Buyers can do some things to avoid real estate disputes, or at least, to document their efforts at due diligence.
- Option Period – Do we have one?
- Earnest Money – What is the lowest we can pay?
- Inspection – Did we order one?
- Seller’s Disclosures – Did you spot any issues?
- Deed Restrictions – What will be the effect on my future renovations or future sale?
- Title Commitment – Do we need to research or object to anything?
Option Period. Buyers can pay a small fee to allow you to cancel the contract for any reason, for a period of time. You should always purchase an option period.
Earnest Money. This is the money that you put down while the contract is pending. The money is usually forfeited if buyer backs out after the Option Period has ended. So, pay as little as possible. The norm is usually around 1-2% of total purchase price. We have seen buyers mistakenly put down way too much (as much as 10%) and then lost the money.
Inspection. This is done to check the conditions of the house that may not be visible to the naked eye. Make sure to order one and review it. It is well worth the price because buyer can normally terminate the contract early if there are serious issues found.
Seller’s Disclosures. The seller is required to answer some questions about the condition of the property. Review the disclosures and ask your realtor if there are any items that raise concern e.g. flood zones, past notices of code violations etc.
Deed Restrictions. These are like rules in the area that affect how you can develop the land etc. This one is a big deal because you don’t want to purchase property to later find that you cannot obtain a permit to make renovations. It will be a very costly mistake. Ask a lot of questions e.g. Will the deed restrictions stop me from getting utilities connected? Adding a room? A guesthouse? Will the deed restrictions affect me when I’m ready to sell?
Title Commitment. The word commitment is basically the title company promising that it will issue a title insurance policy to protect the buyer from issues with title. The commitment is a document and will list any issues found during the title search, and also usually lists deed restrictions. Have your realtor explain the findings, and if still in doubt, consult with a lawyer who may be better able to spot potential legal issues.
Lastly, ask all these questions in written format (email) so that you have documentation that you did do your due diligence. This will help if you ever need to involve a lawyer!