Aside from the fact that your house isn’t edible, here’s an important distinction: A hamburger is personal property and a house is real property.
Personal vs Real Property
You can purchase a hamburger and, if you don’t like it or it’s unsatisfactorily presented to you, you could potentially give it away, give it back and ask for a refund, or, more likely, you’ll just consume it after you’ve paid for it. You might even get a shake with it, but at the end of the day, you exchange money for your personal hamburger. You made a simple decision and fairly quick transaction. But, buying a house? Not so quick – EVEN if you have cash. So, why is that?
The laws regarding real property are a lot more complex and governed by contracts. How we buy real property (otherwise known as real estate) came from English common law where immovable property, a house and anything attached to the land, is the property of some person. This is why a mobile home in a park, not on a permanent (affixed) foundation, is not considered real property. The owner of the mobile home park owns the real property (the land) and leases spaces out to the mobile homes.
Instant Gratification versus Instant Realization
Back to the hamburger for a moment. When you purchase a hamburger, you don’t legally enter into a contract with In-N-Out Burger to purchase it and you get instant gratification. However, when you purchase a house, there’s a very large document called a bilateral contract in which two parties must agree to all of the terms and conditions contained within it. In California, the Residential Purchase Agreement (the “contract”) is nine pages long and there are many terms and conditions for both sides which provides you the instant realization that this is a much bigger deal. So, even if you pay for a house with cash, the terms and conditions of the contract still have to be met and verified along with arranging for the transfer of money from buyer to seller, usually with the help of a title company, a neutral 3rd party, whose knowledge and expertise ensures that the property is properly transferred and recorded according to the contract and to local laws.
The purely contractual side of purchasing a house involves a price, timelines for certain action items like inspections and, most importantly, when the transfer of property will occur – otherwise known as the close date. The contract also establishes a legal name and number identifying the property to be transferred. It identifies the parties to the transaction (the buyers and sellers), and other transactional terms such as the method by which the buyer will pay (be it cash or some form of financing). This isn’t meant to be an exhaustive list about what’s in a contract.
When you enter into a contract as a buyer of a home, you are agreeing to abide by the terms and conditions of the contract. Otherwise, you shouldn’t sign it. Once signed by both parties, it’s considered a legally binding document by law. If your fully executed contract stipulates that you will finish your inspections in 10 days, get an appraisal in 15, and get underwriting approval in 20, you should note that there are also baked-in penalties for not hitting those timelines. You can’t go shopping for a new mortgage loan on day 15! The penalty for missing a deadline could mean that you forfeit your earnest money (usually 1% of the purchase price) along with potentially losing the house when the seller cancels the contract due to non-performance.
The moral of the story? Change your mind about your burger? Low cost. Change your mind about your home purchase? You may not be eating out for a while.