Consumer Rights in Home Purchases

When you decide to purchase a home, you could be exposed to many risks and uncertainties connected to your new property. Fortunately, there are important protective measures in place that will afford you rights as a buyer. These rights are known as consumer rights and are provided by various consumer protection laws.

Among other things, they require sellers to comply with specific legal requirements and provide you with a means of legal recourse if something goes wrong.

Although consumer rights laws can vary considerably from state to state, the majority of these laws give consumers the right to take the following steps to protect themselves when purchasing a home including the right:

• Negotiate for the price of the home, for repairs on the home, or to build a new home altogether
• Learn more about a real estate agent’s relationship to the seller as well as to the property itself
• Choose an interview with the professionals who will assist you in making the home purchase, such as real estate brokers, lenders, appraisers, and home inspectors
• Use only written purchase agreements or contracts when making an offer on the property or accepting a counteroffer
• Give approval or disapproval over the property in question based on the physical condition of the home (note that there may be deadlines and specific time frames associated with such a request)
• Request contingency clauses so that you may back out of the deal if a contingency is not satisfied (more on that below)
• Hire a professional to perform tests or evaluations to discover structural or environmental defects in the home
• Revoke the offer during the escrow period
• Obtain a copy of any documents that are signed in connection with the purchase of the home, as well as have those documents explained to them by a professional
• Have any documents associated with the home purchase reviewed by a lawyer
• Move into the home once all contract obligations have been met and fully satisfied by the parties

Contingency clauses set forth certain conditions to be met before the buyer and seller can officially complete the final sale transaction. If the conditions described in the contingency clause are unmet, the contract will become null and void. It will also allow a party (usually the buyer) to withdraw from the agreement without legal consequences. Examples of contingency clauses include:

• “Encumbrance free” clause: If it turns out that there is a lien on the house, if the seller does not cure this issue by the time of closing, you will not have to purchase the home
• “Insurability” clause: Another contingency clause provides that the home must be proven insurable (homeowner’s insurance) before the sale can be finalized. The lender may require this condition. If you try to get homeowner’s insurance but cannot do so before the closing, then you have the option to back out of the deal
• “Specific repairs or changes” clause: You may insist that the seller make specific repairs or changes to the house. For example, you could require the seller to fix a damaged roof. If the seller does not repair, you will not be required to buy the house
• “Subject to financing” clause: You can make it clear in the sales contract that if you cannot find a lender who will work with your desired mortgage terms, you may legally walk away from the sale
• “Subject to sale of home” clause: If you are having trouble selling your current home for the asking price, and if the parties agree to this contingency, you will be allowed to back out of purchasing the new home if you cannot sell your own home at or above a certain price by a fixed date

While many rights and privileges are afforded to homebuyers, it would still be in your best interest to consult a local real estate lawyer for further advice if you plan on purchasing a house. As mentioned, these rights can change based on jurisdiction, and a local real estate lawyer will know which ones will apply to your situation.

What are Some Rights of Mortgage Borrowers?

Most homebuyers need a mortgage to be able to purchase a house. Mortgage documents are long and technical, and borrowers rarely read them through to learn of their duties and rights. Fortunately, mortgage borrowers (i.e., mortgagors) are granted several significant consumer rights and protections. Again, though these will vary from state to state, they will generally include the following:

• The right to be free from discriminatory practices during the credit approval process (e.g., discrimination is prohibited if it is based on race, religion, sex, national origin, age, gender, marital status, pregnancy, or disability)
• The right to shop for different types of loans as well as to compare the offer rates of different mortgage lenders or brokers
• The right to ask a mortgage broker questions and to have them explain the variety of services they intend to offer you
• The right to ask questions about any loan terms that you do not understand
• The right to be informed about the total cost of the loan, such as the interest, fees, and other kinds of charges that could accrue
• The right to request a good faith estimate of the entire cost of the mortgage
• The right to know which fees on the loan are refundable (if any)
• The right to know whether a loan can be canceled, how long then you will have to cancel it, and any other important cancellation procedures in connection with the loan
• The right to be informed of the reasons as to why your loan application was denied (if applicable)

What if My Consumer Rights as a Purchaser Have Been Violated?

If your rights have been violated, the types of remedies you can recover will vary by state and the kind of violation that occurred. However, you should generally take the following steps if you believe that your consumer rights have been violated while buying a home:

• You should keep a personal written account of the circumstances leading up to the violation. Include a short description of the events. For example, if the seller refused to hand over copies of signed documents, then you should note that fact, along with a description of which documents were not released, the date they were supposed to be released, any times that you asked for them, and the date of the seller’s refusal
• You should gather as much information as possible, such as real estate licenses, certificates, witness statements, or testimonial statements from all parties involved (e.g., seller, seller’s real estate broker, escrow agents, title insurance companies, etc.)
• You should keep and make copies of any important documents associated with buying your home. This is especially true regarding signed documents, contracts or agreements, and documents negotiated and reviewed by both parties.

These steps will help ensure that you are prepared if you need to file a lawsuit against the party that violated your rights. The items mentioned above can be used as evidence during court proceedings, and they will likely be requested by your lawyer so that they can review them and draft a complaint to initiate a lawsuit.

Do I Need a Lawyer for Help With Consumer Rights in a Home Purchase?

Buying a home is governed by complex real estate laws that often vary by state. If you are interested in purchasing a home, it may be best to hire a local real estate lawyer to guide you through the process.

An experienced real estate lawyer can aid you in negotiating for a more favorable purchase price. Your lawyer can also inform you of your consumer rights and assist you in ensuring those rights are enforced.

If you encounter a legal issue or are involved in a dispute over purchasing a home, your lawyer can also provide representation in court if necessary.