The Bushman Law Group

675 S. Washington St.
Alexandria, VA 22314
703-845-9070
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Real Estate

The Process of Purchasing a Home

Welcome to the Bushman Law Group's Real Estate Section. Real Estate is a major field in our client's private and public lives. At the Bushman Law Group, we will handle your real estate needs. Real estate closings include drafting and reviewing the sales contract, lender's documents, and releasing any encumbrances on the property. We will disburse on payoffs and preside at the closing to ensure smooth transactions. The following is a guide to understadning the process of a real estate transaction.

1. A seller will decide to sell his house. The seller will then contact a real estate agent who will list the house, or the seller will attempt to sell the house himself. There are many steps a seller may take, but this guide focuses on the Buyer (may also be referred to as a "Borrower.")
2. A Buyer may hire a real estate agent who will help her find a house or the Buyer may, and in fact will, search for a house herself. Usually, the Buyer will also pre-qualify at a bank with a lender at this point in the time line, so she knows how much she may be able to borrow to buy a house or condominium. Please understand that a lender's prequalification letter does not necessarily mean the lender or bank will loan that amount to the Buyer. It is at best an estimate.
3. The Buyer finds a house she wants to buy (I would recommend speaking with an attorney at this stage) (The attorney can draft the contract, however, most real estate agents are granted that ability under their license) (the attorney can offer a varying perspective on the transaction). A contract is drafted and, the Buyer makes an earnest money deposit and sends the contract to the seller or his agent. It is very important to note that at this point, the Buyer and not the Seller chooses the Settlement Agent. A settlement agent must be registered in Virginia to settle the transactions. Settlement agents can be attorneys or non-attorneys. The buyer's real estate agent may suggest title companies and settlement agents, but you are under no obligation to go with his suggestion. Keep in mind that title insurance companies are profit companies and can be owned by the real estate agents who represent you and is suggesting you use their company. The Bushman Law Group can serve as your settlement agent, and by choosing the Bushman Law Group you will have attorney's conducting the closing.
4. If the terms of the contract are agreeable to the buyer and seller, then the parties will sign the contract and that is a ratified contract and the day of the last signature constitues the day of ratification unless agreed in writing to be a different date. The contract will include the price of the property, how the property will be paid, when the property will close, when the seller will leave the property and buyer can enter the property, what constitutes a breach of the contract, what constitutes a default in the contract, what remedies exists if either party breaches or defaults, and importantly who will be the buyer's closing agent. The contract may contain a number of contingencies that allow the buyer to void the contract. These contingencies may be based on the buyer obtaining financing, the home passing an inspection, the sale of an existing property owned by either party, the property appraising in value, or based on a court approval.
5. The Buyer will go to the bank and see the Mortgage Lender, The mortgage lender will give a Loan Estimate (LE) of the costs to closing the real estate transaction.
   
   The LE will state the origination charge: these charges are the bank's processing fee, application fee, administration fee, underwriting fee, document preparation fees, wire fees, broker fee, lender inspection fee, yield spread premium, and similar charges.
   
   The Lender may also select companies that can do for you the appraisal, credit report, flood certification, title company, closing attorney or closing agent.
   
   The Lender will also tell you services they require, but you're allowed to shop around for: these services can be the title company, closing attorney, the survey, the home warranty, termite inspection and a couple others.
   
   The LE will also inform you of your state and local recordation taxes, transfer taxes, initial deposit for your escrow, daily interest charge, and homeowner's insurance (hazard, flood, earthquake).
6. The Buyer can take this LE from the lender, and the lender must give you a LE within three business days after applying for a loan, and go to any other lender and compare the costs that each lender has (origination costs, other loan requirement costs) as well as the costs for the services that the lender suggested to the Buyer. The LE will state how long these terms are open, and if the Buyer accepts the LE within that time period and the services suggested, then the Lender's origination costs, credit for the interest rate chosen, adjusted origination charges, and transfer taxes are fixed and not to change. However, some costs can change by up to 10%, such as the services they suggested and you approved, title's services and lender's titles insurance (if lender selected them OR you choose a company they identified), owner's title insurance, and government recording charges. When the Buyer chooses a company not recommended by the lender the cost may increase or decrease by any amount: this would depend on the negotiating skills of the Buyer or his agent. If you request a a change to the loan amount or interest rate, then the Lender may have to issue you a new LE and the fees may have changed.
7. The Buyer chooses a lender (unless you are paying all cash). The lender will have the Buyer go through an extensive underwriting process. The underwriting process conducted by the lender is a process that at its simplest is the Lender's calculation as to how much you can afford to pay on a mortgage, and whether the property is worth the contract price. The bank will look at your sources of income, your credit, your employment, and your other assets. The bank will also look at your expenses for grocery, clothing, utilities, association dues, taxes, and other miscellaneous costs. No bank is forced to lend money to a risky applicant. A Buyer (also referred to as "borrower") will have to supply countless documents to the lender proving they are qualified. At a minimum, a Lender requests several years of tax returns, current wage statements, permission to run a credit report, bank and brokerage statements. If you are self-employed, the process is even more tedious and the requests for information are a greater burden. Your organization of your finances ahead of time is key.
8. During the underwriting process, the Lender is communicating with the Title Company and its Settlement Agent. The Settlement Agent, if also licensed as an attorney, will order and obtain a title search, reviewing the title search, order a survey of the property (if requested), review the survey, request a pay off on any liens shown on the title examination, drafting the deed of conveyance, powers of attorney, if necessary, prepare a binder for the title insurance. The Settlement Agent checks to see if there are any judgments or liens against the property and that there is a marketable and insurable title. The Settlement Agent for easements or other irregularities with the property. The settlement agent will arrange a time to close in accordance with the contract and the parties. If the Settlement Agent is not an atotrney, then the Settlement Agent cannot give legal advice or draft legal documents. Those Non-Attorney Settlement Agent must have an attorney draft the deed and other legal instruments. In additiona, the Non-Attorney Settlement Agent cannot give legal advice or tell a Buyer any defects on title as that is the unauthorized practice of law. What happens if a Non-Attorney Settlement Agent gives advice anyhow? They may be committing a misdemeanor, but that will not compensate the Buyer who may be without a home. There is no insurance to cover bad legal advice from someone that is not an attorney licensed to practice law in Virginia.
9. Prior to the parties signing the closing documents, the Settlement Agent will assist in the preparation of the Closing Disclosure (commonly abbreviated and referred to as a "CD." If there is no lender, and the Buyer is purchasing the property in cash a settlement statement may be used instead of a CD (These transactions are not really paid in $100 or $20 dollar bills, but the term is used to describe a purchase without the use of a Note[a promise to pay in the future]) The CD will then be sent by the Lender to the Borrower, at least, three days prior to your closing. At that time, you have the opportunity to discuss the banks charges and compare to the LE given to you by the Lender earlier in the process.
10. The parties arrive at the Settlement Agent 's office. The seller signs the deed conveying the property to the Buyer. The Buyer signs all the paper work that the Lender requires as part of the closing. At this moment the Buyer will sign the CD previously sent by the Lender.
11. The Settlement Agent will take the deed down to the courthouse where most land recorders' offices are located. The Settlement Agent or a title examiner will search the land records to make sure the Seller has not conveyed the property to anyone else, received any new judgments or liens since the title search. If there are no such adverse findings, the Settlement Agent will record the deed with the land records clerk.

