Attorneys and Property Purchase

Factual Questions
1

I hope this isn’t a “poll” and that there’s a factual answer to this, but why? And leave out the “money well spent” and “better safe than sorry comments.” Why can go wrong? We’re in a country where title insurance guarantees the title is clean and we’re buying what we think. We’re also in a place where contract law means we both have to agree to a deal despite what’s written (if you sell me different property than I think you are, you’ll lose). I know enough to get an inspection. What the heck else can an attorney do?

Oh, this is from the perspective of buying a single-family residence from someone else, by the way.

2

For what it’s worth, I’m an attorney and I still used an attorney to do my closing when I bought a house. Believe it or not, there are a lot of things that can go wrong.

For example, what if the seller had sold the house to somebody else before our closing? Our attorney protected us from this possibility by filing a document called a “Notice of Settlement” with the County.

Also, our attorney had a good relationship with the title insurer and knew what searches needed to be done so that the title insurer would write a policy promptly.

Further, our attorney was very facile with the closing documents such as the RESPA statement and made sure we were paying our fair share of utilities, property taxes, etc. and no more.

The truth is, as an attorney I could have done all this stuff myself. However, I might have screwed up and cost us a lot of money. If my attorney screwed up, there would be malpractice insurance to pay. In any event, it certainly would have taken a lot of time and effort on my part.

And there’s lots of stuff that as a non-real estate attorney, I would never know. For example, I was at a closing a couple years ago with my father (he does real estate closings). At the closing, it came out that one of the parties was a non-citizen, so the other party had to withhold money for various taxes. I never would have known to do that and could have really been stuck.

So yeah, get an attorney. Better safe than sorry :smiley:

:smiley: :smiley:

3

I didn’t see the thread that prompted this one so there may be some sort of strange circumstance where an attorney will be needed. If it’s just a generic purchase of a moderately priced (for the area) home, title insurance and an exerienced real estate agent should cover you fine, IMO. It certainly couldn’t hurt though. More important, is to get a home inspection by a licensed inspector.

Haj

4

Another thing you need an attorney for is if the other party does not follow the contract or tries to back out of the deal without a valid reason. We recently had this experience. The property was a VERY moderately priced home, and we had an experienced real estate agent. The buyers tried to put a number of unreasonable items into the contract, which our lawyer rejected. Later, they tried to claim they could back out of the deal because the mortgage they got had a rate higher than they wanted. Our attorney, having been in on everything from the start, had the mortage commitment papers and knew the right letters to write to assure that the buyers either went through with the purchase or lost their deposit. (We had lost a couple of potential buyers in the meantime because the property was under contract.)

Of course, one of THEIR problems was that their own attorney did not review their mortgage contract carefully, and they signed an agreement to a mortgage at “the prevailing rate,” which turned out to be higher than they liked.

Bottom line, the few hundred dollars spent on the lawyer was peanuts compared to the liability involved. Not to mention all the time we would otherwise have had to take away from our jobs to attend to all the hassle and paperwork.

5

Really? the deal isn’t what the written contract says, the contract that you both signed, the contract that normally has a clause saying something to the effect that “this written contract contains all the terms of the agreement and replaces all previous negotiations”? that written contract?

I’m not familiar with the law in your jurisdiction, but that statement sounds pretty odd to me. Are you confident that you’ve accurately stated the law in your jurisdiction?

[The above is not intended as legal advice about your personal situation, but simply to comment on a matter of public interest and discussion. If you need legal advice about your own situation, you should contact a lawyer.]

