Buying a House in Georgia

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 Georgia, real estate agents may act as agents for the buyer, the seller, or as a dual agent, in which they represent both parties to a sales transaction. Georgia real estate agents must disclose their agency relationship to the parties to a prospective transaction. Real estate agents have what's called a "fiduciary duty" to the party who they represent, which means that the agents are held by law to owe specific duties to that person, in this case, the buyer. You can enter into a contract or agreement with a real estate agent for the agent to represent you in a real estate transaction. In addition to duties or obligations that are stated in a brokerage agreement, a listing agreement or other contract, a fiduciary's duties include:

• Loyalty
• Disclosure
• Confidentiality
• Account for funds
• Reasonable care and diligence
• Obedience to lawful instruction

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.

Under state law, a seller must disclose the following potential house defects:

• Defects in the roof
• Defects in the electrical system
• Defects in the plumbing system
• Defects in the heating and air conditioning system
• Defects in the septic system
• Fuel storage tanks located above or underground on property
• Defects in the basement or foundation
• Disclosure that property is located in a flood plain, wetland or shoreline zoning area
• Defects in structure
• Defects in mechanical equipment included in sale
• Boundary line disputes, encroachments or encumbrances
• Radon, radium in water, lead in paint, lead in soil, lead in water supplies or plumbing system
• Asbestos-containing materials on the premises
• Pest infestations
• Defects in wood burning stove or fireplace

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:

• Legal description of the property you want to buy
• Sales price that you are willing to pay
• Amount of earnest money and who will hold it
• Method of financing
• Amount of financing
• Who will pay closing costs and how much
• Move out date for seller and move in date for you
• Deadline for the closing
• Whether you may back out or require repairs if an inspection reveals problems with the house
• Whether any easily removable items stay with the house-such as curtains, blinds, swing sets, grills, refrigerator, washer, dryer and so forth
• Who will provide and pay for a termite inspection letter
• Who will pay for any necessary repairs

The important thing to remember is that you should consult your Georgia 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.

Most buyers prefer to pay for their home inspection so that the inspector is working for them, not the seller. You may wish to include in your purchase agreement the right to cancel if you are not satisfied with the inspection results.

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 Georgia, 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 property, and an easement 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 Georgia, liens on a piece of property may include:

• Mortgages
• Construction or mechanic's liens
• Judgment liens
• Unpaid taxes
• Unpaid municipal utilities (water and sewer)
• Past due support liens

Closing Costs

The closing is when the seller actually transfers the title to the name of the buyer. The buyer signs all loan papers and makes the down payment for the property or brings a cashier's check if there is no loan. The closing usually takes place in the closing attorney's office. The party paying closing costs pays for the closing attorney. Remember, the closing attorney represents the lender, so if you want an attorney to represent you, it's up to you to hire one.

In Georgia, you can expect to pay for the following closing costs at the time you purchase your home:

• Down payment
• PMI insurance
• Loan discount points
• Loan origination fee
• Underwriting fee
• Processing fee
• Administration fee
• Appraisal fee
• Credit report fee
• Tax service fee
• Flood certification fee
• Document preparation fee
• Settlement or closing fee
• Transfer Taxes
• Title search
• Title insurance
• Recording fee
• Inspection fees
• Survey of property
• Hazard insurance reserve
• Prepaid interest
• Tax impounds
• Escrow fee
• Lender attorney fees

Closing Documents

In Georgia, the documents typically included in a closing are as follows:

• Promissory Note-formal "IOU" showing the loan amount, interest rate and term of loan
• Security Deed-mortgage document that is recorded in the courthouse records showing the amount and term of loan, giving the lender the right to foreclose if the loan isn't paid back
• Warranty Deed-document signed by seller conveying title to you
• HUD-1 Settlement Statement or closing statement-shows all financial terms of the transaction
• Truth in Lending Statement-identifies the annual percentage rate and shows the total amount paid back over the term of the loan
• Aggregate Escrow Disclosure-shows the calculation of how much money you need to establish in your escrow account to pay next year's property taxes and insurance renewals
• Various Affidavits

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 when an unexpected fee 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.

Security Deeds

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. In Georgia, the document you sign as a security interest in your house is called a security deed, and the purpose of this document is to name your house as the collateral for the loan. If you fail to make your loan payments, the lender can have your home sold to pay off the loan. Mortgages are also a type of security interest.

It's a good idea to shop around and get the best possible deal because the loan terms offered by various lenders do vary.

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 might not bring enough to pay off the mortgage plus cover 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.