Choosing an attorney to serve as the Settlement Agent and conduct the settlement is the smart choice. An attorney is a licensed professional registered with the Virginia State Bar and subject to its disciplinary action. The attorney should have mal-practice insurance and ask them to make sure. The attorney not only spends time to understand the law, but the attorney can give legal advice: legal advice that you can count on or sue them for mal-practice. An attorney can explain the difference between the various forms of ownership. An attorney can review your survey and inform you of encroachments and easements and what your rights are. Don't pay attorney prices for non-attorney work.

• Do I need an attorney before I purchase a house?

  No, there is no law that mandates the employment of an attorney, however, an attorney experienced in real estate issues can be a valuable resource saving more money than any extra cost. In most circumstances, a real estate attorney as a settlement agent is competitive in pricing.

• How can an attorney save me money

  Certainly, an attorney does not operate like a bank to save you money be depositing money. A lawyer can save a client money by reviewing the circumstances and documents for potential problems down the road. By identifying problems and providing solutions upfront, an attorney can save time and money before a problem has a time to grow in size.

• What type of issues does can attorney assist with.

  Although a buyer is represented by a real estate agent and an attorney at the same time, the focus of each representative is different. A real estate agent's main focus is on identifying the client's real estate needs and desires then matching those needs and desires with what is available on the market. Incidental to an agent's real estate license is the ability to provide limited negotiating and drafting in regards to real estate contracts. An attorney can review the Promissory Note and explain the defenses a buyer may have or is waiving. An Attorney can review the Deed and explain easements and covenants. Most importantly, no real estate agent, who is not a practicing lawyer, can inform you of any remedies by the subsequent breach of either party or explain how the issues will proceed at court. You need an attorney to give such advice. Obtaining that advice in the beginning and allowing the attorney to review the documents and circumstances may prevent or limit substantial litigation based on the attorney's experience.

• I own property as a Joint Tenant? What does that mean?

  Ownership as a Joint Tenant in Virginia without the Common Law Right of Survivorship is no different than owning the property as a Tenants in Common. Owning property as Joint Tenants with the Common Law Right of Survivorship means that the owners are united in Time, Title, Possession and Interest, so that upon the death of one of the Joint Tenants, the surviving tenant(s) gain the decedent tenant's interest.

• I own my property as Tenants in Common with a friend, can I sell my interest in the property without my friends consent?

  Yes, as a Tenant in Common your interest is alienable and devisable. Alienable means that you may offer the property for sale to another. Devisable means that your interest in the property can be conveyed after your death by a Last Will and Testament or the property may pass by operation of law to your heirs at law. However, if you have entered into a contract with your friend, then you may be subject to a partnership agreement restricting your ability to sell the property.

• My mother owns our child hood home as Joint Tenants with the Common Law Right of Survivorship with my brother, she has since passed away, do I have an interest in the property?

  No. Your brother by operation of law is the owner of the real estate.

• My mother transferred her property to herself and my sister as Joint Tenants with the Common Law Right of Survivorship, with the precise understanding that my sister, upon my mother's death, would transfer my share of the house to me, is this legal?

  Yes and No. Your mother gave your sister an interest in the real estate. The interest is a gift if your sister did not give fair market value for the interest. Your sister's interest is that she will own one hundred percent of the property by operation of law if your mother predeceases her. Your mother's plan is relying on the good will of your sister to follow through with her direction, and without other affirmative written declaration you may not have any recourse if she does not follow your mother's desire.