(Part III of a series on buying a home)
Real estate transactions are fairly standardized. Most residential home sales occur without a serious hitch. But that is not to say there is no need for an attorney. Think of a real estate lawyer as a form of insurance; hopefully everything goes smooth, but if something goes wrong, you have protection.
Below are some common scenarios in which homebuyers (or sellers) may need legal counsel and representation.
5 reasons to hire a real estate lawyer when buying a house
Real estate agents are well-versed in the financial aspects of transactions and the mountain of paperwork. But if legal questions or conflicts arise, your agent cannot (ethically) give you legal advice. They cannot represent you in legal proceedings. As go-betweens, they do not exclusively serve your interests. In some situations, the agent and their employer may become your legal adversary.
A real estate attorney is your sounding board and advocate. They represent you and only you. Here are five situations where you may need a lawyer to step in on your behalf:
- Negotiation: Real estate agents earn a 7 percent commission (or other fixed share) of the purchase price. It’s in their interest for you to close at the highest price. If you are not a wheeler-dealer, it can be cost-effective to hire an attorney to negotiate the purchase terms on your behalf. Price is only one factor. You or the seller may demand legally complex contingencies (proof of funds, passing inspection, sale of the buyer’s home, a specified closing date or cutoff, etc.). If the transaction is non-standard in any way, the fine print can be critical.
- Problems with the title: The price is right, the location is perfect, but there’s a glitch. The owner doesn’t actually have authority to sell. Their ex-spouse is still listed on the title. Or there was a co-signer on the mortgage. Or an unpaid contractor has a lien against the property. Title discrepancies are not necessarily a dealbreaker, but you may need legal intervention to compel the other party to clear up the title defects.
- Problems with the property: The seller may profess that the property is up to code and free of defects. But prior to closing or after you take possession, you discover a leak in the roof or septic system, or some other serious flaw that will cost you money or devalue your property. The seller feigns innocence. “I had no idea.” With the help of an attorney, you might renegotiate the purchase price or force the seller to fix the issues or pay for repairs.
- Breach of contract: If the seller (or buyer) backs out of the deal for any reason, you are caught between a rock and a hard place. You may be “homeless” if you have already vacated your existing house or apartment. You may be caught in a chain reaction of other buyers and sellers affected by the breach of transaction. You could need a lawyer to get back your down payment or seek reimbursement for expenses you have incurred (inspections, title search, financing costs, temporary housing, storage rental).
- Fraud: There are identity thieves and other criminals who pose as property owners or real estate professionals to swindle homebuyers. Anyone can also fall victim to unscrupulous buyers, sellers, bankers, real estate agents, title agents, inspectors or building contractors. Fraud comes in many forms, from someone committing mortgage fraud in your name to sellers or agents defrauding you through omissions or material misrepresentations. You may need legal counsel to recoup your earnest money and hold the wrongdoers accountable in a civil action.
Protect your investment
Please don’t misunderstand us. We work with real estate professionals and lenders on a daily basis. The vast majority are honorable and qualified people who want to help you. But you need to understand that there are limits to their role and their advocacy. It is common to work with both a realty agent and a lawyer in the home buying process.
At a minimum, it is advisable to hire a real estate attorney to review the purchase agreement, title report, inspection reports and mortgage terms. If there are any red flags, it is easier to walk away or address those issues before you have consummated the deal. If you are the seller, a lawyer can also protect you by performing due diligence on the buyer and making sure you are in compliance with all required disclosures.
Also see our recent blog on how much down payment you really need.
The Law Office of Rajeh A. Saadeh, L.L.C., handles residential real estate transactions and related litigation in Somerset County, Middlesex County and surrounding communities of New Jersey.
Source: Should you hire a real estate agent or lawyer to buy a house? (Nolo.com)