Exactly what real and personal property is included in the purchase?

How should we take title?

What financing and terms of payment can be arranged?

Are any liens filed against the property?

Are real estate taxes paid to date?

How can we evaluate the physical condition of the property?

Do any easements or covenants restrict use of the property?

What local land use regulations affect the property?

Is there mandatory membership in a homeowners association?

Are utilities adequate?

What happens if a builder fails to deliver as promised / when promised?

Exactly what are our rights and responsibilities under the proposed contract?

The names and addresses of the sellers and the purchasers;

The purchase price, and how it is to be paid, including the amount of down payment and deposit;

Arrangements for financing, especially the purchasers' right to cancel the contract if they cannot secure financing;

The legal description of the real property, including a representation about the square footage/acreage of the property and when a survey is available, the incorporation of the survey into the legal description;

A provision that title to such property shall be good and marketable of record, subject to reasonable easements, conditions and restrictions that may exist;

Description of any personal property that is included in the sale;

The condition of the property at the time of sale;

The date of settlement and possession;

A list of settlement costs and which party is responsible for paying them;

A provision that the terms of the contract, particularly any warranties on the condition of the property, should survive the execution and delivery of the deed;

A provision stating who bears the risk of loss if something should happen to the property before settlement;

A provision stating who is entitled to the deposit in the event of default by either party;

If the property is a condominium or part of a homeowners association, additional written disclosures are required by law and the purchasers should have the specific right to cancel the contract after reviewing the disclosures; and

Signatures of all of the parties.


The purchasers' attorney should review the provisions of the contract offer and make any changes which he or she determines would be in the best interests of the purchasers.


FINANCING
Most people do not have the personal economic resources to pay cash for their home and, therefore, must secure financing from some lending institution, such as a bank, a savings and loan association, or mortgage lender. In some cases, the sellers will take back a note secured by a deed of trust (the form of mortgage used in Virginia) for part of the purchase price or let the purchasers assume the loan under an existing deed of trust. In other cases, one of the purchasers' family members or an independent third party may be interested in a shared equity financing arrangement for part of the purchase price or to bolster the purchasers' qualifications for mortgage financing. Exploration of shared equity ownership and financing should be explored with an attorney in order that each party may be advised of their legal rights and tax considerations before entering into such a transaction.

Since the contract will usually include provisions with respect to the purchasers' responsibility to apply for and obtain new financing, the purchasers are obligated to adhere to these terms of the contract. Usually the real estate agent will assist the purchasers in making application for a loan to purchase the house. However, even at this stage, it is best for the purchasers to seek advice from their attorney to insure that the terms of the contract are being followed and that the contractual arrangements with a lending institution are legal and fair. Some loans which are insured by state and/or federal agencies, either the Federal Housing Administration, Veterans Administration, or Virginia Housing Development Authority, call for lower interest charges or extended terms of repayment. However, such loans may entail additional fees charged by the lender to account for the below-market interest rates.

If the loan application is approved, the lending institution should provide its commitment to make the loan. The commitment will set forth the conditions under which the loan will be made, including, for example, if the loan is 80 percent or more of the sales price, a requirement that you purchase mortgage insurance to insure the lender against potential loss in making the loan, payment of a loan discount and/or loan origination fee (usually 1 percent or more of the loan amount, thereby increasing the total finance charge for the term of the loan) and, of course, the interest rate of the loan.

Once the commitment is signed with provisions to the satisfaction of both the lending institution and the purchasers, the date and time for settlement should be arranged in accordance with the contract.


TITLE
Prior to closing the transaction, the purchasers and the lending institution will want to be assured as to the quality of the title the purchasers are obtaining. First and foremost, of course, the purchasers and the lender want to be assured that the sellers own the property and have the power to convey it. But, also, there may be other matters affecting the title that would seriously impair the use and enjoyment of the property by the purchasers. Thus, while financing is being arranged, the purchasers will usually also arrange to have a title search performed among the land records of the county or city in which the property is located and order an examination of the title documents. (The title search involves only an investigation of the land records to identify documents bearing on the title in question. The title examination involves a review and evaluation of those documents.) The title search may be performed by your attorney or a title insurance company, which company may then agree to insure the title against certain challenges in the future (subject to such exceptions as may be included in the title policy). But even if a title insurance company performs a title search and offers a title insurance policy, your title should be examined by an attorney who is qualified to examine titles in Virginia.

