A “home sales transaction” is a legal agreement involving the sale and purchase of a residence.
Selling a house can often be a complex undertaking. A home sales transaction may involve very valuable property, and the house is often the owner’s most valuable asset. In many cases, a home holds much sentimental value for the owner.
A home sales transaction is sometimes conducted solely between the owner and the buyer, the way people buy and sell used cars. In most home sales deals, however, professional relationships are necessary due to the complexity of this kind of transaction. The types of professionals may include real estate brokers (salespeople), title agency representatives, and lawyers.
These transactions usually involve a house but may also include other types of property, such as a condominium. There are four kinds of home sales transactions:
- The sale of a new home between a consumer and the construction developer
- A buyer purchasing a home from a previous owner
- A buyer purchasing a home from a bank or lending company, such as a foreclosure sale
- A sale involving the court system, known as a judicial sale
Numerous parties may be involved in a home sales transaction. These may include:
- The buyer
- The seller
- The mortgage lender
- Other loan companies
Are There Legal Regulations for Home Sales Transactions?
Yes, there are legal regulations for home sales transactions. The laws that govern home sales transactions vary by state. They may also vary depending on the type of property being sold.
One of the oldest rules about selling real property is that the contract has to be in writing to be enforceable. This law was adopted in England in 1677 and came to the United States dating from the country’s formation. According to this Statute of Frauds, all sales involving real property must be written.
The written agreement for the sale of a house is known as the real estate contract or the home sales contract. The real estate contract contains key provisions related to the sale of the home. This includes:
- A legal description of the property being sold
- The final sales price
- The terms of payment
- Whether or not there are any necessary disclosures regarding the property
Many home sales transaction provisions are standard, known as boilerplate, but some can contain very specific arrangements, such as specific instructions regarding additions or changes to the structure that must be made before the buyer will accept the house, and non-litigation or arbitration clauses, where the parties agree not to sue one another in the event a dispute arises from the contract.
Is a Contract for the Purchase or Sale of a Home Binding?
Yes, a contract between the parties for the purchase and sale of a home is binding between those parties, subject to certain conditions known as contingencies. Contingency clauses are found in most contracts for the purchase or sale of a home. These clauses permit a party to back out of the contract without any legal consequences if certain requirements are not met.
Contingency clauses provide certain conditions that must be met before the parties being legally obligated to complete the home sales transaction. If the contingency conditions are not met, the contract may be considered null and void, and the party may back out of the contract without facing any legal consequences.
There are many different types of contingency clauses. The most common include:
- A “subject to financing” clause
- A “subject to inspection” clause
- A “subject to sale of home” clause
- A “kick-out contingency” clause
In a subject-to-financing clause, if the buyer cannot secure a loan, favorable mortgage terms, or an interest rate that they can afford, they can legally back out of the sale. The terms and conditions of this clause are defined in the sales contract.
In a subject-to-inspection clause, the buyer may back out of the contract if they are not satisfied with the outcome of the home inspection. The buyer may also change the offering price or attempt to negotiate with the seller to fix issues with the house without legal consequences.
In a sale of a home clause, if the buyer cannot sell their current residence for at least their asking price, they may return from purchasing the new home without legal consequences. In most cases, it will require a good faith inability to sell, not just a buyer who is unreasonable with the terms of selling their current residence.
In a kick-out contingency clause, designed to combat the effects of a “subject to sale of home” clause, a seller may use this clause to be protected if it appears the buyer won’t be able to sell their home in time. This clause provides that while the buyer is trying to sell their current home, the seller can keep their home on the market and can back out of the deal if they find a more qualified buyer.
What are Some Common Legal Disputes in a House Sale?
Legal disputes may arise during a home sales transaction. These disputes are often connected with specific real estate issues, which may include:
- A defective title
- Real estate fraud
- An issue with securing the mortgage. In most cases, closing is not possible until the purchaser can secure a mortgage.
- A dispute involving the truthfulness of a real estate listing
- A disagreement regarding the valuation of the property
- Issues with previous ownership, deeds, titles, or inheritance laws
- Disputes over the final purchase price
- Disputes over the payment terms
- Breach by one part of the real estate contract
Disputes of these issues often require legal intervention. In straightforward cases, the court will review the existing sales contract to determine whether a breach has occurred. In some cases, a dispute may be resolved through a careful examination of the sales transaction records.
In other cases, a court may be required to conduct a more detailed analysis to resolve the dispute. For example, if a party claims the other party did not pay them correctly, a court may be required to examine bank and mortgage records as well as the conduct of the seller and the buyer to determine what occurred.
A court may also be required to review the jurisdiction’s laws to determine what remedies are available. Generally, a damages award is sufficient to compensate the non-breaching party for their losses. In other cases, different legal methods may be required, such as an eviction notice or a forced sale of the home.
What are Some Legal Remedies for Home Sale Disputes?
Sometimes, a home sale dispute may require litigation to resolve the issue fully. If the plaintiff is successful, they will receive an award of monetary damages meant to compensate for their losses relating to the non-payment, fraud, breach of contract, or other violations.
In some cases, the appropriate remedy is an action to quiet title. These proceedings are necessary when there is an issue regarding the title of the property, such as a dispute over the identity of the true owner of the property, as well as issues such as easements. A quiet title proceeding can help clear the title of any encumbrances and thus make the property marketable.
Another potential remedy is specific performance. This occurs when the buyer refuses to purchase the home without a valid reason. If the seller cannot find another buyer to purchase the home, then the seller can sue the buyer for specific performance and force them to purchase the home whether they want to or not.
Do I Need a Lawyer for Assistance with a Home Sale?
Yes. A home sale is a complex transaction involving many contract and mortgage documents, just to name a few. It is essential to have the help of an experienced real estate lawyer for assistance with a home sale. As noted above, many issues can arise, and every transaction is unique. It is important to use a local lawyer who will be familiar with all of the state and local laws that may apply.
An attorney can provide you with advice regarding the sales process, review and edit documents related to the transaction, and represent you during court proceedings in the event a dispute arises from the transaction.
