Completing the purchase of your new home

It’s Wednesday. Newspaper day. Thank heaven there’s a reason to get out of bed.

I hope you remember a couple of weeks ago that you signed a contract to buy Fred Wilma Flintstone’s house for 4.5 times what it would have cost you in Peoria, Ill. You have applied for bank financing and are awaiting approval.

Your contract with the Flintstones gives you the right to have the house inspected. So what do you do now? If you know a competent contractor who is willing to spend a few hours away from his regular job (getting rich building 8,000 square-foot houses), hire him to examine the house. If not, check with your realtor who undoubtedly has worked with one or more inspectors and is likely to have a recommendation.

A house inspection will cost between $250 and $600, depending on the size of the house and who is doing the inspecting. Do not even think about skipping the inspection to save some dough. You really need to know what an expert pair of eyes has to say about your dream house before you buy it.

As likely as not an inspection will uncover a number of items in need of repair. Even minor defects may justify the cost of the inspection; you may be able to negotiate with the Flintstones to make the repairs at their cost, or deduct that cost from the purchase price.

A defect requiring major repair is another matter. Your contract has a clause that states that if you and the Flintstones cannot agree as to who will pay the cost of a major repair, especially a repair required by a lender as a loan requirement, either party can void the purchase

Every lawyer who handles real-estate transactions has “war stories” about house sales that have gone south to Antarctica.

I was involved in a case recently in which a trusting and naive young married couple bought a modestly priced in Teton County in the early 1990’s. The owner was a builder in the valley, and the couple assumed that the house was in sound condition. They waived their right to have an inspector examine the house. Bad decision.

Five years later they decided to sell their house and upgrade to a bigger, better one. When a prospective buyer had an inspection done it revealed a crumbling foundation 16 inches shorter than the building code allows, unsafe wiring (which the State actually condemned), and major structural defects. The condition of the house was so bad that it literally could not be sold. It required more than $100,000 in repairs to make it livable and marketable. They paid $130,000 for it in 1991. Another great American dream turned into the all-American nightmare.

Your contract with the Flintstones requires them to provide “…a title insurance policy in an amount equal to the purchase price, showing merchantable title in Seller.” What in the world does that mean?

The Flintstones must be able to transfer “clear title” to you. Title is a short legal word with tall legal consequences. When you purchase the property from the Flintstones you are actually acquiring their “title” to the property. Your rights of ownership in the house are embodied in the title to it, just as the ownership of your car is evidenced by the title that the car dealer handed you when you bought it.

Title to the property needs to be distinguished from possession of the property. You may own the title to your house, but someone else may be living in it, a renter for example. Title to the car may be in your name, but your daughter uses it 100 percent of the time.

So the Flintstones buy an insurance policy from one of the local land title companies in your name. The title company charges a percentage of the purchase price to insure the title to the property, approximately $3 for every $1,000 of the purchase price ($900 for a $300,000 house).

The title company researched the official Teton County records in the County Clerk’s office, looking for unpaid mortgages, unpaid property taxes or unpaid judgments against the Flintstones, any of which will appear as a lien against the property, and which will need to be paid in order for the Flintstones to transfer clear title to you.

No human being alive today, including the owners of the title companies, can explain to you precisely what protection you are getting when you buy title insurance. For whatever it is worth, you will be covered if someone 20 earlier forged a deed to the property or a long-lost relative of a former owner appears out of the blue claiming an interest in the property. No matter; you will be subject to involuntary commitment to the state hospital in Evanston if you fail to obtain title insurance when purchasing your house.

We are now approaching the closing date — the day when you pay the balance of the purchase price to the Flintstones and they transfer title and possession of the house to you. The title picture looks good, the bank has approved your loan, the Flintstones have agreed to fix the loose tiles in the bathroom and caulk the kitchen counter tops prior to closing. All systems are go.

Most closings in this day and age are coordinated through the title company office, and the fee charged by the title company for this service (between $250 and $500) is usually shared by the seller and buyer.

Congratulations! You now officially own a piece of the American Dream. This entitles you to begin complaining about exorbitant property taxes and the neighbor down the block who doesn’t mow the law. Welcome to the club.