Is it really necessary to have an attorney in a real estate transaction?
Many non-legal professionals, such as realtors, bankers, or mortgage brokers might still insist that real estate contracts and closings can be accomplished without the assistance of an attorney. They argue that the expense is too great, especially when customers are paying so much in other expenses related to selling or buying their home or obtaining financing. Yet, it ís still true — the purchase of a home is the most expensive purchase you will ever make. Why wouldn’t you want to protect that investment with all the resources available to you? Here are just some of the reasons why you should engage an attorney when you buy or sell a home:
1. Real estate contracts are fairly complicated. For example, each State in which I am licensed has mandated real property disclosure requirements — if you sell your home, you are obligated to truthfully disclose specific property conditions, and these disclosures create important obligations and potential liabilities. Also, most form real estate contracts contain attorney review provisions, which will allow the attorney to make sure there are no hidden “pitfalls,” and that the contract meets the clientís expectations and that the clients truly understand what they getting into. This will include understanding the contractual time frames involving inspections, financing, notices, and other contingencies, so that in the event such contingencies are not met, the attorney can protect the clientís rights. What about prorations of taxes and other expenses? How will financing be handled? These questions need to be addressed at the contract-drafting stage.
2. The process of getting approved for a loan, and dealing with the ins and outs of home finance is changing all the time. The recent scandals involving loan fraud, improper documentation, and lenders or title companies charging unfair fees reveal how tricky these concepts are. A lawyer’s advice and experience can help avoid these problems from the time you enter into the contract through the closing and even afterwards. But even more so, now that federal and state regulators are trying to “fix” these problems, and the regulatory pendulum is swinging towards making it more difficult to obtain financing and for getting buyers to the closing stage, the new rules are confusing for buyers, sellers, lenders, and realtors — an attorney can help make sense of the financing landscape.
3. Many municipalities have enacted strict requirements that must be satisfied before the real estate transfer can be completed. These can include home inspections and repairs, zoning certificates, water certifications and payment, and transfer taxes and other requirements before a property can be transferred. In some cases, such requirements are the Sellerís responsibilities, in others itís the Buyerís. Your attorney will help you keep this all straight.
4. Purchasing a home often involves more than just qualifying for a mortgage and closing. The client who now owns real estate will need to understand matters relating to debt-servicing because of the value of the home. Home ownership raises questions of estate planning, financial planning, accounting, and taxation. There are also different ways a person can hold title to real estate — a buyer needs to make an informed decision on how title should be held. For example, estate planning concerns might dictate holding title in a trust, or the owner of a business or a professional (e.g. a doctor) might want to try and avoid exposure to legal liability. An attorney will help his client understand these issues, and refer the client to other professionals to help properly sort out these concepts when necessary.
5. What about title insurance? Who will explain the intricacies of title exceptions or unknown liens? Will the buyer of a new home have all the issues of mechanics liens for new construction, and any contract add-ons explained and taken care of? What if survey, other liens, or indemnification questions arise? What happens when the title company requests more documentation? The attorney is invaluable in offering explanation and assistance.
6. Whether buying or selling a home, the documents youíll be signing at closing will seem both voluminous and confusing. You need your questions answered. Representatives of the lender or title company either cannot answer or are biased. A realtor has a conflict because he or she will only get paid if the deal closes. An attorney will explain them all to you, as your advocate.
7. Starting soon (currently October, 2015) a new Federal Agency, the Consumer Financial Protection Bureau (CFPB) will be taking over the oversight of real estate transactions nationwide. The rules and procedures will radically change. Of course, realtors and lenders will be trained to deal with this — but ALL professionals involved in that process will be on a learning curve. Having an attorney in your corner will be invaluable.
8. Probably the most important reason for involving your attorney in a real estate transaction is your lawyer will have the background to deal with legal emergencies and unforeseen pitfalls. Indeed, if something goes wrong, and the deal falls apart, and the result is rancorous and expensive litigation over who is at fault, the only professional sitting around that closing table who has professional liability insurance to cover such problems is your attorney.
9. The going rate for hiring an attorney to help you with your real estate transaction is still generally a bargain when you consider what the other closing charges and fees will be and the services an attorney provides. Most attorneys will provide real estate closing services on a flat fee basis, encompassing all matters related to the transaction. The amount of the fee usually amounts to about one half of one percent of the contract price or less.