Residential Real Estate Law
Real estate law involves a person's rights relating to the ownership and possession of land, buildings or structures on land. Real estate or immovable property is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. Real estate (immovable property) is often considered synonymous with real property (also sometimes called realty), in contrast with personal property (also sometimes called chattel or personalty). However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate. The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property.
Real Estate Ownership
Ownership is the state or fact of exclusive possession or control of some thing, which may be an object or some kind of property.Ownership is self-propagating: If an object is owned by someone, any additional goods produced by using that object will also be owned by the same person. The most common form of ownership of property is called "fee simple absolute". Fee simple absolute means the owner has the right to sell the property, use the property as security for loans, improve the land or buildings, possess the property and pass the property on to his or her beneficiaries as part of the estate. A fee simple absolute is the most complete form of ownership.
Property can also be owned jointly by two or more persons. A tenancy in common, for example, is a form of joint ownership whereby all of the owners have a distinct and undivided interest in the property. Each owner is free to possess, sell or encumber the property. Should one of the owners die, his or her interest will be transferred according to his or her will or according to the state's intestacy laws if there is no will. A joint tenancy is also a form of joint ownership. However, when a joint tenant dies, his or her interest in the property is transferred to the remaining joint tenants, not to his or her beneficiaries. This transfer of ownership to the remaining owners is known as a right of survivorship.
Additionally, property can be owned by a husband and wife as an estate by the entireties which is similar to a joint tenancy. However, if the marriage is dissolved, the former husband and wife become tenants in common.
Encumbrances
An encumbrance is a legal term for anything that affects or limits the title of a
property, such as mortgages, leases, easements, liens, or restrictions.
Also, those considered as potentially making the title defeasible are
also encumbrances. For example, charging orders, building orders and
structure alteration. An encumbrance is not an ownership interest in
real property, and the property may be bought and sold even though
there are encumbrances attached to the property. Encumbrances attach to
property, not property owners, so a person who buys property with an
encumbrance is bound by the encumbrance.
One of the more common forms of an encumbrance is an easement. An easement is the right of use over the real property of another. The right is often described as the right to use the land of another for a special purpose. Unlike a lease, an easement does not give the holder a right of "possession" of the property, only a right of use. It is distinguished from a license that only gives one a personal privilege to do something on the land of another. There are many forms of easements. Easements may be considered public or private. A private easement is limited to specific individuals or entities such as the owner of an adjoining land. A public easement is one that grants the right to a large group of individuals or to the public in general, such as the easement on public streets and highways or of the right to navigate a river.
Deed restrictions, also known as covenants, are privately arranged rules that attach to specific tracts of real property; usually these state restrictions on how the land can be used, and thus are generally known as restrictive covenants. Restrictions may limit the color, size and shape of a house and require general upkeep of the property as well as other restrictions on the use of property, such as zoning ordinances and building codes.
Buying a Home
Buying a home can be one of the most rewarding experiences a person can
have and one of the most complicated and stressful. Every home purchase
involves a number of potentially complicated legal issues, confusing
terminology and a great deal of paperwork. Retaining a real estate
attorney to assist in the process is often a necessity. Not only can an
attorney explain the significance of various decisions a buyer will
have to make, but the attorney can point out potential problems that a
buyer may not otherwise see.
Real Estate Agents
A real estate broker is in the business of brokering real estate transactions; that is, finding sellers for those who want to buy real estate and finding buyers for those trying to sell real estate. Real estate brokers and their salespersons assist sellers in marketing their property and selling it for the highest possible price under the best terms and assist buyers by helping them purchase property for the best possible price under the best terms. In many jurisdictions, particularly in the United States, a person is required to have a license in order to be remunerated for services rendered as a real estate broker. In particular, any of the following descriptions could refer to a real estate broker in the USA:
- A person owning, managing, or being in charge of a real estate brokerage firm, even if the broker just works for him- or herself.
- The real estate brokerage itself. The brokerage is the firm or business of the broker which can also be called a real estate agency.
- A licensed real estate professional who has obtained a broker's license (which entitles them to operate a real estate brokerage). By default, a real estate broker of this kind has already met the requirements of "salesperson" or "agent" licensure. A real estate broker can still be designated as such without owning a real estate brokerage.
- Some people may refer to any licensed real estate agent as a real estate broker. A licensed real estate agent is a professional who has obtained either a real estate salesperson's license or a real estate broker's license.
Inspection
Though a seller and a seller's agent are obligated to make full
disclosure of a house's material defects, it often pays to have a
professional evaluate a home's structural and mechanical condition. A
professional may uncover problems overlooked by an untrained eye:
rotting floors, termites, rusty plumbing and defective electrical
systems. A professional may also be able to give a buyer a more
accurate estimate of repair costs.
Buyers may also want a real estate appraiser to research property appreciation rates, neighborhood population trends, average neighborhood income and employment base, or find out if there are any plans to build an unwelcome facility nearby, like a nuclear reactor or garbage dump. The more research a buyer conducts, the more likely he or she will be satisfied with the purchase.
Purchase Agreement
A purchase agreement is a written document submitted by the buyer to
the seller detailing the buyer's terms for the purchase of real estate.