The attorney will examine the documents and form an opinion as to the quality of the title and explain any potential problems. In examining the title, your attorney will make sure that the sellers actually have good title and that they have the right to transfer title of the property and will review covenants, easements or restrictions on the use of the property, as well as any real estate tax obligations which have gone unpaid. In addition, there may be special assessments for public improvements, or covenant established by the developer or a homeowners association setting restrictions on the use of the property and imposing mandatory homeowners association fees. The purchasers' attorney will review all of these documents and explain the status of the title and the purchasers' rights should they acquire an ownership interest in the property.

In most cases in Virginia, lending institutions will require that the purchasers pay for a lender's title insurance policy covering the lender in case future title problems may arise. The purchasers should seek counsel from their attorney as to the advisability of also obtaining an owners' title insurance policy to cover their interests as owners of record.

In Virginia, title is usually transferred by a general warranty deed wherein the sellers guaranty the title against the claims of any other persons. The purchasers should, of course, have their attorney review the deed to insure that it is properly drafted and conveys marketable title.

In some circumstances, title to property may be conveyed by special warranty deed. By this type of deed, the sellers are only warranting title against the claims of themselves and those claiming to hold title under them, but not against the claims of other persons.

Purchasers should also consult with their attorney on the best method of taking title. For example, a husband and wife may wish to take title as "tenants by the entirety with the common law right of survivorship," which means that if one should die, the survivor will take full title by operation of law. Two unrelated persons may wish to take title as "tenants in common," by which each person would own a percentage share in the property and may convey his or her share independent of the other owner or owners. Questions as to the form of taking title may be complicated and the language used must be precise. Only an attorney can properly assist purchasers in making such decisions.

Once the purchasers have been assured of marketable title and have obtained financing, it is time for settlement.


SETTLEMENT
Before settlement, all of the settlement papers should be carefully drafted and reviewed. These documents include (1) the deed, (2) the note which evidences the loan, (3) the deed of trust conveying the property to trustees to secure payment of the loan, (4) the settlement statements by which an accounting is made of the transaction, (5) any deeds of release or certificates of satisfaction releasing the property from deeds of trust given by previous owners to secure their loans, (6) the truth in lending statement by which the lending institution discloses all of the finance charges, (7) the survey of the property showing any building restriction lines, easements or other encumbrances on the property, and (8) any other documents required by the lending institution or by the particular requirements of that settlement. The purchasers' attorney should, of course, be responsible for drafting or reviewing all of these documents to assure that they are in proper order. At settlement, the documents will be executed by the proper parties, and several of them will require notarization. Also, the settling of the financial accounts among the buyers, sellers, lender, sales agents and others will be explained by the settlement attorney and transactions will be completed.

Following settlement, the attorney is responsible for recording the legal documents among the land records of the county or city in which the property is located and disbursing all of the proceeds of the transaction to the proper parties. In Virginia, the Wet Settlement Act requires, among other things, that all the funds collected at settlement be disbursed to the proper persons by the settlement attorney within two business days after all the funds are collected and deposited in the settlement attorney's escrow account.

A word should also be said about settlement costs. It is at settlement that the attorney's fees, recording fees, real estate commissions and all other fees agreed to in either the contract or the finance documents will be paid. It is generally required that the purchasers bring to settlement the balance of the down payment and required closing costs by certified or cashier's check or wired funds. It is recommended that purchasers consult with the settlement agent prior to settlement to assure ample time to convert money into the proper form.

The attorney's charges in representing the purchasers will be estimated in advance. The expense will be modest in comparison to all the other essential costs of the transaction and in relation to the responsibility of the attorney for examination of title, preparation of documentation, and properly disbursing all related escrow funds.


CONCLUSION
An important point to remember is that purchasing a home is a significant event in anyone's life and will affect both family life and financial position for years to come. Over a lifetime, it will be more economical to retain the services of an attorney from the outset so that the process of purchasing a home, including contracting, obtaining financing and settlement may be done precisely and properly. When done properly, the purchase of a home can be one of the greatest satisfactions of a lifetime.