Real estate is covered by both federal and state laws. State laws differ on a number of issues. As a result, it is important to protect your interests by retaining an experienced attorney for routine as well as complex transactions. This overview will discuss topics that are important in understanding real estate law.

Brokers

Real estate brokers may be employed by sellers to find a buyer for a property, or by a buyer to locate a property for purchase. When a seller employs a broker, they sign a listing agreement which obligates the broker to work to locate a buyer, and the seller to pay the broker a commission upon sale. Brokers are usually held to rigorous standards in order to be licensed. A broker is a legal agent of the person who hired him or her, and thus has duties and obligations to work in their client’s interest. The broker is not a party to any agreements about purchase. These agreements are strictly between the seller and the buyer.

Contracts and Transfers

Real estate purchase agreements are governed by contract law. To be enforceable, these agreements must, therefore:

• Be in writing.
• Be reasonably definite as to what is being sold, the price, dates of closing and possession, and other important terms.
• Be supported by consideration, i.e., earnest money.

Once the parties agree on the terms and the contract is signed, the next phase in the process is usually contingency fulfillment. In other words, the buyer and seller fulfill their respective promises that lead up to and are contingent on their final completion of the deal. For example, the buyer will nail down financing and, in Iowa, the seller will have the necessary title searches performed.

The title search is he process of examining the public records. In Iowa, it is typically the seller's obligation to provide an abstract of title demonstrating that the title to the property is marketable by law and under the Iowa Bar Association's Iowa Land Title Standards. The abstract of title is a summary of all material public records on file that affect the marketability and use of the real estate. The abstract will be prepared by a professional (the abstractor), who certifies that the abstract is an accurate summary. This process also exists in other states, but the professional is employed by a title company.

The title search is then examined. In Iowa, this is typically done by the buyer's attorney. In many other places in the United States, this is done in-house by the title company or an underwriter for a title insurer. In either instance, the goal is supposed to be to report on what must be done to give the buyer a good, clean, marketable title to the property.

Iowa boasts having the cleanest titles in the nation because of the attorney examination system. In other parts of the country, the buyer receives an insurance policy with the deed purporting to insure against defects of title. Rather than fixing problems, it is easy to "insure over" the defect and hope that it does not blossom into a big problem.

To complete a land transaction, the seller is required to execute and deliver a deed that includes a legal description of the land. The deed be be delivered to the buyer when the agreed price is paid and all the promises in the purchase agreement are fulfilled. The deed is then recorded with the county recorder to show the transfer ownership. After delivery, there is frequently a final title search to verify that the Seller has not incurred any intervening liens and to confirm the buyer's good title and any liens for new mortgage loan financing.

Mortgages and Foreclosure

There are a number of methods to finance a real estate transaction. The most common is a mortgage. This is a loan which transfers an interest in the land as collateral for repayment of the debt. The borrower typically pays the mortgage in installments that include both interest and principal payments. If the borrower fails to make payments, the mortgage’s owner can and will foreclose on the property. In a foreclosure, the lender declares that the entire debt is due immediately. If this is not repaid, the lender can sell the property to pay the remainder of the debt.

Foreclosure procedure depends on federal and state laws, the terms of the mortgage, and the existence of any other liens on the property. A limited amount of late payments are allowed in many states in order to avoid foreclosure, and most lenders also attempt to work extensively with borrowers in a variety of situations before going through with a foreclosure as a last resort to receive payment. If a foreclosure is threatened, a borrower should consult with an experienced real estate attorney to protect his or her interests and resolve the situation as soon as possible.

Borrowers in Iowa may benefit from contacting Iowa Mortgage Help for counseling and potential assistance. A borrower in foreclosure should receive a notice regarding this service.

Deeds

A deed is a legal document which records the transfer of real estate between owners. No real estate transaction is complete unless the buyer receives a valid deed to the property. Legal requirements for deeds include:

• Must be in writing. Verbal transactions are not legitimate.
• The names of the buyer and seller.
• A legal description of the property.
• The signature of the person transferring ownership.
• Must follow state and federal laws.

State laws differ regarding the language and format for deeds. There are different types and the two most common deeds are quitclaim and warranty deeds.

A quitclaim deed allows the seller to resign any rights he or she has to the property. However, it does not guarantee the extent of these rights. Quitclaim deeds are often employed during divorces, when one spouse transfers property rights to the other. This does not release one from an obligation to a mortgage they have signed.

A warranty deed includes an explicit promise to the buyer that the seller has clear title to the real estate. The warranty deed offers the buyer much greater protection, as it guarantees that no liens or encumbrances are extant against the property and undisclosed in the deed. It also obligates the seller to protect the buyer against any defects in the deed. A special warranty deed only contains this guarantee for claims which arose while the seller was the legal owner of the property.

