Risk is inherent in every transaction you make, but why take unnecessary risks and rush into a legally binding contract without getting legal advice? It’s easy to get swept up in the emotion of a home purchase, thinking it might slip out of your hands if you don’t act quickly to secure a deal. It’s also easy to end up over your head.
An experienced real estate attorney is an invaluable ally when purchasing property in Minnesota. Having a disinterested person review documents before you sign contracts can save you a big headache later.
What You Need to Know When Buying Minnesota Real Estate
Purchasing a new home is exciting but it can turn into a nightmare if you jump in before understanding the implications of what you’re signing. If you understand the potential issues when purchasing real estate you’re less likely to make the mistake of ignoring red flags and act on emotion. Without guidance from a professional you may become legally responsible for a contract to purchase a home that has serious flaws.
Important concepts to understand before agreeing to buy real estate:
- Contingencies are conditions that must be met before the property is purchased or sold. Sellers may require time to find another home before they will officially sell their property, and buyers may do the same. Common buyer’s contingencies include a requirement that the home passes an inspection, the buyer’s mortgage company approving the purchase, and the title search showing no issues.
- Earnest money is a mutually agreed-upon sum of cash that the buyer deposits with an escrow agent (third party that does not have an interest in the property sale) as an indication that they intend to make the purchase. If the property fails inspection, does not appraise for the mortgage value, or has title issues, the buyer should renegotiate or back out and the money should be refunded.
- Covenants, Conditions, and Restrictions (CC&R) are the terms of homeowner’s associations. These should be read carefully before purchasing a property that is governed by them, particularly the fee schedule and planned capital improvements, which are non-negotiable and can escalate your monthly costs.
- Closing Costs are usually paid by the buyer and can total five percent of the sale price. This is in addition to the downpayment amount. The earnest money may be applied to the closing costs but the escrow account may not be released in time.
- Riders and Clauses are used to further define conditions of the purchase and sale, such as deadlines for inspections and mortgage approval. These deserve particular scrutiny as they can hide important clues to the property’s condition or the seller’s intentions. A frequently-used “kick out clause” allows the seller to accept back-up offers for the property if the original buyer needs to sell their own home before they can complete the purchase.
- Seller’s responsibility includes divulging any material issues with the property. While a buyer may feel comforted that Minnesota state statute 513.57 Subd. 2 provides some recourse, up to and including reversing the property purchase within two years, it must be proved that the seller knew about serious flaws but did not reveal them. Sellers don’t have to point out issues that are plain to see, such as foundation cracks that are not disguised, ceilings stained by roof leaks, or rotted floorboards in easily accessed areas.
Real Time Help and Advice for Peace of Mind
Deciding on a property to buy, inspecting it, qualifying for a mortgage, and moving are all big decisions. Don’t go it alone. Let the experts at Waypoint Law help you navigate the ins and outs of home buying. We can put our experience to work for you, explaining riders and clauses, dissecting red flags, and helping you feel confident that you’re making the right decision. Call for a consultation today.