Understanding Buyer and Seller Rights Before Closing
Just like any sale, both the buyer and the seller have their own rights in making a home purchase. Are you knowledgeable about these? Don't get into a deal just yet if you don’t know your rights!
In investing in a property, you must be familiar with your own legal advantages and limitations, and always remember that the seller has his/her own rights as well.
Before anything, be sure you know what you're getting into!
Before closing any deal, you must know what it means to make a “sale.” Legally, this means that one party (seller) is transferring property to another party (buyer) for a price.
This price may be paid in full by the buyer upon entering the agreement, or the buyer may have promised to pay in full when he/she gets the rights to the property. Another case would be making partial payments: partial payment upon agreement (a down payment), with a promised partial payment that will complete the deal when the property has been fully transferred from buyer to seller.
Now that you’ve made a deal, remember the rights the law provides you.
I'm the Buyer
If you're the one who the property is being transferred to, here are the things you may need to know.
1. The seller kept something about the property from me, can I do something about it?
If the seller didn't disclose something about the property, you should look up the local guidelines for this. Laws on disclosure depend on the state, and may even vary among cities.
For example, some states allow a sale even if the seller didn’t tell you that the house you’re buying was once used to manufacture illegal drugs. In another state, though, this will not be tolerated.
2. I'm not sure about the Home Owner's Association (HOA) contract, so I don't think I want the property anymore.
Can you walk away from a deal if this is an issue? Yes! But this will depend on a date specified in your contract.
There is a law that protects the buyer from any disagreements about the HOA Declaration of Covenants, Conditions, and Restrictions. But keep in mind that there's a specific time for you to check and read through these documents, and this time frame is different in every state. Make sure to check the grace period in your state when you make a deal.
3. My current home isn't sold yet, but I already want to make a deal on my dream home. What can I do?
You wouldn't want to be stuck paying two mortgages, so what are your options?
Try making an offer with your seller that is dependent on the sale of your current home. A deal like this gives you the option to back out from the deal within a fixed period.
You must know, however, that a contract of this kind still gives the seller a choice to back out at any time another offer comes in, especially if it doesn't have a contingency clause. If in case this happens, don't worry--you still have time (around 72 hours) to remove the contingency and make a deal with the seller.
I'm the Seller
If you're the one transferring the property to another party, you should take note of the following:
1. I accepted an offer, but I still want to look at my options. Can I still do this?
Yes, you can still look at other offers, but that doesn't mean you can accept them in place of the contract you already agreed to.
What you can do at this point is to make another interested buyer take the "backup position." If your first deal doesn't go well and fails for any reason, you can automatically take the deal with the second buyer.
2. The buyer's financing is unstable. Can I back out?
Yes, especially for the following conditions:
- If the buyer's financing fell through before your closing date, you have the right to walk away.
- If you see the buyer's loan terms will affect you negatively, you have the right to refuse the offer.
3. The house appraisal doesn't match the contract price. Can I stop the buyer from opting out of the contract?
If the house inspection raised issues your buyer is not prepared for, you can shoulder the cost for your buyer to continue with the contract.
If it's a matter of appraisal that is less than your offer, don't panic about the possibility of the sale falling through. If the lender allows it, you can give the buyer the option of paying the difference in cash. If not, have the buyer shoulder some of the seller's closing costs instead. It is worth noting, though, that lowering the price is often the best solution--since a higher appraisal isn't a guarantee when you decide to go with a different buyer (not to mention the hassle of having to sell the property again).