It is a good idea to officially record the deed and make it public record. County governments record property deeds at an office, which is often (but not always) called one of the following:

• The recorder’s office.
• The land registry office.
• The register of deeds.

Even if the broker or closer handles the recording of the deed, it is a good idea to make sure that this crucial step takes place. Recording the deed makes the transfer public record, and allows future title searchers to find the history of a property’s ownership.

Given the crucial nature of the deed, it is vital to have the deed reviewed by a competent real estate attorney.

Home Inspections

A home inspection can relieve some of the stress of purchasing a house. Independent home inspectors can give a buyer a full assessment of the property he or she is considering purchasing. The inspector’s report provides a full and unbiased evaluation of the house’s condition and indicates whether the house needs any work or may need work in the future. Reviewing a home inspection report with a real estate attorney will provide a buyer with an advantage when negotiating the purchase.

Obviously, a buyer should inspect a house before making a decision. However, a professional inspection should be done to uncover less obvious defects. In many states, inspectors require a license. Appraisals required by lenders are mainly superficial, stating the property’s value compared to similar properties sold within mainly the past six months, and do take the condition of the home into consideration of the value. FHA and VA loans also require a third party appraisal, and will require that specific cosmetic and other obvious defect be repaired before completion of the sale. These repairs are considered as completed when assessing the value of the home by these government licensed inspectors. Appraisers do request or recommend additional inspections if they see problems that raise suspicion, such as potential structural defects or insect infiltration, such as termites. Termite inspections are mandatory for VA mortgages, and are extremely advisable on all others.

Home inspectors look at a number of things, including:

• Structural issues. These include the foundation, ceilings, walls, floors, and roof.
• Mechanical systems. These include the electrical system, plumbing and waste disposal, heating and air conditioning, water source and quality.
• Construction issues. These include ventilation, insulation, windows, and doors.

When inspectors discover problems, they may recommend a more thorough investigation. Buyers should also consider requesting inspection for health-related issues such as radon, lead, or asbestos. Many buyers prefer to attend the inspection, although this is not necessary. Many inspectors will answer questions about their findings and offer an objective opinion at the inspection.

Most often, home inspections are not done before completing an offer on a property, and the buyer should always include an inspection clause in the offer. This allows the buyer to back out of the purchase if an inspection reveals serious problems. It can also require the seller to adjust the sale price or repair problems before purchase. The cost of an inspection is generally less than $500. It is well worth the price to disclose problems with the property’s value and safety. A real estate attorney can help to guide you through the inspection process.

What to Expect at Closing

Closing a purchase for real estate varies in each state. While some closings are done in your attorney’s office, others are completed at the lender's or a title company's offices. Either way, the closing meeting is where the ownership of a property is officially transferred. A closing may be attended by the buyer, seller, their brokers, and the closing agent. (Frequently, buyers and sellers never meet, and their agents and attorneys handle all of the interaction well before the exchange of the purchase price and the deed.) If the buyer is borrowing money to complete the purchase, a representative of the lender may also attend. All open issues should be settled before the closing, yet not always. At the closing, any remaining open issues are settled, the closing statement is verified, and all necessary documents are signed. A real estate attorney can help to advise you through this process.

A good closing agent will help the buyer through the complicated aspects of the closing. When financing is involved, however, the closing agent is typically there representing the interests of the lender. While the buyer's and the lender's interests are closely aligned, they are not the same. An attorney’s assistance can be invaluable in determining that the buyer has received everything the buyer has bargained for and that closing costs are allocated correctly.

The closing costs cover a large number of one-time fees. For the buyer, they also include the first year’s payment for homeowner’s insurance, real estate tax and one month of property taxes escrow, and mortgage interest. Other fees covered in closing costs include but are not limited to:

• Attorney fees
• Loan origination fees and rate discount points
• Appraisal fees
• Recording fees
• Survey fees
• Document preparation fees
• Inspection fees
• Homeowner’s association fees

At a closing, the seller and buyer will provide items required by the contract, such as proof of homeowner’s insurance, warranties, and other documents. Once both parties have approved the closing statement and all documents, the seller and buyer sign the statement, the buyer signs the mortgage, and the seller signs the deed and transfers ownership. Generally, the buyer pays all closing costs unless otherwise stated in the purchase contract. The closing agent provides the buyer with a settlement statement detailing the closing costs, and then records the deed and (when applicable) the mortgage.



The buyer usually receives the following documents:

• Settlement statement
• Mortgage and mortgage note
• Copy of the deed
• Truth-in-Lending statement
• Sales contract
• Keys to the property
• Any required affidavits