Expert advice is always a good idea when you’re making a
life-changing financial decision, and a sale or purchase of a home certainly
fits that description. In addition to hiring a real estate agent before buying
or selling, most buyers also will consult with an inspector and pay for an
appraiser.
Another expert who can play a pivotal role in the
transaction is a real estate attorney.
Some states require real estate lawyers to be part of the
process, while attorneys are not used much, if at all, in other states. Here is
a look at why hiring a lawyer might be a good idea—or not—from a buyer’s and
seller’s perspectives.
What Does a Real Estate Lawyer Do?
A real estate lawyer is licensed to practice law and
specializes in real estate transactions. A real estate lawyer is familiar with
all aspects of the home purchase process and can represent buyers, sellers or
lenders.
In states where a lawyer is required to be present at
closing, it’s possible that the lawyer is there solely to represent the buyer’s
lender. You will need to hire a lawyer yourself if you want someone to
represent your interests exclusively. Requirements governing the involvement of
real estate attorneys vary from state to state and even within states, such as
in California, where the rules differ by county.
Some people hire an attorney early in the process, to handle
such matters as reviewing the brokerage contract with a real estate agent,
while others wait until the purchase contract is drawn up, or until closing.
The cost for a lawyer could be around $200 to $300 an hour,
or just a flat fee of several hundred dollars that you pay at closing.
When Would I Need a Real Estate Lawyer?
There are several situations in which a real estate attorney
can be helpful in the home-buying and selling process, from reviewing the
purchase contract in a typical sale to dealing with a uniquely complicated one.
Purchase Contract
Although real estate agents usually play a central role in
preparing purchase contracts, a lawyer could provide a review of the purchase
contract terms. What’s more, real estate agents are generally limited to
filling out contract templates, rather than drafting them from scratch. For
that reason, more complex contracts may need to be drafted by an attorney.
If you’re going to involve a lawyer at this stage, it’s
important to provide a few days, if possible, for legal review of the contract
before it is finalized. It can help you avoid potential problems down the line
by making the contingencies as favorable to you as possible.
The contract is the most important document in the home sale
process, and it includes several negotiable issues. Some of the most important
issues in the purchase contract involve:
Timing. Your timeline for closing on the property could be
affected by the sale of your own home or issues largely outside of your
control, such as unexpected lender delays.
Inspection. A home inspection can uncover many problems, and
a seller and buyer could end up negotiating on who will pay for repairs. In
some cases the buyer—if the contract allows it—could withdraw from the contract
without penalty.
Title. A title search is routine before a purchase, and might
turn up a lien on the property you’re selling or buying, which a lawyer can
help investigate. A lawyer also could help ensure the title insurance on your
new home adequately protects you from potential issues.
Closing
The moment you’ve been waiting for—closing on a home sale or
purchase—often involves dozens of pages of legal documents to review. A lawyer
can help both the seller and buyer navigate the review, which can be especially
intimidating and confusing to a first-time homebuyer.
“We negotiate the repairs, monitor the financing and review
the title when representing the buyer,” says Michelle Chase, a real estate
attorney in Naperville, Illinois. “At closing, we explain all the mortgage
documents to buyers.”
Less Typical Scenarios
Here are some situations that are unusual and might require
an attorney’s advice and negotiating skills:
- You’re buying a home that is part of a special
type of sale, such as an estate sale, short sale, auction or purchase from a
bank
- You’re purchasing a home that’s in another state
- You’re selling a home that is a central part of
a divorce settlement
- You’re selling a home that was owned by a family
member and you are in charge of the estate
- You’re buying or selling a property that has
major issues, such as structural damage
- You have major financial issues and are trying
to sell a property that has liens on it
How to Find a Real Estate Attorney
Recommendations from people you trust, such as real estate
agents and lenders, can be a good place to start when you’re looking for a real
estate lawyer. You also can search for real estate lawyers in your area, check
with the local American Bar Association chapter or contact a non-profit
organization that helps homeowners. You’ll likely want to interview at least a
couple of lawyers so you can compare their approach, rates and availability.
Some questions to ask:
Do you charge by the hour or a flat fee? You’ll want to find
out how lawyers usually charge for services in your area, and what the price
range is. Also find out if the price includes the time to review, discuss and
possibly negotiate aspects of all documents or just attend the closing.
How available will you be during the process? This is
important because when you’re in the middle of a potentially contentious
negotiation that needs to be resolved quickly, you’ll want the lawyer to be
available to advise you and negotiate with the other party.
How many residential real estate transactions do you advise
on per year? Asking this question can provide insight into the attorney’s
overall experience with real estate transactions. Plus, it can be helpful to
know if an attorney is unpopular, in-demand or, perhaps, over-committed and
less likely to provide one-on-one attention.
How are you usually involved in real estate transactions?
Real estate transactions can be extremely multifaceted so it’s important to
find an attorney who is experienced in the type of assistance you need.
Why You Should Hire a Real Estate Attorney
Some common examples of when hiring a real estate lawyer
makes sense include:
Exclusive representation. When you are buying or selling
your home, everyone has an interest in the deal getting done, including real
estate agents and the lender. This can make you feel like you’re on your own at
times. However, if you hire a lawyer, you’ll have access to an independent
third party who can review the contract and represent your best interests
throughout the transaction.
Reasonable cost. If a real estate lawyer charges an
affordable fee, hiring one could be a solid investment. An improperly
negotiated issue involving a major problem uncovered in a home inspection, for
example, could cost you thousands of dollars or more.
Peace of mind. Even if you are not required to hire a lawyer
for any part of the home-buying or selling process, you might feel better
having someone who can explain complicated legal issues. A real estate attorney
can also provide assurances that you’re making the right moves as you proceed
with possibly the largest purchase you’ll make in your life.
Why You Shouldn’t Hire a Real Estate Attorney
A couple reasons why you might not want to hire a real
estate lawyer:
You don’t have the money. If you have a fairly
straightforward transaction and a real estate lawyer is not required in your
state, you might be OK with just the real estate agent and title company
helping you. The money you save could go toward the down payment and other
necessities.
It could become a battle. If your lawyer is looking for
reasons to tangle with the other party—such as making a big deal about a small
item on a contract—it might delay the transaction and could be costly if the
fight drags on and you have to pay by the hour.
Bottom Line
The decision to hire a real estate lawyer often depends on
your personal preference and ability to pay a bit more at your closing. If you
can have a team of professionals on your side—a real estate representative,
lender, inspector and lawyer—it should make the home-buying experience
smoother, especially for a first-time home buyer.
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