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:
- A real estate attorney will keep things above board and ultimately save you money. Real estate contracts are fairly complicated. Your realtor will help prepare the contract, but even the savviest real estate agent is still filling out a form. These form contracts contain attorney review provisions, which will allow the attorney to make sure there are no hidden “pitfalls,” that the contract meets the client’s expectations and that the clients truly understand what they are getting into. An attorney’s experience helps assure the deal is fair to you. The goal is to protect your interests. Unforeseen problems might come up before or after the closing. If contractual contingencies are not met, the deal might fall through. The attorney review process that happens when the contract is signed could save you a lot more than the attorney’s fee.
2. Real estate attorneys can help you get your loan approved. 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. Real estate attorneys help make sure the deal closes. A lot of things need to happen before a real estate transaction can close. There are key points along the way where conflicts often arise. If these conflicts can’t be overcome, the deal inevitably dies. Time frames involving inspections, financing, notices, and other contingencies need to be followed, and if they are not, the attorney can protect your rights. What if the inspection turns up an unforeseen defect? Or the survey reveals an encroachment? What if there are issues with the chain of title, unpaid taxes, judgments against the parties, or other liens? Your attorney will work to resolve these problems before you close.
4. Real estate attorneys help cut red tape. 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 Seller’s responsibilities, in others it’s the Buyer’s. Your attorney will help you keep this all straight.
5. Real estate attorneys make sense of title issues. In Illinois, a real estate attorney acts as the Seller’s title agent. The attorney works with the title company to make sure the Seller can convey clear title to the buyer. The buyer’s attorney will review the title commitment and survey to ensure the buyer is receiving exactly what the contract requires. The attorney will explain the intricacies of title exceptions and liens. Your attorney is invaluable in offering explanation and assistance in this area.
6. Real estate attorneys help avoid post-closing problems. Even after the closing, disputes can arise. There might be a lack of clarity or even a mistake in the contract. An issue with the title arises. The buyer moves in and discovers some horrible problem after the fact. Your attorney will help make sure any contractual issues are covered, the title is clear prior to closing, inspection issues have been resolved, and all required disclosures were made. If the Seller and Buyer each have an attorney, things go a lot smoother. (As a side note, even if something does go horribly wrong, the deal falls apart, and the result is rancorous and expensive litigation over who is at fault, the only professional sitting at the closing table with professional liability insurance to cover such a problem is your attorney).
7. Real estate attorneys help make sense of it all. Whether buying or selling a home, the documents you’ll 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 have a conflict of interest. A knowledgeable realtor is out of their depth when trying to give what is essentially legal advice. An attorney will explain it all to you, as your advocate.
8. Real estate attorneys advise you on more than real estate. Your attorney will look deeper than just the transaction. 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 based on the value of the home. Home ownership raises questions of estate planning, financial planning, accounting, and taxation. For example, there are different ways a person can hold title to real estate — a buyer needs to make an informed decision on how title should be held. 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.
9. Real estate attorneys are not that expensive. 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. And the cost of a litigation attorney to clean up the mess of a failed transaction is a lot higher.