Real Estate Law

Do I need an attorney to advise me on my home purchase or sale?

The use of an attorney may prove exceedingly helpful in the purchase or sale of your home.  An attorney, experienced in the process of home purchase, may provide a multitude of services throughout the real estate transaction.  While an attorney should be consulted to complete the purchase or sale of your home, he or she can be beneficial early in the process, such as prior to signing the sales contract.  An attorney can assist in drafting the contract by offering custom suggestions to address your particular needs in the home purchase.  As the transaction progresses, an attorney can offer additional assistance, including the items listed below.  While extremely experienced in helping buyers and sellers, your Realtor® cannot give you legal advice.

What are some of the pitfalls in the home purchase and home sale process?

Pitfalls in the home purchase and sale process include improperly drafted contracts, unqualified buyers, missed closing dates, title defects, poor advice from unqualified sources, improper disclosure of material facts or defects, survey problems, lack of proper or necessary inspections, and many more.  While all risk in a real estate transaction cannot be eliminated, the risk can be minimized or managed with proper advice.

What does an attorney do in the closing process?

An attorney may provide one, or typically several, of the following services, along with many additional services:

  • Provide advice concerning contract drafting.
  • Give advice on the legal implications of the contract and other documents.
  • Assist in negotiation for the purchase or sale where required.
  • Obtain and examine title evidence to assure good title to the property.
  • ·      Order and review a property survey.
  • Request payoff statements for any encumbrances.
  • Obtain or review a commitment for a title insurance policy.
  • Coordinate the closing with other professionals in the transaction.
  • Prepare a statement of closing costs including proration of taxes, etc.
  • Prepare and review loan documents.
  • Prepare or review deeds transferring the property.
  • Close the transaction and explain the documents involved in the closing.
  • Collect and disburse the funds required for closing.
  • Obtain releases of the Deed(s) of Trust and other encumbrances affecting the property.
  • Manage recording of the Deed, Deed of Trust and other documents.
  • See to the issuance of title insurance.
  • Follow up on post-closing matters.

 

What is the difference in a real estate appraisal, a property survey and a home inspection, and do I need all three?

 

A real estate appraisal is an opinion of fair market value of a particular piece of property.  The appraisal must done by a licensed professional who visits the property.  The appraiser may calculate square footage of the dwelling, look at its general condition, compare it to other comparable sales in the area, compare features with comparable properties, analyze market conditions and arrive at a value for the property.  The appraiser does not review the same features as a home inspector.

 

A property survey is a drawing of property boundaries with a depiction of the boundaries, structures, fences, easements and other features shown on the drawing.  To be called a survey, the drawing must be done by a licensed surveyor.  In the typical residential real estate transaction, a product known as a “mortgage loan inspection” is substituted for a survey.  It is not required in Tennessee that a surveyor prepare the “mortgage loan inspection;" however, in this area most are done by surveyors.

 

A home inspection is done by a professional trained in evaluating the condition of property, its appliances, equipment and amenities.  The home inspector will visit the property to test and inspect various components of the home. The inspector will then prepare a written report as to their findings and recommendations concerning the condition of the property.  The home inspector does not determine value of the home.

 

The purchase of a home may require the services of one or more of these professionals.  Each provides an extremely valuable service in the home purchase process.

 

What is a “home warranty” or a “home protection plan”?

 

A home warranty is generally a promise that a property is free of listed defects.  Home warranties are often provided by homebuilders on newly constructed homes.  The warranty may be backed by a third party who will partially guarantee the home to be free of material defects in workmanship and materials, guarantee the major systems in the home (plumbing, electrical, heat, air conditioning, etc.), and guarantee the home to be free of structural defects.  The warranty period for the various components of the home will vary from plan to plan.

 

A home protection plan is generally in the nature of a service contract administered by a third party.  These are available on existing homes.  These may be referred to as a home warranty, but differ in that they are less comprehensive.  The plan will provide coverage for systems and appliances for a given property for one year.  Many of the plans offered may be renewable from year to year. They will usually have a deductible feature for each service visit.

The differences in plans and warranties may be dramatic.  They should be thoroughly reviewed prior to purchasing a property because of a purchaser’s reliance on a particular plan.

 

What is title insurance?

 

Your home is typically your most expensive and important investment.  A review of the public records may not discover defects in the title to property.

 

Title insurance is a single premium form of insurance that protects the policy holder, e.g. a homeowner, for so long as they may have any interest in their home, against matters that may not be discoverable by an examination of title to real property, such as:

  • False impersonation of the true owner of the property
  • Forged deeds, releases or wills
  • Undisclosed or missing heirs
  • Instruments executed under invalid or expired power of attorney
  • Mistakes in recording legal documents
  • Misinterpretations of wills
  • Deeds by persons of unsound mind
  • Tax liens against an owner that may not yet be recorded
  • Deeds by minors
  • Deeds by persons supposedly single, but in fact married
  • Liens for unpaid estate, inheritance, income or gift taxes
  • Fraud
  • Unposted taxes

Title insurance will protect you against these type of unknown risks and will pay for defending against any lawsuit attacking the title and either clear up the problem or pay the loss to the insured.  Tennessee law requires that you be offered owners' title insurance at the closing of your home.

Do I need to obtain a title policy if my lender is getting one?

Although the decision whether to obtain a title insurance policy is a personal one, the low cost of title insurance in Tennessee may favor an owner’s obtaining a policy.  A title policy is a policy of insurance that generally benefits only the named insured, and a policy in the name of an owner’s lender is essentially of no benefit to the owner and cannot be enforced by the owner.  Generally, in underwriting a loan, lenders require that their lien against the property be in a “first priority” position, i.e. that no other lender, contractor or other person who could claim a lien against the property has one that could trump or “prime” that of the lender.  A lender’s title policy, also known as a loan policy, insures the lender that it has such priority.  While the loan policy assures the lender that the borrower owns the property and therefore has the right to grant a lien against it, that policy does not extend such assurance to the owner.  Accordingly, an owner’s obtaining an owner’s title insurance policy, and a lender’s obtaining a loan policy, is not redundant.  Furthermore, in most instances in which a lender obtains a policy to insure its deed of trust or mortgage, an owner’s title policy can be obtained simultaneously for a minimal, additional charge.

DISCLAIMER: The above information available through www.jacksonmadisonbar.org is basic legal information and is neither intended as legal advice, nor a substitute for legal advice.  No attorney-client relationship is created herein.  The content on www.jacksonmadisonbar.org is provided by the Jackson-Madison County Bar Association as a public service and for general information only. You should consult your attorney if you have questions concerning any specific situation. If you do not have an attorney, may we suggest that you visit our (Real Estate Foreclosures, Real Estate Land Use/Zoning, Real Estate Closing) section or find a lawyer in the phone book.  The topics covered through www.jacksonmadisonbar.org will provide basic information and should make it easier for someone with a problem to decide whether they need professional help from a lawyer or if another agency could provide them with assistance.

A special thanks to the Memphis Bar Association for its contributions and assistance to the Jackson-Madison County Bar Association in making available this legal information.  Portions of the foregoing content have been reprinted with the permission of the Memphis Bar Association.  www.memphisbar.org.