Buying a House in Ohio

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 Ohio, real estate agents may act as a buyer's agent, a seller's agent, or represent both parties to a sale as a dual agent. State law requires Ohio real estate agents to provide you with an agency disclosure statement, which discloses the agency relationships existing among those involved in a real estate transaction or a potential sales transaction and describes the duties owed by real estate agents to their clients. The "Agency Disclosure Statement" will be presented to you before you are shown property or discuss your financial ability to purchase the property.

Real estate agents have what's called a "fiduciary duty" to the party who they are legally representing, in this case, the home buyer, which means that they owe specific duties to the buyer. An Ohio real estate agent's duties to a client include:

• Loyalty
• Disclosure
• Obedience to lawful instructions
• Confidentiality
• Reasonable care and skill
• Accounting for all money received in which the buyer has an interest

An Ohio real estate agent representing you as the buyer will assist you in seeking a property, making and presenting an offer on the property, and within the limits of his or her real estate license, answer your questions about fulfilling the terms of the sales contract.

The seller of residential real estate is required to prepare a comprehensive disclosure form on the physical condition of the property. In Ohio, a Residential Property Disclosure Form specifies the history of the known condition, repairs and defects of a structure and property and is completed by the owner(s) prior to listing the property for sale.

The Ohio Residential Property Disclosure Form requires the seller to indicate any known problems or defects of certain features and structural aspects of a house. The form requires information about the following:

• Water supply
• Sewer system
• Roof
• Basement
• Structural components
• Mechanical Systems
• Termites
• Presence of hazardous materials
• Drainage
• Code violations
• Wells
• Boundary lines
• Encroachments
• Shared driveway/party walls
• Flood plain
• Lake Erie Coastal Erosion Area
• Zoning violations/nonconforming uses
• Assessments
• Homeowner's association
• Historic building district
• Fire/smoke damage
• Water intrusion/mold
• Water quantity and quality

In houses built prior to 1978, the seller is to provide notice that if lead based paint exists, it may present a danger, provide a lead-based paint disclosure form, and provide information on hazards from inspections in the sellers possession.

Ohio law does not provide a penalty for a seller who fails to disclose known defects, but the disclosure law does provide a chance for the buyer to rescind or cancel the purchase contract if the disclosure form is not provided before entering into the contract. The seller and his or her agent have a duty to disclose defects not observable or discoverable upon a reasonable investigation. This means that a duty remains upon the buyer to conduct a reasonably diligent inspection and inquiry of the property he or she intends to purchase to find the discoverable defects.

Purchase Agreements

When you find a house you'd like to buy, you'll put together and sign a purchase and sale agreement also called a "purchase contract", "purchase offer" or "purchase agreement." A purchase offer or agreement contains all the details of the offer to purchase a piece of property. An agreement is binding only once the document has been agreed to and signed by the buyer and seller. Often in the purchase of real estate, there are a number of offers and counter offers until an agreement is reached.

Items and conditions that are often included in the purchase offer include:

• Description, both the street address and legal description of the property
• Purchase price
• Earnest money
• Features and fixtures which are to remain with the property
• Home inspection results
• Anticipated financing
• Closing date
• Final inspection and move-in condition
• Penalties for breaking the offer
• Response time to accept the offer
• Obtaining clear title to the property
• Clean home inspection report

The transactions involved in purchasing a home give rise to a number of legal question that an Ohio 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. The purchaser has a duty to conduct a reasonably diligent inspection and inquiry of the property he or she intends to purchase. A professional inspection will allow you to determine the condition of all mechanical and structural components of a home. You can make your offer contingent on inspection.

An inspection should determine the condition of the plumbing, heating, cooling and electrical systems. The structure should also be examined to assure that it is sound and to determine the condition of the roof, attic, siding, windows, doors, visible insulation, walls, ceilings, floors, windows, foundation, basement, landscaping, and visible structural elements.

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

Legal Title Issues

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. Most purchase agreements are conditioned upon a title search that guarantees that there are no liens on the property. If someone else has a claim to the property, the seller's title to it is not "clear." You are not obligated to complete the purchase in that case.

In Ohio, for example, an implied easement may be present where there has been a prior grant of an easement in a valid document that is too ambiguous to create an express easement. 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 of the property granted or reserved.

Your property may also be subject to a "lien," which is a charge on the property to satisfy a debt or other obligation that has been recorded in the public records.

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

• Mechanic's lien
• Construction lien
• Tax liens
• Unpaid federal and state tax lien
• Unpaid child support
• In a divorce case, the court may award one spouse ownership of the marital home but grant the other spouse a lien on the property

Closing Costs

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

• Down payment
• PMI insurance
• Lender points
• Loan origination fee
• Appraisal fee
• Credit report
• Tax service fee
• Assumption fee
• Pest inspection fee
• Other inspection fees
• Title search
• Title insurance
• Survey of property
• Hazard insurance reserve
• Prepaid interest
• Mortgage insurance
• Tax impounds
• Escrow Fee
• Lender's attorney fees

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. To learn more about RESPA visit the Real Estate Settlement Procedures Act home page on the HUD web site.

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. The vast majority of home loans are secured with a mortgage. A mortgage makes the home itself the security or collateral for the loan. The buyer receives the deed from the seller, and so becomes the legal owner, but the buyer gives the lender the right to take possession of the house in the event the buyer defaults on the loan, also known as foreclosure.

There are several types of available mortgage options. It's a good idea to shop around and get the best possible deal because your choice of lender and type of loan will influence not only your settlement costs, but also the monthly cost of your mortgage loan.

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 when a foreclosure sale might not bring enough money to pay off the mortgage plus cover the costs 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. It also requires loan servicers to send annual disclosures to all mortgage borrowers about PMI and how to initiate early cancellation. You can apply for early termination or cancellation of your PMI insurance if you have at least 20% equity in your home.