6

Besides what others have said, your attorney is working for YOU alone. The agent doesn’t work for you, the seller doesn’t work for you, nobody is your advocate except your own attorney. A buyer’s agent is not an attorney and shouldn’t be expected to know the legal ramifications of everything that can go wrong with a contract. A “buyer’s agent” is in many cases not even a true buyer’s agent - they are still being paid based on the purchase price and are in actuality working for the seller. (Unless you pay a separate fixed fee to a buyer’s agent, who is completely unrelated to the selling agent and the seller, they do NOT work for you. No matter what they tell you. Nobody whose fee is based on a percentage of the selling price can be truly impartial and solely YOUR advocate.) Even when buying a single-family house, there can be many issues you may never have thought of. There may be covenants, easements, title issues, etc., that you don’t know how to deal with. Your attorney can negotiate everything for you - you don’t ever have to get into any arguments with the seller - the attorney can do it all. When you close, your attorney is looking out for YOU and making sure all points that were agreed upon are carried through. At my own closing, it came out that the seller had not removed an old shed from the yard, the removal of which was a condition of sale. He wanted to give me $100 so that I could remove it. Well, no, for one $100 wouldn’t cover anyone to come dismantle it and haul it away; and two, I didn’t want to deal with that - that’s why I put it as a condition of sale, and they agreed to it, and now were trying to back of it. I didn’t have to argue or do anything else - my rabid bulldog of an attorney (thank you Linda!) made it quite clear that their offer of compensation was unacceptable and that we were going to have a BIG problem if they didn’t come up with something more reasonable. The less than 1% of purchase price I spent on my lawyer was worth every penny.

And all this goes double if you are buying a condo.

7

Title insurance is terrific, but you might wish to check for what it does not cover, and check what cancels it. It is not a panacea. A real estate lawyer can help explain to you what to watch out for with title insurance.

If your lawyer screws up, you can go after your lawyer’s E&O, but if you do not use a lawyer, you had better not screw up.

As a litigator, I would have less business if people considering listing their property or making an offer to purchase would speak with a lawyer before signing anything.

Besides, for a few hundred bucks, it’s more cost efficient for most folks to go through a lawyer than to muddle about and do it themselves.

8

Damn it. So how do I shop for an attorney? And at what point? Pre-offer? Should I retain the guy for the sale of my current home, too? Golly, I wish I’d asked more questions before listing my house. Luckily nothing went wrong when I bought the place – without an attorney.

9

If you don’t want the advice, don’t ask for it.

10

Muffin, you misinterpreted my “damn it.” Turn it around 180-degrees, and you’ll see I was soliciting additional advice. The “without an attorney” remark was prefaced with “luckily,” as in, “thank God nothing went wrong the first time and I’d like to ensure that nothing goes wrong this time.”

11

Fair enough.

12

Oops, and by “the place” I mean the one I just put onto the market. Therefore, let me be more clear:

I’m selling one house, and will (hopefully) shortly be purchasing another. Hence:
[ul][li]One lawyer for the sale of current house?[/li][li]One (subject of this this thread) for the purchase of my next house?[/li][li]Same lawyer for both?[/li][li]One or the other not necessary?[/li][li]And then aside from advertising on SDMB for Muffin, Esq., :slight_smile: I’ve never had to think about actually finding a lawyer. For some reason looking for the biggest, fanciest ad in the yellow pages doesn’t seem like the right thing to do (“Lionel Hutz; Works on Retainer[?] No[,] Money Down[!]”)[/li][/ul]

13

The reason for consulting before listing or making an offer to purchase is because it is far less costly to spot and avoid problems rather than try to clean them up or litigate after they occur.

In the normal course of events in a residential sale, the contract is made between the parties and then later brought to a lawyer. This is fundamentally flawed, for the lawyer should review the contract before it is made. Just because the realtor uses a pre-printed form does not necessarily mean that all the terms in that form are a good thing.

It is not the practice of realtors to advise people to consult with a lawyer before making the most significant monetary contract of their lives because it might slow down and possibly stop a potential sale, and the realtor’s job is to make the sale.

What it comes down to (particularly with residential real estate) is that with a realtor you have someone who is a salesperson who can be very useful in bringing to parties together, but otherwise is neither trained nor experienced in ensuring that the contract is sound, whereas with a real estate lawyer, you have someone who’s job it is to see that the contract is sound, and who is trained and experienced in doing just that.

