Buying a House in South Carolina

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 South Carolina, real estate agents may act as a buyer's agent, a seller's agent, or as a dual agent, and represent both the buyer and the seller in a real estate sales transaction. It is also possible to work with a real estate agent without entering into an agency agreement, in that case, the agent would work with you as a customer, and would not have a "fiduciary duty" to you, meaning that the agent would not legally represent you and would not owe you certain duties under the law. Rather, the agent would assist you with various tasks in completing a transaction.

Real estate agents must provide you with a disclosure form, either at your first substantive meeting, or possibly by e-mail, if your first substantial contact is over the phone. the form explains the options for agency relationships, and defines what the real estate agent's role is in your situation. A real estate agent will owe you the duties stated in your buyer agency agreement or other contract, and will owe you the additional fiduciary duties of:

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

A seller's agent does have to treat you with honesty, and can't give you false or misleading information about the property. Likewise, a buyer's agent must be honest with a seller about a buyer's ability to complete the purchase.

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. Home sellers in South Carolina are required to fill out and give you a disclosure form, which will provide you with information about known problems with the property.

The disclosure form must be delivered to you before you sign a contract of sale, and the seller should disclose the following items:

• Defects, leaks or other problems with the foundation, windows, doors and siding
• Problems with roofs, electrical and plumbing work, heating and air conditioning units, septic systems and appliances
• Problems with termites or other insects
• Drainage problems
• Fixtures, such as pools, hot tubs, ceiling fans, satellite dishes and security alarms
• Structural changes or environmental hazards
• Noise or odor nuisances
• Fire damage
• Building code variances
• Deed restrictions
• Utility easements
• Lead paint (required under the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 for homes built prior to 1978)
• Foreclosures or other lawsuits affecting the property title

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 "contract of sale," which contains all of the terms of the transaction, including the following:

• The names and addresses of the sellers and purchasers
• The purchase price and down payment
• Arrangements for financing
• 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 sale
• Date of settlement and possession
• Statement of the settlement costs
• Provision as to who bears the risk of loss if the property should be damaged prior to settlement
• Liens on the property

An important thing to remember is that you should consult your South Carolina 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

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 South Carolina, 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 South Carolina, liens on a piece of property may include:

• Mortgages
• Construction or mechanics' liens
• Judgment liens
• Tax liens

Closing Costs

In South Carolina, you can expect the following charges - called "closing costs" - at the time you purchase your home:

• Down payment
• Private mortgage 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

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

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 South Carolina, the document you sign as a security interest in your house is called a mortgage.

A mortgage is the instrument, usually held by the lender, by which the property is named as collateral to secure the payment of your loan. Mortgages require judicial foreclosure which means that the lender would have to go to court to get a foreclosure judgment before your house could be sold to pay off your loan. 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 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.