Buying a House in Oklahoma

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 Oklahoma, real estate agents, brokers, or sales associates, also known as real estate agents, may act as a single party broker or a transaction broker in a real estate sales transaction. A single party broker represents a seller or a buyer under a contract called a written brokerage agreement, and provides services for the benefit of the seller or buyer in a real estate sales transaction.

A transaction broker can provide a seller, a buyer or both parties assistance with a real estate transaction without being an advocate for a particular party's benefit. Oklahoma law requires real estate brokers or agents to provide you with disclosure statements concerning their role and responsibilities in a real estate transaction. Single party and transaction brokers share common duties to the parties to a transaction including:

• Exercising reasonable care and skill toward all parties
• Receiving and presenting offers and counteroffers
• Accounting for money and property received in connection with a transaction
• Confidentiality as required under state law
• Disclosure of information about the property under Oklahoma's Residential Property Disclosure Act

A single party broker will have these additional duties to the party who they are representing, in this case, the buyer, under a buyer brokerage agreement:

• The single party broker works for the benefit of the buyer
• The single party broker obeys specific directions of the buyer, as long as, the directions are not against the law or against the terms of the sales contract
• The single party broker keeps the buyer informed regarding the transaction

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. Oklahoma's Residential Property Condition Disclosure Act requires sellers to provide buyers with a disclosure statement, which is a form issued by the Oklahoma Real Estate Commission. The disclosure law does provide buyers with the right to sue sellers for damages, including repair costs, if a disclosure form is not provided or if a known defect is not disclosed.

A seller should disclose the following potential house defects:

• Plumbing and sewage problems
• Water leakage of any type, including in basements
• Termites or other infestations
• Roof defects
• Heating or air conditioning system or electrical system problems
• Property drainage problems
• Foundation instabilities or cracks or other structural problems
• Problems with title to the property or other land use matters
• Substantial additions or alterations made without a building permit
• Major fire or tornado damage
• Hazardous materials
• Lead paint (required under the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 for homes built prior to 1978)
• Any condition of the property that materially affects the physical health or safety of an individual
• Any other problems

Purchase Agreements

When you find a house you'd like to buy, you'll put together and sign a "contract of sale" or purchase and sale agreement or "contract of sale" which contains all of the terms of the sale. The Oklahoma Real Estate Commission has a standardized contract of sale form, which you are likely to see used in your sale, and it will include the following terms:

• The names and addresses of the sellers and purchasers
• The purchase price and how it is to be paid, including any down payment or earnest money deposit
• Arrangements for financing (there may be an extra form to describe your financing if the sale isn't a cash deal)
• The legal description of the property
• A provision that title to the property shall be good and marketable of record, subject to reasonable easements
• The condition of the property at the time of closing
• Whether a survey and appraisal are to be made and, if so, at whose expense
• All expenses to be divided between the seller and purchaser
• The method of handling any escrow account containing reserves for payment of taxes and insurance held by the seller's mortgage company
• Seller's statement of the condition of the property
• Closing date and possession
• Statement of the closing costs
• Provision as to who bears the risk of loss if the property should be damaged prior to the closing date
• Signatures of parties

An important thing to remember is that you should consult your Oklahoma 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.

Every inspection should include an evaluation of at least the following:

• Foundation
• Plumbing and electrical systems
• Doors
• Ceilings, walls and floors
• Roof
• Hazardous materials concerns
• Heating and air conditioning systems
• Common areas (in condominiums)
• Insulation
• Ventilation

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 issues you'll need to understand.

In Oklahoma, 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 owner of the property. A lien encumbers property for as long as it exists and has been recorded in the public records.

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

• Mortgages
• Deeds of Trust
• Land sale contracts
• Involuntary liens (includes workmen's liens, liens for unpaid taxes and liens filed by creditors holding judgments against the owner)

Closing Costs

"Closing costs" are expenses incurred by buyers and sellers in transferring ownership of property. In Oklahoma, you can expect to pay for the following closing costs at the time you purchase your home:

• Loan origination fee
• Loan discount points
• Appraisal fee
• Credit report
• Interest
• Private mortgage insurance
• Hazard insurance premium
• Reserves or escrow accounts
• Settlement or closing fee
• Document preparation fee
• Title search
• Title insurance
• Recording and transfer fees
• Survey
• Home inspection
• Homeowner's warranty

Many times buyers and sellers may negotiate who pays which costs as part of the final terms of the purchase agreement.

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 Web site.

Mortgages and 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.

In Oklahoma, the document you sign as a security interest in your house, or making your house collateral for the loan, is called either a mortgage or deed of trust. Deeds of trust differ from a mortgage in the following way; the title to your property is placed in the name of a third party, called a trustee, while you keep possession of the property. Deeds of trust contain a private power of sale, as do some mortgages, which means that the lender can have the trustee sell your property, if you default on the loan, without first going to court in a foreclosure action to get a judgement to sell your house, which saves the lender time and money. Because mortgage terms and rates 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 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. 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.