What this article is all about:
Background on this Article
Home buying is a complex process and even more so when it’s your first home. Each state has its own requirements on who and what needs to be involved, and that’s exactly why you should start your journey with a consultation with an experienced real estate lawyer.
In this article, we’ll work to break down how you can benefit during the transaction, how much it’s going to cost, and the common pitfalls real estate attorneys can help you avoid by limiting your exposure to any future risks.
In most states, it’s not mandated that you work with a real estate lawyer. Your real estate agent is generally equipped to handle purchase agreements and bills of sale. However, they will stop short of offering legal guidance.
Why You Need a Real Estate Lawyer
The legal consequences from mistakes or omissions during the buying process can cause you some major headaches. You might have heard differing opinions about whether or not you need a residential real estate attorney.
The best step you can take is to review the housing and mortgage situations with your agent and mortgage broker, respectively. You will also want to do a thorough review of the mortgage documents prior to signing anything. This will give you an idea of whether there are some unique cases with your purchase that require a professional legal opinion.
Consider the circumstances
Is there anything unique about the property? For example, if there are any improvements on the lot such as fences, pools, sheds, car ports, or trees, you will want a legal review of the deed and lot survey to ensure that everything was built to code with proper permits.
Be particularly mindful of anything on the property that could be considered to encroach on your neighbor’s land, or even public property such as sidewalks or easements.
Real estate attorney fees
Costs for an attorney vary across the country, but figure up to a couple thousand dollars, depending on the complexity of your transaction and how involved you want the attorney to be during the process. Some attorneys charge a flat fee from contract to closing and others will charge an hourly rate, often between $100-$300 per hour.
You control the relationship, so be upfront with any potential attorneys about how much you can afford and what the limits are. You’re not a Rockefeller, probably, so make it clear that you have a budget to stick to.
Request a retainer agreement
The retainer agreement outlines the attorney’s charges and responsibilities. Ask your agent to recommend an experienced, full-time attorney who is state-licensed and specializes in residential real estate law. Most lawyers will have a boilerplate agreement that covers the majority of the client’s needs, but if you have special considerations be upfront so that it can be added to the agreement.
The Common Legal Pitfalls for Homebuyers
Only an experienced professional, who is closely familiar with the documents involved in a home purchase, can catch all the problems or mistakes and save you future expenses to correct them.
An attorney who specializes in residential real estate will review your purchase contract before you sign it. This is especially recommended for first-time homebuyers. Excitement and anxiety tend to take over when you buy your first house, which makes it easy to miss critical terms.
They will work with your mortgage loan officer, the home seller’s attorney and agents to make sure that dates are set for: attorney approval, home inspection, mortgage commitment, and other contingencies. This is critical, because many states have certain requirements and limitations on the timelines for these events. Missing any of them could add extra fees or prevent you from backing out of a deal even if you find something catastrophically wrong with the property.
Review critical closing documents
The attorney will inspect important documents for common mistakes such as typos and misspelled names, including:
The legal description of the home is critical to get right, as it can impact your ability to remodel and add improvements, and can influence your property taxes.
The bill of sale is another important part of the transaction that categorizes and inventories any personal property, such as appliances, that are to be included as part of the deal.
They are also extremely helpful in negotiating for unpaid prorated expenses due to you from the seller, such as: property taxes, condominium assessments, and utilities. Attorneys don’t typically counsel homebuyers through the purchase negotiations, but you can ask yours for assistance.
When possible, try to get your attorney to attend the closing as well. You want to make sure all of the documents, revisions, and terms are represented in the actual documents you are signing.
If you need to back out of a deal
In most states, attorneys can change legal language in a purchase contract and void a purchase contract under state laws. You might need this in case an inspection comes back with serious red flags such as mold, plumbing, or foundation issues.
Once you begin to go through the process, and understand the steps and procedures, you will be glad that you have another seasoned pair of eyes looking out for your best interests.
Resource Center & Glossary
Key terms – in plain English
Bill of Sale – Details any personal property not attached to the home that is part of a transaction. Example: kitchen appliances, washing machines etc.
Deed – The legal document that affirms ownership for a property.
Home Inspection – Commonly, an official review of the property by a skilled professional that results in a report detailing any issues discovered on the property. Usually, the home purchase is conditional on the inspection report results.
Improvements – Anything added onto the home or property that is permanent. Example: fence, car port, etc.
Mortgage Broker – A real estate professional specializing in securing mortgage terms for the homebuyer.
Mortgage Loan – A loan that is raised to buy a property. This is a secured instrument, in that if there is a default on the loan the lender can sell the property to settle the debt.
Plat of Land Survey – A map which shows the divisions of a piece of land. This is how you learn where your property lines are legally.
Real Estate Agent – A real estate professional that specilizes in buying and selling homes on behalf of home buyers and sellers.
Real Estate Lawyer (AKA Real Estate Attorney) – An attorney specilizing in real estate law.
Retainer Agreement – An agreement with your real estate attorney that outline the duties, responsibilities, and associated fees for the relationship.
Title – A formal document that serves as evidence of ownership for a property.
Title Insurance – Insurance against loss due to defects, or mistakes related to the title or deed for a property.