Johnson, Duffie, Swewart & Weidner - Law
Always a Step Ahead



By Dick Stewart

Buying a home is the most expensive purchase most people ever make in their lifetime. With so much at stake, it is wise to take all steps necessary to protect yourself. Here are a few tips for the unwary.

1. Review the Seller Disclosure form carefully. Once you have narrowed your search to a house that you are interested in, carefully review the Seller's Disclosure form. Under Pennsylvania law, every seller is required to answer a series of questions concerning the condition of the property. Make sure that all the questions are answered and ask for further explanation if the answers raise a red flag about the condition of the property.

2. Get all representations in writing. If the seller or real estate agent has made representations concerning the property's condition or other matters, and, if those representations were not true you would either not be willing to purchase the property or you would only purchase the property at a lower price, get the representation in writing. Oral promises will not hold up in court. If the Seller won't put the representation in writing, chances are what you were told wasn't the truth.

3. Have an attorney review the contract before you sign it. Just because a contract is on a pre-printed form doesn't mean that it is "standard". Legal landmines often lurk in pre-printed forms. If time does not allow for an attorney to review in advance, put a clause in the contract that says that the contract is contingent upon your attorney's approval and review of the contract within 2 or 3 days.

4. Limit your liability. Make sure that the contract is worded so that if you default, the maximum you can lose is your deposit. If the contract is not properly worded, you can be held liable for any damage suffered by the seller as a result of your default. These damages can escalate rapidly if the seller has a creative attorney.

5. Get pre-qualified by a lender. If you have a written certification from a lender that you will be able to obtain a mortgage sufficient to purchase the property you are looking at, a seller will feel more comfortable in dealing with you and will be more likely to accept your contract if other terms and conditions are satisfactory.

6. Make sure the deposit is held by a third party. Never give the seller a deposit directly. If a dispute later arises as to whether the deposit is to be forfeited, or if the seller cannot perform, your chances of getting the money back are slim.

7. Get a home inspection. Unless you are expert, you don't know whether there are any conditions or defects which could wind up costing you a lot of money. Make your contract conditioned upon an acceptable home inspection. If the inspection turns up significant problems, you can then re-negotiate the price with the seller or terminate the contract. It is much better to find out about a problem before you have invested your life savings.

8. Ask for a home warranty. Warranties that insure against major mechanical problems are available for approximately $400.00 for the first year of ownership. A smart seller will readily agree to providing the home warranty since it relieves the seller of claims if a new furnace or other major mechanical repair is needed. If the seller won't furnish a warranty, consider purchasing one yourself to protect you against unforeseen disasters.

9. Make sure all timelines in the contract are followed precisely. Most contracts provide an opportunity to get mortgage approvals or home inspections within a certain number of days. If you don't follow the timelines precisely, you will lose your protection under the contract.

10. Purchase owner's title insurance. Title insurance protects a buyer and the buyer's heirs against liens and encumbrances and defects in title for as long as the buyer owns the property. Most lenders require title insurance to protect their interests. Be sure that your interest is protected. Insurance rates are set by the Pennsylvania Insurance Commission. It costs no more to have title insurance provided by a firm that is operated by attorneys.

11. Have an attorney present at settlement. Lots of issues can arise at the settlement table. It makes sense to have an experienced attorney to protect your interest when those issues arise. When you purchase title insurance through an attorney, it costs no more to have an attorney present at settlement. Sellers are looking out for their interest. Brokers are looking out for their interests. Make sure someone is looking out for your interests.

12. Be careful in escrowing for repairs. Oftentimes home inspections reveal defects which a seller agrees to repair at his expense. In other instances, a major system may break down between the time of the contract and the time of settlement and the seller is responsible to restore the system but cannot get repairs completed before settlement. In order to secure the seller's performance, funds are often escrowed at settlement to protect a buyer. Insist on escrowing an amount based upon a firm estimate from a reputable contractor who is able to carry out and perform the work. In certain sorts of repairs, such as a repair to a septic system, it is usually advisable not to have settlement until the repair is made and approved by municipal officials.

13. Watch out for the transaction fee.  Many Brokers charge what is called a transaction fee ranging from $165 to $400. This is a fee for processing the paperwork.  Negotiate this out up front.  You should not pay for the Broker's overhead.

14. Call us. If you're thinking of purchasing a home, call us. We'll be happy to guide you through the process and we'll look out for your interests. Whether you're spending $10,000.00 or $10,000,000.00, our experienced real estate attorneys will help you through every step of the process.