Mike is an attorney in Obermayer’s Business & Finance Department. He has a transactional practice focusing on banking (public and private financing) and real estate matters, as well as corporate formation and...Read More by Author
“So you are moving? Have you called a Lawyer?” How Attorneys can assist with your Residential Real Estate Transactions
By the time we rung in the New Year, many men and women were working from home for almost nine months, while at the same time running a virtual school out of their house for their school aged children. Even the largest homes have begun to feel small and cramped and many people are considering moving to a new home to cope with the uncertainty of extended COVID-19 restrictions.
As people begin to explore buying or selling their residential real estate properties, one of the most common questions I get is, “why do I need an attorney if I am working with a real estate agent?” At first thought, the need to combine an attorney with a real estate agent may seem like an unnecessary expense, but spending some money up front to have an attorney assist with your transaction may you save you big bucks in the long run. Here are a few important ways attorneys can help you with your residential real estate transaction:
1. Analyze, Draft and Explain Legally Binding Documents
Even before beginning the search for the home of your dreams, you will be asked to sign legally binding documents that could adversely affect you. From the moment you execute a listing agreement, you have agreed to certain legally binding terms and conditions that could have ramifications on you whether you close on a property transaction or not (i.e. do you owe your broker a real estate commission if you sign an agreement of sale and the transaction does not close?). Additionally, whether you are the buyer or a seller of a property, you will be asked to execute some form of agreement of sale, which will govern your transaction and any timelines, inspection periods or mortgage contingencies negotiated as part of your transaction. Attorneys can assist here by drafting or reviewing the transaction documents to make sure you are protected and that any specific terms or conditions you are concerned about are addressed. Attorneys are also familiar with good and bad real estate transactions and can add additional specific language to your agreements to tackle potential problems prior to their occurrence. Unfortunately, real estate attorneys have seen litigation with respect to residential real estate transactions and as a result, have careful and thought through ways to better prevent these disputes from occurring. Further, and most important, consulting with an attorney prior to executing any listing agreement or transaction related agreements will allow any of your questions with respect to the documents to be answered and any concerns you may have addressed prior to signing legally binding documents.
2. Analyze Title Commitments, Exception Documents and Policies
Almost every real estate transaction requires the seller to convey good and marketable title to the buyer. If clear title, subject to certain permitted encumbrances, cannot be conveyed you may not be able to proceed with your transaction. Real estate attorneys analyze and review title reports contained in the title commitment and any accompanying documents evidencing encumbrances or restrictions on the property to ensure that clear title can be conveyed. Real estate attorneys also have experience working with title companies and the opposing parties to transactions to clear encumbrances from the records to ensure that the property being conveyed is legally allowed to be conveyed and the buyer will not have any surprises post-closing. All too often attorneys are contacted post-closing when a buyer realizes they are not able to improve their brand new property because there is an easement or other restriction on the use and development of the property that was not addressed prior to closing. When an attorney is involved in the transaction from the beginning he or she can work with you to ensure you know what encumbrances and restrictions are on the property and how this affects your property and any future use of it. After consulting with you, an attorney can then either work with the title company and other transaction parties to remove the encumbrance or restriction, or if it can not be removed and it will have a material and adverse effect on your desired use and enjoyment, provide you with the information you need to determine if you still wish to move forward with the property transaction. Finally, an experienced real estate attorney can ensure you obtain an appropriate title policy from the insuring title company to protect you from any future claims against you or your property.
3. Closing Assistance
Closing assistance is one of the most important tasks an experienced real estate attorney can assist with. Whether you are the buyer or the seller of a residential real estate property, the deed and other closing documents have a material effect on closing and your post-closing obligations. For example, if you are selling a property, a real estate attorney could review the closing documents and make certain changes to ensure that any of your post-closing obligations are limited to your ownership of the property. On the other hand, if you are the buyer, it is important to ensure that all of the representations and warranties that you make to the title company and your lender are accurate, which may require slight changes to affidavits and loan documentation. Failure to do this could lead to a default under your loan. Almost every document signed with respect to closing will have an effect on both the buyer and seller – whether it is transaction related, bank related or an IRS form. Attorneys can review these documents with you to make sure they are accurate and are set up to limit any potential liabilities you may have. For more complex transactions, real estate attorneys may be able to consult with their tax colleagues to ensure that you are obtaining the most favorable tax treatment in connection with closing.
4. Protect Your Sanity
Finally (and most importantly), engaging an attorney to assist with your residential real estate transaction will provide you cost-effective assurances that the transaction is being handled by a legal professional who will ensure that your interests are protected throughout the transaction. Having the peace of mind that you have an experienced attorney handling the transaction and working in connection with your real estate agent will allow you to focus on the more enjoyable aspects of buying or selling a home, while trusting that the legal aspects of the transaction will be completed without issue.
There are many justifications that a buyer or seller can make to avoid hiring an attorney to help with their residential real estate transactions. However, it is much cheaper to hire an attorney to help you buy or sell your home than it is to hire an attorney to help litigate over your home or the use of your property after you have closed on the property transaction.
Please note that this blog post provides general information regarding residential real estate transactions in Pennsylvania. If you own or are interested in purchasing or selling a residential property, it is important to reach out to a member of our team so we can provide more specific advice based on the facts and circumstances relating to your property or the property you are interested in buying. The information on the subject matter contained in this blog is merely an overview and cannot be applied to your specific set of facts without additional information analyzed by an attorney.
The information contained in this publication should not be construed as legal or medical advice, is not a substitute for legal counsel or medical consultation, and should not be relied on as such.