The terms of the purchase agreement can be enormously complicated and
cover a panoply of issues such as price, down payment (also known as
earnest money), mortgage arrangement, what items will be left with the
property, zoning restrictions, title, deed, taxes, remedies in the
event of default, conditional requirements for purchase and other
important details (such as a satisfactory inspection).
The seller may accept the buyer's purchase agreement, reject it or issue a counter-offer. Usually, a buyer will limit the period of time in which a seller can accept the purchase agreement. If that period passes without a seller's acceptance, the buyer is under no obligation to purchase the real estate. However, if the seller accepts the buyer's purchase agreement within the time allotted, the buyer is legally committed to buying the real estate under the terms of the agreement. Therefore, it is extremely important that the buyer understand the terms of the purchase agreement before signing it and submitting it to the seller. Any contingencies (e.g., need to obtain financing) should be provided for in the purchase agreement.
Title and Title Insurance
Title insurance is insurance against defects in title to real property, available in
most but not all countries. It is meant to protect an owner's or
lender's financial interest in property against loss due to title
defects, liens or other matter of public record Typically the real
property interests insured are fee simple ownership or a mortgage.
However, title insurance can be purchased to insure any interest in
real property, including an easement, lease or life estate. A
marketable title is a title generally free from encumbrances and title
defects that may lead to litigation. An example of a title defect might
be a gap in the history of the property's ownership. In such a case,
after the buyer has purchased the property, someone could conceivably
show up and claim to be the rightful owner. A title insurance policy
sometimes includes a provision requiring the title insurance company to
defend the title in litigation should anyone challenge the title. Title
insurance can also be purchased by the holder of the property mortgage.
Deed
The deed is best known as the method of transferring title to real
estate from one person to another.There are a number of different types
of deeds. The most common is the warranty deed which requires the
seller to pledge or warrant that he or she is the legal owner of the
property and that there are no outstanding liens, mortgages, or other
encumbrances against it. A warranty deed also guarantees that the
seller may be held liable for damages if the buyer later discovers the
title is defective. A warranty deed is no substitute for title
insurance however. A seller can disappear, move out of the
jurisdiction, die or declare bankruptcy.
Another type of deed is a quitclaim deed. A quitclaim deed neither warrants nor professes that the grantor's claim was actually valid. By comparison, a grant deed (or in some U.S. States, a warranty deed), which is normally used for real estate sales, contains certain warranties that vary from State to State. Quitclaim deeds are sometimes used for transfers between family members, gifts, or to eliminate clouds on title, or in other special or unusual circumstances.
Mortgages
In most jurisdictions mortgages are strongly associated with loans
secured on real estate rather than other property and in some cases
only land may be mortgaged. Arranging a mortgage is seen as the
standard method by which individuals or businesses can purchase
residential or commercial real estate without the need to pay the full
value immediately. A mortgage is a loan for which the buyer agrees to
repay the principal amount, plus interest, over a period of years. The
subject of the mortgagethe house and propertyis the security for the
loan. If the buyer fails to pay the mortgage, the financial institution
has a right to foreclose on the property in order to satisfy the debt.
The key to obtaining a favorable mortgage is to shop around for the best interest rates and terms. Among the terms to keep in mind are:
- Prepayment penalties
- Service charges
- Is the mortgage assumable?
- Maintenance of insurance
- Lender's right to change interest rates during the term of the loan
- What is the maximum repayment term?
- Can more money be borrowed under the same mortgage agreement?
Closing
If the terms of the purchase agreement have been met, inspections
concluded, title questions settled and financing obtained, all of the
parties involved in the sale of the house will meet to sign documents
and transfer money. This meeting is known as the closing. Just before
the closing, the buyer and seller may meet to inspect the property one
more time to ensure that the house and property have not substantially
changed since the buyer last saw them.
A basic closing usually includes, among other things, the buyer showing the lender proof of title insurance and homeowner's insurance. The buyer then signs the mortgage agreement. The completed mortgage agreement provides cash toward the amount of the purchase price which is given to the seller. The seller then signs the deed that transfers ownership of the property over to the buyer. After any remaining cash adjustments are made, the purchase is concluded and the buyer should be the new property owner. The buyer should immediately have the deed and mortgage recorded at the local county records office.
Condominiums
A condominium is a planned development, either residential or business,
in which a person has individual ownership of a unit and joint
ownership of the common elements. The common elements are any portions
of the condominium not included in the units such as sidewalks,
hallways, swimming pools and tennis courts. An owner of a condominium
unit owns the area formed by the walls, floors and ceiling, and
everything inside, including appliances, fixtures and cabinets. The
owner pays property taxes based on the value of the unit and a pro rata
portion the common areas.
Condominiums are operated by condominium associations made up of unit owners. The association is a corporation and can enter into contracts, sue, be sued, and can make assessments against the units to pay common expenses. Though Florida law sets certain mandatory provisions regarding condominium ownership, the condominium association has the authority to impose many of its own operational rules concerning things such as pets, children, parking, unit maintenance, noise levels and unit resale or leasing. Therefore, when considering the purchase of a condominium unit, be particularly aware of all rules, restrictions and regulations in the condominium documents and those promulgated by the condominium association.
