HOMEOWNERS AND RENTERS | Buying and Selling a Home

Whether you are buying or selling a new or an existing home, you will be entering into contracts with various participants in the process, including real estate agents, title companies, home inspectors, surveyors, contractors, and mortgage companies or banks. In addition, each of these participants will receive payment for its services in the form of fees or commissions that either the seller or buyer will have to pay, so more than the price of the house has to be paid when the sale is closed.

Dealing with mortgage companies and banks

  1. Start here, because most realtors or builders will want to know up front how much house you can afford. Your lender can “pre-qualify” you for an amount before you start looking, so you don’t waste your time looking at properties that you can’t won’t be able to get financing for.
  2. If you are going look for new construction, the builder may offer financing through its own captive lender. You don’t have to use that lender. Try your own bank or credit union.
  3. Do your homework. Ask friends and neighbors about their lenders and their recent experiences. Search the Internet for information about the lender.
  4. When you purchase or sell a home, Federal and state truth-in-lending laws require banks and mortgage companies to disclose to you certain information about the estimates of your closing costs and other facts and figures relating to the sale. Be sure to talk to your realtor about this.

Dealing with realtors

When you hire a realtor to help you buy or sell a home, you are entering into a legally binding contract with the realtor. Primarily, if you are a seller, your obligation will be to pay the realtor a commission once the house is sold and the sale is closed. Ordinarily, the commission comes out of the proceeds of the sale. If you are a buyer, your realtor will receive her or his commission the same way, from the proceeds of the sale.


Federal and state fair housing laws prohibit certain practices in the selling of homes to prevent unfair discrimination based on race, color, religion, sex, familial status, disability or national origin. If you believe you have been discriminated against for any of these reasons in your search for a home, you can file a complaint with the Office of Fair Housing and Equal Opportunity of the U.S. Department of Housing and Urban Development at this web address: http://portal.hud.gov/portal/page/portal/HUD/topics/housing_discrimination.

The basic process

Once the buyer has identified the home he or she wants, the purchase and sale will likely proceed as follows:

  1. The buyer will make a written offer, accompanied by a deposit called earnest money and specifying a period of time in which the offer can be accepted.
  2. The seller will then either accept the offer, reject the offer, or make a counteroffer. If the seller makes a counteroffer, it will state how long the buyer has to respond to it.
  3. This process continues until the negotiations break down or an offer or counter offer is accepted.
  4. Once an offer or counter offer is accepted, the parties will have entered into a binding contract to buy and sell the house. This agreement will be in writing and it will say what conditions or events will allow either the buyer or seller to withdraw from the contract without penalty. Some of those conditions can include the buyer’s inability to obtain the necessary financing to buy the house or the failure of the house to pass inspections or the failure of the seller to be able to prove clear title. To prevent title problems from stopping a deal, title insurance is available and title companies will become involved.

Dealing with title companies

Unless you take action early on, you won’t have a chance to choose the title company for your purchase or sale of a home. Lenders and mortgage brokers often use captive or favorite title companies, but you don’t have to accept their choice. A poorly run title company can seriously delay the closing or even cause a deal to fall through, so you should discuss this with your realtor before you make an offer on a home.

Buying new construction

Ask plenty of questions. The construction process can be complex and drawn out, so always ask for explanations of anything you don’t understand. It is definitely worth a few hundred dollars to hire and pay an independent building inspector to periodically check on the builder’s progress to avoid problems later in the process.

Pay close attention to the builder’s warranties.

If you are getting upgrades, make sure they are included in any contract that you sign. Try to visit the builder’s design center before you sign a contract. You may encounter resistance about this but don’t give up easily. You have a right to full disclosure of what will wind up in your contract and what a salesperson may tell you about available materials and features may not exactly match what is available at the design center. Don’t assume that different departments in your builder’s company communicate well with each other. The design center may be slow in telling sales representatives about changes in materials.

Buying an existing home

It is even more important to hire your own inspector when buying an existing home than it is when buying new construction, so be sure to find and hire a reputable and competent inspector. You should have the house inspected before you make an offer. The inspector’s report may convince you to look elsewhere and once you have made an offer, you may lose your earnest money if you withdraw your offer if your agreement doesn't adequately allow for inspections. A competent realtor is indispensable because he or she can ensure that your contract contains the protections you need.