Q. We have just come to the Washington area with the new administration, and are interested in buying a house. We have heard that buying houses here is a good investment. Since this is the first house that we will buy, could you give up some tips on what to look for and what to include in any real estate contract?
A. The first thing to keep in mind is the cast of characters involved in a real estate transaction. They include, in addition to the buyer, the seller, the real estate agent, the lender, and the title company or settlement attorney. It should be kept in mind that each of these characters have their own interests to watch for, and thus may or may not be representing your interests. While there is very little price competition among many of these providers of services, there nevertheless remains a very fierce competition within the various industries. You should recognize that only you will be looking out for yourself.
If you plan to buy an older house, there are at least five important provisions which must be included in any real estate contract.
1. Plumbing, heating and electrical facilities (including air conditioning units or systems) should be in good working order at the time of settlement. You should have the right of an inspection just before the settlement, and you should take advantage of this. The time to find problems with the house is before you settle -- not afterwards.
2. You should obtain from the seller at settlement, a letter from a reliable termite company that the property is free of active termite infestation. This is termite country, and you should have this protection built into your contract.
3. If you plan to obtain financing, the contract must be contingent on your obtaining financing within a specified period of time (30 to 45 days) from the date of ratification of the contract. If cannot get the financing that you desire within the specified period of time, the contract should be null and void and your deposit should be refunded. Most standard District of Columbia real estate contracts (other than the one prepared by the Bar Association) do not contain any such contingency for financing. Unfortunately, a lot of litigation has occurred as a result of the buyer not being able to obtain the necessary financing and the seller refusing to return the deposit.
4. The purchaser should be able to hire an independent inspector to determine the condition of the property. The purchaser should pay for this inspection, and it should be completed within three to five days after the contract is signed. If the purchaser is dissatisfied -- for any reason -- the contract should be null and void and the deposit refunded in full.
5. The buyer should determine the location of closing, (settlement) and has the absolute right to select his or her title attorney or title company.
Buying a home in Washington has often been described as being 180 degrees different from buying a home in California. It is advisable to have your attorney and your tax advisor review the situation -- especially before you sign a contract. Once the contract has been signed, and a deposit has been given, a firm legal obligation is generally created. At that time, if you want to include any additional provisions in your contract, it may be too late.