Buying a Home
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initial agreement
Signing an Offer and Agreement to Purchase, whether called an Earnest
Money Contract, Real Estate Purchase Agreement or just Contract, is a
critical act in the real estate sale. It is imperative that it be
carefully and appropriately worded.
The essential elements of any sale must be included. The description of
the property, price, terms of payment, time in which to complete, type
of Deed, the persons who are to sell and buy.
Once signed a Contract has been entered into and you can be forced to
sell or buy as the case may be.
Additional factors should also be considered., but which are not needed
to make an enforceable Contract. These include in whose name you would
best take title, the type of title evidence you may wish (abstract or
title insurance), whether financing is essential and, if so, what terms
you must have, whether a long term Contract would be better than a cash
sale, who will pay the taxes, what encumbrances on the title are all
right, whether an escrow account should be used and others which may be
essential only to you.
Unless you know the answers and the questions, your lawyer can serve
you best. You should consult your lawyer before you sign.
title
A real estate title is a claim of ownership. For the owner's
protection, it is important that a title be recorded properly. The
Register of Deeds in each county keeps records of all titles filed.
abstract
An abstract is a summary, compiled from public records, of the legal
history of a piece of real estate.
The possession of an abstract is no indication of ownership of the land
to which it relates. Anyone may buy an abstract of any piece of land.
title examination
A title examination is a careful study of the abstract and other title
evidence. It may require interpretation of a number of deeds,
mortgages, wills and court decrees as well as consideration of factors
such as the validity of divorces, the effectiveness of foreclosures,
the seriousness of restrictions, the danger offederal or state tax
liens and the effect of old claims against the land. From examining the
United States patent to analyzing the last deed, the process involves a
variety of legal issues. An abstract does not deal with defects or
questions relating to survey, easements and mechanics liens if they are
not a matter of public record.
Once the title examination has been completed, the lawyer gives a
written opinion stating his conclusions concerning ownership. Included
in this opinion is a listing of any defects in the ownership and
conditions (if any) which must be met to ensure proper title.
Mortgage lenders usually have titles examined. The question arises:
"Why should a purchaser who is being financed by a lender require an
examination on his own behalf?"
Although there are occasions when a title opinion is directed to both
the borrower and the lender, when the opinion is given only to the
lender it is for his benefit alone and the borrower has no right to and
should not rely upon it. A mortgage lender has an interest different
from that of a purchaser.
title insurance
Title insurance is an insurance policy issued by a licensed company
which pays you the face amount of the policy or the value of the
property, whichever is less, in the event someone else can show they
have a betten title than you do. There are two types of title insurance
policies -- owner's and lender's. The owner's policy provides certain
general protections for you as owner. The amount of insurance coverage
should include any existing improvements on the property or anticipated
improvements. The lender's policy will protect the lender for the
amount of its mortgage. Simultaneous issuance of an owner's and
lender's policy, which is usually but not always done, will save you
considerable insurance premium costs.
possession
Possession of property is not sufficient by itself to vest title to
property in a person. If someone who does not own the land is in
possession of it, a court action may be required to remove the occupant
from the land. Ownership based on possession does not give good title
until a court action has been brought and a decree properly recorded.
This procedure is generally called "quieting title".
deeds
A Warranty Deed conveys title with a guarantee that the Grantor has the
right to pass title. Normally a Warranty Deed is used in a sale of real
property. A Warranty Deed given by a financially responsible seller is
certainly desirable but it is no substitute for a title examination. A
Quit Claim Deed conveys any title, interest, or claim the Grantor has
but does not guarantee such title is valid.
contract for deed
A Contract for Deed is a written agreement between a buyer and a seller
that the seller will give a deed to the buyer after certain conditions
have been fulfilled, generally payment over a period of years.
closing
Prior to closing, requirements stated in the title opinion or insurance
commitment must be met and all papers properly drafted to state the
intentions of both buyer and seller. The final step in closing a sale
is the proper execution, delivery, and recording of the papers.
This brochure is based on South Dakota law and is designed to inform,
not to advise. No person should ever interpret any law without the aid
of a trained attorney who knows the facts and may be aware of any
changes in the law.
The State Bar of South Dakota
222 E. Capitol
Pierre, SD 57501
(Revised 2/03)
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