By E. Drew Nelson, Attorney
Buying your first home can be an exciting (and sometimes scary) process. As you look at homes or floor plans, you are probably imagining what the house will look like once it becomes yours. Where will you put your furniture? What do you need to buy? What colors will you paint the rooms? Once you are ready to make an offer and become a homeowner, there are some things you should know before you sign on the dotted line.
Here is a list of some of the more common things buyers need to know. This list is by no means all encompassing, so if you have questions about the process or the laws governing real estate transactions in North Carolina, you may wish to consult with an attorney:
- For most people, purchasing a first home will be the largest dollar transaction they have ever made. Your best bet is to get pre-approved by a reputable mortgage company before you begin house-hunting. It’s important to understand all the terms of the mortgage loan document before you sign. You are borrowing money from the bank and the property is being used to secure the loan. Should you default, you may lose your home and your credit will be damaged.
- When you make an offer on a home, you generally will provide earnest money to show your intent to purchase the home. These monies are typically held in escrow by the realtor and applied toward the purchase price at closing. Should you back out of the agreement, you will lose the earnest money.
- Many homes are part of planned communities with homeowner’s associations (HOAs). Should you purchase a home in a neighborhood with an HOA, you are agreeing to pay annual dues in the amount stated, and to abide by the covenants and bylaws governing the community. These covenants are intended to protect homeowners and maintain the resale value of the homes. The rules may include such things as the right to store a boat or RV on the property, exterior or landscaping changes you are allowed to make, or even the type of grass you may grow. In most cases, failure to abide by the rules entitles the HOA to levy and collect fines. In extreme cases, the HOA is permitted to foreclose on your property. I recommend you request copies ahead of time to understand what the rules will be. If you are not willing to abide by these covenants, you may wish to find a home that is not governed by an HOA. (Note: the laws governing planned communities are under review and do change often, so you may wish to ask an attorney if you have questions.)
- I also recommend you look closely at the area surrounding the property you are considering. If there is open land, how is it zoned? Are there plans to widen the road near the property such that you might lose some of your land through government condemnation proceedings? You should also look to see if there are any easements noted on the last survey that would impact your usage of the property.
- Is the property in a floodplain? If so, you will need to purchase separate flood insurance. If at all possible, you should visit the property after a heavy rain to see how the land drains.
- Can you get clear title to the property? Generally speaking, a title search is part of the pre-closing process. This search is a detailed review of the public record to ensure there are not any liens or encumbrances on the property so you can have the title transferred to your name(s). As a rule, most lenders require the purchase of title insurance just in case issues are found.
- Was the property ever used for dumping or by a business that might have left toxic materials? If so, there may be expensive cleanup required by the Environmental Protection Agency. Likewise, older homes may have lead-based paint, asbestos-based products, or even mold. You may wish to have the property inspected by a professional before closing. While the presence of these materials does not mean you should not purchase the home, it is important to understand what the costs of remediating these problems will be.
Once the deal has been finalized, you will head to “closing” where you will sign lots of paperwork to complete the purchase. In many cases, this will take place at an attorney’s office, though more and more often purchasers are completing these transactions via overnight mail. You should be provided with copies of all the documents you signed, and you should keep these copies in a safe place.
Congratulations! You are now a homeowner!