Know your rights in a real estate purchase --
"A real estate attorney will go through the documents,
make sure you understand what it is you're signing, and be the second
pair of eyes that doesn't have a vested interest in seeing the deal
close," says Glink. "The real estate agent doesn't get
paid until the deal closes and the mortgage lender doesn't get paid
until the deal closes but ... that attorney gets paid separately,
so he or she doesn't care whether you close on the deal.
They just want to make sure that if you're going to buy this house,
you're going to be protected legally."
In some states, a real estate attorney handles the
closing, or settlement. In those cases, don't assume that the real
estate attorney is representing you since he or she might be representing
the seller or the lender.
The sales contract will include such provisions as the price, mortgage
clauses, sharing of expenses and the settlement date. Just because
agents typically use a pre-printed purchase and sale contract doesn't
mean you can't change anything in it. Everything in the contract
is negotiable. The seller, however, has the same right and there's
no agreement until you agree to agree.
Under the Real Estate Settlement Procedures Act (RESPA), lenders
and mortgage brokers are required by law to give you a copy of the
booklet, "Buying Your Home: Settlement Costs and Information,"
within three days of you applying for a loan.
A number of federal laws are designed to protect you
when you apply for loans. The Equal Credit Opportunity Act and the
Fair Housing Act protect you during the lending and real estate
transaction processes from discrimination based on race, color,
religion, national origin, sex, marital status and age.
The Equal Credit Opportunity Act also gives you the
right to know why you were approved or denied a particular loan
and the right to secure a copy of the appraisal report for the home
you're purchasing. The Fair Credit Reporting Act requires that your
lender let you know if you were denied a mortgage loan because of
information in your credit report, and if so, you have the right
to a free copy of that credit report.
If your real estate agent or broker suggests you use
a certain lender, realize that you're not obligated to do so. Be
vigilant for kickbacks. Under RESPA, it is illegal for anyone to
pay or receive money for referring lending or settlement business.
So if your real estate agent gets a fee from a settlement company
for steering you to that company, that is against the law.
A Truth in Lending Disclosure Statement is a document
that shows you how much interest you'll be paying for a loan you've
applied for. Also, compare settlement costs and points, fees that
equal a percentage of the loan amount.
RESPA requires that lenders and mortgage brokers give
you a 'good faith estimate,' which details an estimate of settlement
costs. While this will not necessarily be an exact amount -- circumstances
can change -- it should give you an idea of what you can expect
when it's time to go to the closing.
Many lenders require that you purchase title insurance, which protects
the lender from any claims that may be made against the home. However,
recognize that the policy does not protect you. However, you can
purchase an owner's policy to protect yourself from such claims
If you believe that you have been taken advantage
of at any point in the home-buying process, contact an attorney.
Your state's Department of Housing or the U.S. Department of Housing
and Urban Development (HUD) Office of Consumer & Regulatory
Affairs can also be of assistance. "It's the single largest
purchase you're ever going to make in your life," says Glink.
"To go into that without having any idea of what you're doing
is just foolish."