Mistake No. 2
2) Not Getting Proper Legal Advice Before Signing Anything.
The first thing you must realise is when you sign a contract, you are now obligated not only to buy the property but also to do it exactly in accordance with the terms and conditions of that contract. Even very minor and almost unnoticeable changes in the wording of the contract can have a huge effect in shifting the risks and costs between the buyer and the seller. If you sign a contract without fully understanding every word in that contract then you will be making one of the biggest mistakes in buying real estate.
Not knowing or understanding all your legal rights and obligations when signing a contract can be disastrous as real estate law can be confusing and complex. The contract you will sign when buying a home is legally binding. Most standard contract forms used by most firms are heavily weighted in favour of the sellers (this maybe why they are often referred to as “sellers” contracts and not “purchase” contracts)
When the negotiating is done, all is agreed, and everyone’s temperature is high, the contract document is prepared and handed to you for signing. This is the time you must stop!, take the contract away to get some trusted advice from a legal adviser who is experienced in real estate law. Good advice at this stage, even if it is just changing a few words in a contract can save you many times the cost of the advice and can protect you from making a mistake that will cost you thousands.
Horror Story – Nigel and Lisa, in their early twenties, baby on the way, after months of looking finally found a house they could afford. Nigel and Lisa borrowed all they could from family and friends to raise the $35,000 deposit. The contract was signed that included a building inspection clause that was subject to receiving a satisfactory structural inspection report and a finance clause
Nigel and Lisa where on cloud nine, they applied for their home loan the next day then arranged the building inspection. Upon receipt of the building inspection it was confirmed the home was structurally sound. However the building report also revealed the electrical system was substandard, dangerous and would need to be replaced. (Cost to rewire is $8,730) The old galvanised plumbing was rusted out and leaking and would also need replacing (Cost of re-plumbing $6,810). The corrugated roofing was rusting out and also leaking and would need replacing immediately. (Replacement cost 9,370) The valuation was OK and the home loan was approved.
Nigel and Lisa were devastated; due to the wording in the building clause they could not cancel the contract because the home was in fact found to be “structurally sound” Yet they were now up for an extra $24,910 just to make the house liveable. Money they just don’t have.
If Nigel and Lisa had gotten some sage advice and simply deleted the word “structural” from their building clause. They would have avoided this situation completely. Sadly there are many example like this but you don’t get to hear about them because the people involved are just to embarrassed to admit they made such a simple mistake that resulted in such a devastating loss. Some research shows that as little as 5% of buyers actually get the contract checked before signing. Remember the saying” Caveat Emptor” or “Let the buyer beware”