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Expert advice is always a good idea when you’re making a life-changing financial decision, and a sale or purchase of a home certainly fits that description. In addition to hiring a real estate agent before buying or selling, most buyers also will consult with an inspector and pay for an appraiser.
Another expert who can play a pivotal role in the transaction is a real estate attorney.
Some states require real estate lawyers to be part of the process, while attorneys are not used much, if at all, in other states. Here is a look at why hiring a lawyer might be a good idea—or not—from a buyer’s and seller’s perspectives.
What Does a Real Estate Lawyer Do?
A real estate lawyer is licensed to practice law and specializes in real estate transactions. A real estate lawyer is familiar with all aspects of the home purchase process and can represent buyers, sellers or lenders.
In states where a lawyer is required to be present at closing, it’s possible that the lawyer is there solely to represent the buyer’s lender. You will need to hire a lawyer yourself if you want someone to represent your interests exclusively. Requirements governing the involvement of real estate attorneys vary from state to state and even within states, such as in California, where the rules differ by county.
Some people hire an attorney early in the process, to handle such matters as reviewing the brokerage contract with a real estate agent, while others wait until the purchase contract is drawn up, or until closing.
The cost for a lawyer could be around $200 to $300 an hour, or just a flat fee of several hundred dollars that you pay at closing.
When Would I Need a Real Estate Lawyer?
There are several situations in which a real estate attorney can be helpful in the home-buying and selling process, from reviewing the purchase contract in a typical sale to dealing with a uniquely complicated one.
Although real estate agents usually play a central role in preparing purchase contracts, a lawyer could provide a review of the purchase contract terms. What’s more, real estate agents are generally limited to filling out contract templates, rather than drafting them from scratch. For that reason, more complex contracts may need to be drafted by an attorney.
If you’re going to involve a lawyer at this stage, it’s important to provide a few days, if possible, for legal review of the contract before it is finalized. It can help you avoid potential problems down the line by making the contingencies as favorable to you as possible.
The contract is the most important document in the home sale process, and it includes several negotiable issues. Some of the most important issues in the purchase contract involve:
- Timing. Your timeline for closing on the property could be affected by the sale of your own home or issues largely outside of your control, such as unexpected lender delays.
- Inspection. A home inspection can uncover many problems, and a seller and buyer could end up negotiating on who will pay for repairs. In some cases the buyer—if the contract allows it—could withdraw from the contract without penalty.
- Title. A title search is routine before a purchase, and might turn up a lien on the property you’re selling or buying, which a lawyer can help investigate. A lawyer also could help ensure the title insurance on your new home adequately protects you from potential issues.
The moment you’ve been waiting for—closing on a home sale or purchase—often involves dozens of pages of legal documents to review. A lawyer can help both the seller and buyer navigate the review, which can be especially intimidating and confusing to a first-time homebuyer.
“We negotiate the repairs, monitor the financing and review the title when representing the buyer,” says Michelle Chase, a real estate attorney in Naperville, Illinois. “At closing, we explain all the mortgage documents to buyers.”
Less Typical Scenarios
Here are some situations that are unusual and might require an attorney’s advice and negotiating skills:
- You’re buying a home that is part of a special type of sale, such as an estate sale, short sale, auction or purchase from a bank
- You’re purchasing a home that’s in another state
- You’re selling a home that is a central part of a divorce settlement
- You’re selling a home that was owned by a family member and you are in charge of the estate
- You’re buying or selling a property that has major issues, such as structural damage
- You have major financial issues and are trying to sell a property that has liens on it
How to Find a Real Estate Attorney
Recommendations from people you trust, such as real estate agents and lenders, can be a good place to start when you’re looking for a real estate lawyer.
You also can search for real estate lawyers in your area, check with the local American Bar Association chapter or contact a non-profit organization that helps homeowners.
You’ll likely want to interview at least a couple of lawyers so you can compare their approach, rates and availability.
Some questions to ask:
- Do you charge by the hour or a flat fee? You’ll want to find out how lawyers usually charge for services in your area, and what the price range is. Also find out if the price includes the time to review, discuss and possibly negotiate aspects of all documents or just attend the closing.
- How available will you be during the process? This is important because when you’re in the middle of a potentially contentious negotiation that needs to be resolved quickly, you’ll want the lawyer to be available to advise you and negotiate with the other party.
- How many residential real estate transactions do you advise on per year? Asking this question can provide insight into the attorney’s overall experience with real estate transactions. Plus, it can be helpful to know if an attorney is unpopular, in-demand or, perhaps, over-committed and less likely to provide one-on-one attention.
- How are you usually involved in real estate transactions? Real estate transactions can be extremely multifaceted so it’s important to find an attorney who is experienced in the type of assistance you need.
Why You Should Hire a Real Estate Attorney
Some common examples of when hiring a real estate lawyer makes sense include:
- Exclusive representation. When you are buying or selling your home, everyone has an interest in the deal getting done, including real estate agents and the lender. This can make you feel like you’re on your own at times. However, if you hire a lawyer, you’ll have access to an independent third party who can review the contract and represent your best interests throughout the transaction.
- Reasonable cost. If a real estate lawyer charges an affordable fee, hiring one could be a solid investment. An improperly negotiated issue involving a major problem uncovered in a home inspection, for example, could cost you thousands of dollars or more.
- Peace of mind. Even if you are not required to hire a lawyer for any part of the home-buying or selling process, you might feel better having someone who can explain complicated legal issues. A real estate attorney can also provide assurances that you’re making the right moves as you proceed with possibly the largest purchase you’ll make in your life.
Why You Shouldn’t Hire a Real Estate Attorney
A couple reasons why you might not want to hire a real estate lawyer:
- You don’t have the money. If you have a fairly straightforward transaction and a real estate lawyer is not required in your state, you might be OK with just the real estate agent and title company helping you. The money you save could go toward the down payment and other necessities.
- It could become a battle. If your lawyer is looking for reasons to tangle with the other party—such as making a big deal about a small item on a contract—it might delay the transaction and could be costly if the fight drags on and you have to pay by the hour.
The decision to hire a real estate lawyer often depends on your personal preference and ability to pay a bit more at your closing. If you can have a team of professionals on your side—a real estate representative, lender, inspector and lawyer—it should make the home-buying experience smoother, especially for a first-time home buyer.