Documents and Disclosures When Buying a Home
Buying a home is often the single most significant financial transaction people enter into during their lifetime. Whether it’s your first home, or you’ve done this a few times, you can’t get too comfortable in the transaction process, as you don’t want to miss something important. The pile of documents involved in a home purchase transaction is tall, and you want to pay attention to everything you’re signing.
You want to pay particular attention to the ones you receive during the sale, which you must acknowledge in writing. The fact that you’re signing to indicate you’ve received a document shows that it is important to you and could contain information you’ll later find valuable.
Some disclosure documents are included in almost every transaction and not necessarily applicable to the particular home you’re buying. They could be general information about taking care to read all documents, much like this article is saying. There is a Lead-Base Paint Disclosure for homes of a certain age or older. In some areas of the country, there is a disclosure about radon, a colorless and odorless gas that seeps into the home from the ground and is known to be hazardous to your health.
Seller’s Property Disclosure
The content and wording of this disclosure document vary by state, as each state regulates real estate transactions. This document is relevant, however, as the seller or sellers are disclosing what they know about the property. It will tell you about past problems such as major repairs or damages.
Some disclosures also cover anything the owner or owners know about the past ownership of the property or lawsuits and claims that could present future problems. You will want to read this document carefully, as you may require clarification about some items. You may also find at a later date that the seller(s) omitted something important that creates problems for you.
The Title Insurance Binder or Commitment
This document is one that tells you the title insurer is committed to providing title insurance at closing to protect your ownership in the property. Although formats vary by state, they usually have three major sections.1. The property is defined with address and other information about its location.2. Requirements — The title insurer is bound to provide the policy, but in this section, the insurer states that this coverage is contingent upon specific requirements.
Things like the current mortgage being paid off and any liens paid would be in this section.3. Exclusions — These are things the insurer will not cover, usually because there is nothing that can be done about them, as they are a part of the property history and legal chain of ownership. These items could include homeowner association (HOA) or subdivision covenants and restrictions.
HOA and Subdivision Covenants and Restrictions
You want to look at these because they could have something in them that will create a problem or nuisance for you in the future. The subdivision or HOA has this document recorded at the courthouse and owners are bound to obey these rules and restrictions. Typical items you can find in these rules include no fences in front yards, no boats or recreational vehicles parked outdoors, no outdoor storage buildings taller than privacy fences, and others.
It’s not life-threatening, but it is annoying to find out after you move into your new home that you must keep your $40,000 automobile out in the weather because you are required to keep your $10,000 boat in the garage. Oh, and there could be a restriction against a carport over your vehicle as well. Do not assume that you can get away with what you consider to be minor infringements. There are often homeowners whose job is to patrol the neighborhood and place notices on your door for violations.
You’re going to be in this home for years, so why not invest a few hours in reading what you’re signing and acknowledging during the transaction?