and signed engagement letters.