To make this concrete, here is just one example of many of how a realtor works to make a sale, whereas a real estate lawyer works to protetct the interests of his or her client. In my area, the realtors have taken to including a vendor disclosure statement as part of the contract. There is no legal requirement to do so. Some well intentioned realtors thought it would be a good idea, for it is soothing to a purchaser to have a checklist of what the vendor thinks does or does not need repair, so their association has adopted it as a standard practice. It has led to no end of litigation over the assertions vendors have made in those statements, but the realtors continue to use them because they help make the sale. When a vendor comes to me prior to listing, I advise that person to not make a vendor disclosure statement (among other advice). Obviously I don’t want to stand in the way of a sale, but my job is not to simply assist in the sale, but also to ensure that following the sale nothing comes back to bite my client in the ass.

Use one lawyer for all of your transactions. The more the lawyer knows about you, and the longer the lawyer knows you, the better the job the lawyer can do for you. Often tax matters, family business matters, family law matters, or estate planning matters may affect how the real estate is handled. A good lawyer will keep an eye out for both problems and oportunities of which you may not be aware, but can only do so by knowing all your circumstances.

Find a lawyer who specializes in real estate law and who works at a firm where there are lawyers who litigate real estate matters. That will help ensure that you are getting top quality advice from someone who has the experience you need, and who is aware of where real estate matters can screw up.

Having friends introduce you to their lawyers is a good way to start shopping around, but the key here is to keep shopping around until you find someone who not only is sufficiently experienced but also is able to communictate comfortably with you.

14

As another Real Estate lawyer, I’d like to add to my colleague Muffin’s comments.

First of all, a home is likely the largest purchase an individual or family will make in their lifetime, and involves a large percentage of the household assets and income. If it gets screwed up, it can be really bad. The relatively small cost of a lawyer compared to the cost of the home is usually worthwhile based on the potential amount of grief involved.

As to finding a lawyer, I would talk to your real estate agent, who will probably will be able to recommend local attorneys on request. Also friends and neighbors are good sources for referrals.

As to whether you should use the same lawyer on your purchase and sale, I would generally agree that it is a good idea, if both transactions are in the same area. Real estate is a very local type of a legal practice, so if the two transactions are in different areas, it might be better to have two lawyers. If they’re in the same or adjoining counties, a local lawyer’s experience will usually cover the sale. If they are on other sides of a state or in different states, different lawyers might be called for.

To flesh out Muffin’s example, in New York there is a recently enacted law requiring property disclosure forms to be filled out by sellers. If they don’t fill them out, the buyer can take a $500 credit on the purchase price. The majority of New York real estate attorneys recommend that sellers not fill out the form and just give the credit because of the possibility of expensive litigation based on the form.

Good luck.

15

The miniscule size of said $500.00 cop-out fee permitting all manner of abuse, of course.

16

Muffin and Billdo, thank you both so much for your answers!

17

Point taken. Now the converse: is a real estate attorney expected to perform the functions of a buyer’s agent, or is it recommended to have both?

18

In my jurisdiction, as a lawyer I am authorized to sell real estate as if I were a real estate agent, however, I am not in the business of going through T-lists and showing people houses. That’s what purchasers’ agents are good at.

If you know what you want and how much you are willing to pay for it, and you are able to find it without assistance, then there is no need for a purchaser’s agent, but if you want to shop around to see what is available, then use a vendor’s agent.

Something that realtors in my area have access to, but I as a lawyer do not have access to, is the Multiple Listing System (MLS) database, which nicely identifies what is for sale. Access to that database often justifies going through a realtor.

19

Accck! Make that “but if you want to shop around to see what is available, then use a purchaser’s agent.”

20

I dunno. I find it interesting that the strongest proponents of using a lawyer are… lawyers!

The bulk of the issues presented here can be resolved relatively easily without a lawyer. Granted, an experienced lawyer could solve them quicker and enable you to not get your fingers dirty, but unless you’re a totally hands-off sort of person, I’m not sure benefit is big enough. Even if you don’t know how to resolve a given issue, the real estate agents are motivated enough to try and find a solution on your behalf.

The shack that a seller left on a property and wanted to compensate the buyer with $100 is a good example. A simple call to the seller saying “no” would’ve solved the problem.