Buying a House in Alaska

Buying a house is one of the most important legal transactions you'll ever undertake. It's important to know your legal rights and understand the process.

Working With a Real Estate Agent

In Alaska, real estate agents may enter into a contract to represent sellers, buyers or act as a dual agent who represents both the buyer and the seller in a sale. Real estate agents have what's called a "fiduciary duty" to the party who they are representing, in this case, the buyer, which means that they are held by law to owe specific duties to that person. In addition to duties or obligations that are stated in an agency agreement, a listing agreement or other contract, a fiduciary's duties include:

• Loyalty
• Obedience
• Disclosure
• Confidentiality
• Reasonable care
• Diligence
• Accounting

You may want to hire a "buyer's agent," which is someone that will act on your behalf. The sales commission is then split between the seller's and buyer's agent.

When selling a house, disclosure of all important facts actually known to the seller is critical, even though it may impact on the ability to complete the sales transaction or on the ultimate sales price of the house.

Alaska law requires that sellers give a written property disclosure statement to buyers prior to accepting an offer to purchase on all residential property. The statement is used to disclose problems that could affect the property's value or desirability. Generally a seller is responsible for disclosing only information that is within his or her own personal knowledge.

A seller should disclose the following in the property disclosure statement:

• Property features that are built-in and will remain with the property and also whether any of these have known defects or malfunctions
• Structural components that have known defects, malfunctions or have had major repairs performed within the last five years
• Property drainage problems
• Roof or other leakage
• Date that chimneys were last cleaned
• Information about heating system
• Information about hot water heater
• Type of water supply and any problems
• Information and any problems with sewerage system
• Frozen water lines
• Average annual utility costs
• Problems with title to the property
• Setbacks or restrictions
• Encroachments (like a neighbor's fence or tool shed on the seller's property)
• Environmental concerns
• Soil stability
• Any structural modifications of improvements
• Pests in the structure or past damage from pests
• Pets or animals that have ever been in the house
• Noise or sound disturbances that affect the property
• Lead paint (required under the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 for homes built prior to 1978) and other environmental hazards including asbestos, radon gas, or fuel storage tanks on the property

Purchase Agreements

When you find a house you'd like to buy, you'll put together and sign a purchase and sale agreement, which contains all of the terms of the sale, including the following:

• The amount and form of earnest money that will accompany the offer
• The amount that you are willing to pay for the property
• An expiration date and time by which you want the offer to be accepted or refused
• List of any personal property that you would like to have included
• A date for the closing of escrow
• Information to the seller about how you intend to pay for the property
• Language that offer is contingent upon being able to qualify for a loan
• Name of title or escrow company that you will use
• Disclosures
• Inspections and warranties
• Additional terms and conditions
• Acceptance section where seller either accepts your offer or indicates that a counteroffer is being made

An important thing to remember is that you should consult your Alaska real estate attorney before you sign the contract. The real estate transactions involved in purchasing a home give rise to a number of legal questions that a lawyer with a real estate background and experience is best equipped to answer.

Inspection

It's always a good idea to hire an independent professional home inspection service before you buy a house. A home inspection is a visual examination of some combination of the structural, mechanical, electrical and plumbing systems that is designed to identify material defects in those systems and components. You can make your offer contingent on inspection.

In Alaska, an inspection generally covers the following:

• Exterior and Roof
• Structure
• Electrical
• Heating
• Air Conditioning and Heat Pumps
• Plumbing
• Cooling
• Insulation and Ventilation
• Interior

Legal Title Issues

When a home is purchased, title insurance is also purchased. Based upon a search of public records, a title search brings attention to any known property title problems before the closing takes place. It also insures against loss due to certain title defects that didn't turn up during the title search. Your real estate lawyer or title company will investigate the legal title of the property you want to buy, and may find issues you'll need to understand.

