Buying a House in Indiana

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 Indiana, a real estate agent has what's called a "fiduciary duty" to the home buyer if he is representing the buyer, and not the seller. In Indiana, this means that the agents are held by law to owe specific duties to the person who they are representing, in this case, the buyer. In addition to duties or obligations that are stated in a written agency agreement or other contract, a fiduciary's duties include:

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

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 Indiana's Residential Disclosure Law, the seller of a home, except in limited circumstances, is required to disclose to prospective buyers certain information concerning the condition of the home. The information must be disclosed on a form known as the Residential Property Disclosure Form.

Under state law, sellers of residential real estate must disclose to their potential purchasers known defects or information concerning such areas as water and sewer systems, insulation, structural systems (including roof, walls, floors, foundation and basement), plumbing, electrical, heating and air conditioning systems, fixtures, hazardous conditions on the property (including asbestos, mold and radon) and much more.

To protect families from exposure to lead from paint, dust and soil, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992. Under this law, anyone selling a house that was built before 1978 must notify potential buyers of a possible lead problem.

More Articles - Selling a House in Indiana - Real Estate, Construction Law and Zoning - Real Estate: Selecting a Good Lawyer Ask a Question - Live Chats - Real Estate Message Board Web Links - Indiana Property Code

Purchase Agreements

When you find a house you'd like to buy, you'll put together and sign a "purchase and sale agreement." The purchase agreement should contain an accurate description of the property and all of the terms of the sale, including the price, the terms of payment, the type of deed to be given, the date of possession, provisions for the furnishing of title evidence, proration of real estate taxes and casualty losses, and matters on which the buyer may want to make the purchase contingent, such as financing, inspections and the sale of an existing residence. Additionally, provisions may be needed for items of personal property or fixtures.

An important thing to remember is that you should consult your 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 Indiana real estate attorney 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 involves inspecting all visible areas and reviewing all accessible items and areas, including the heating system, central air conditioning system, interior plumbing and electrical systems, the roof, attic space and all visible insulation, the walls, ceilings, floors, doors, windows, basement or crawlspace area, the foundation and all visible structural components.

Most inspectors will charge extra for services such as radon testing, termite inspections and well or septic inspections.

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 legal title issues you'll need to understand.

In Indiana, 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 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 o' 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 Indiana, liens on a piece of property may include:

• Mortgages
• Mechanic's lien
• Judgment lien
• Unpaid tax lien

Closing Costs

In Indiana, you can expect to pay for the following charges - called "closing costs" - at the time you purchase your home:

• Down payment
• Lender's points
• Loan application fee
• Credit report
• Lender's document preparation fee
• Lender's appraisal fee
• Prepaid interest on the loan
• Lender's real estate property tax escrow
• Title insurance
• House inspection fees
• Title company or escrow company closing fee
• Recording fees
• Local, county, and state property transfer taxes
• Attorney's fee

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.

Mortgages

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 Indiana, the document you sign as a security interest in your house is called a mortgage, and this document names your house as collateral for the loan. Under the terms of the mortgage, if you fail to make your loan payments, the lender can foreclose on the loan and have your house sold to pay off the loan.

It's a good idea to shop around and get the best possible deal, because lenders' terms, such as the interest rate you will pay, can 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.