In Alaska, for example, an implied easement exists where a person grants lands to which there is no accessible right-of-way except over her or his land or retains land that is inaccessible except over the land which the person conveys. In such instances a right-of-way is presumed to have been granted or reserved. Such an implied grant or easement in lands or estates exists where there is no other reasonable and practicable way of accessing the land, and it is reasonably necessary for the beneficial use or enjoyment of the part granted or reserved.

The property you're interested in may also be subject to a "lien," which is a charge on the property to satisfy a debt or other obligation owed by the current owner of the property. A lien encumbers property for as long as it exists and has been recorded in the public records.

In Alaska, liens on a piece of property may include:

• Mortgages
• Mechanics' liens
• Judgment liens
• Tax liens

Closing Costs

"Closing costs" are an accumulation of charges paid to different entities associated with the buying and selling of real estate. In Alaska, you can expect the following closing costs at the time you purchase your home:

• Down payment
• Loan origination fee
• Discount points
• Appraisal fee
• Credit report fee
• Lender's inspection fee
• Application fee
• Mortgage insurance application fee
• Assumption fee
• Tax service fee
• Processing fee
• Mortgage broker fee
• Document preparation fee
• Underwriting fee
• Application fee
• Flood certification fee
• Accrued interest
• Mortgage insurance premium
• Hazard insurance premium
• Flood insurance
• Escrow account deposits
• Title charges
• Recording fee
• Surveyor's fee
• Pest inspections
• Lead-based paint inspection fee

Many times buyers and sellers may negotiate who pays which costs as part of the final terms of the purchase agreement. Also, lenders keep funds for taxes and insurance in escrow amounts as they are paid with the mortgage, and they subsequently pay the insurance or taxes for you.

RESPA

The US Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) administers several regulatory programs to ensure equity and efficiency in the sale of housing. One of these programs, under the Real Estate Settlement Procedures Act (RESPA), applies to almost all mortgage loans and mortgage companies, not just FHA-insured mortgages.

RESPA protects consumers by requiring a series of disclosures that prevent unethical practices by mortgage companies and that provide consumers with the information to choose the real estate settlement services most suited to their needs. RESPA helps consumers avoid surprises, like an unexpected fee that appears in your closing documents. The disclosures take place at various times throughout the settlement process. Certain disclosures are required at the time of loan application, before closing occurs, at closing, and after closing.

Deeds of Trust

At the time of purchase, you'll sign a promissory note that legally obligates you to pay back the money you borrowed to buy your house. A promissory note is, in effect, an "IOU." You promise to pay your lender the full amount, payable in equal monthly installments, at the interest rate previously agreed upon. Your lender will keep the original until you completely pay off the loan.

Most states use a mortgage to secure the debt to the property which is an instrument (contract) in which the property is named as the collateral for the loan. In Alaska, deeds of trust can be used in place of mortgages and are favored by lenders because a deed of trust also gives the lender the right to foreclose on your property without taking you to court first. A deed of trust is similar to a mortgage contract except that a deed of trust involves a third party called a trustee, usually a title insurance company, who acts on behalf of the lender. When you sign a deed of trust, you are in effect giving the trustee ownership of the property, but you are holding on to the right to use it and to live there. The lender or trustee holds the original deed of trust until you repay the loan on your home.

Because terms and rates for financing may vary, it's a good idea to shop around and get the best possible deal.

Private Mortgage Insurance

If you put down less than 20% on a home mortgage, lenders often require you to have "private mortgage insurance" (PMI). PMI is a type of insurance that protects the lender in the event the borrower defaults on the loan, which is a concern if you don't have much equity in your home. PMI covers the gap if a foreclosure sale of your home does not bring enough money to pay off your mortgage plus the cost of the foreclosure proceedings. PMI is a cost added to the monthly payment of many conventional loans. The loan servicer collects these monthly premiums and pays them to a private mortgage insurance company.

The Homeowners Protection Act of 1998 (HPA) establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80% of the original purchase price or appraised value.