Real Estate and Law

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Even in this down economy, real estate transactions are occurring frequently. People are still buying and selling homes, and finding commercial property for their businesses. In most cases, a realtor helps buyers and sellers negotiate these deals.

Realtors rent, buy, or sell property for clients. They perform duties like studying property listings, interviewing prospective clients, accompanying clients to property sites, discussing conditions of sale, and drawing up real estate contracts. In short, realtors are responsible for making the real estate transaction process as smooth as possible. When there are problems, a real estate lawyer is sometimes necessary.

To over simplify, real estate lawyers do two main things: they help structure the legal aspects of real estate transactions and they litigate real estate disputes when things go wrong.

Why We’re Asking:

In most real estate transactions, collaboration between a homeowner and a real estate agent is pretty typical. Realtors understand the local area and can advocate for sellers and buyers. They are also familiar with the standard paperwork.

But sometimes contracts can be confusing. Even more, homeowners and home buyers may come across legal roadblocks in the real estate process. We’re interested in finding out when hiring a real estate attorney is a good idea.

Share your thoughts below:

When are real estate lawyers necessary?

During a real estate transaction, when does it become necessary to contact a real estate lawyer?

What are some of the most common situations where a real estate lawyer is brought in?

What sort of questions should I ask before hiring one?

Should I let my realtor choose my real estate lawyer?

How much interaction or overlap is there between my realtor and my real estate lawyer?

We’re excited to see helpful tips and advice from our first Legal Resource Network post! Check back next week for our awards and follow-up posts.

Please post your answers in the comment field below!

11 COMMENTS

  1. In a commercial real estate transaction, it’s best to involve an attorney from the beginning. If it’s a residential real estate transaction, and unique issues arise that make it advisable to involve an attorney, then do so before signing anything with the other party. Once the LOI, or worse the purchase agreement, is executed, the attorney’s ability to help is very limited.

    In a commercial real estate transaction, whether buying/selling or leasing, it makes sense to involve an attorney early in the process. I think having a lawyer involved on a commercial real estate transaction almost always makes sense. The form purchase agreements provided by real estate agents do not work well on commercial deals. The purchase agreements need to be drafted to the specifics of each transaction.

    In a standard residential purchase, it may not be necessary to have a lawyer involved at all; however, if unique issues arise, then a lawyer should be brought into the picture before anything binding is signed. Some examples would be if there are potential environmental issues, issues with easements or property lines, unusual title questions, a tenant that will need to be evicted, or any other issue that is out of the ordinary and a standard purchase agreement doesn’t readily address.

    Before retaining a real estate lawyer, you would want to find out what type of real estate transactions he or she has worked on in the past. For example, someone with a background focused on leasing transactions may not be the best choice for a purchase transaction, and vice versa. If it’s likely that a dispute will arise in the transaction, and litigation will be necessary, then the lawyer should also have experience in litigation (many transactional lawyers do not) or have a colleague in their office that is an experienced litigator.

    Many attorney’s have web sites, and are on LinkedIn, etc., which allows someone to look at their bio and other information to get a feel for their experience and the focus of their legal practice.

    The realtor should not be choosing your lawyer but it doesn’t hurt to ask for the realtor’s input. Many realtors are well connected in the real estate professional community and can frequently provide useful advise about local real estate attorneys.

    Whether there is much interaction between the realtor and the real estate lawyer differs from deal to deal. On some transactions I’ve never spoken with the realtor as all communications passed between the client on the realtor without my involvement. On other deals the realtor was invaluable in acting as a buffer between the buyer and seller and keeping the flow of information moving so the deal stays on schedule.

    There’s not much overlap, or shouldn’t be, between the services provided by the realtor and the lawyer. However, the realtor may suggest you start with their brokerage’s preprinted purchase agreement as opposed to having outside legal counsel drafting one for you. In a standard residential purchase with no unique issues, the preprinted form will typically work fine.

  2. I am a REALTOR in the state of California. A Real Estate Attorney is usually only needed when there is a dispute that cannot be solved by arbitration or mediation. In my 23 years of real estate sales I have only been involved with 3 transactions when attorneys were involved.

  3. Let’s distinguish between residential and commercial (including residential rental property) real estate.

    While it has become fairly common for residential transactions, either purchases or sales, to be concluded without an attorney for either buyer or seller, in recent years, issues of title and condition of the property have necessitated involvement of an attorney. Take 2 of our recent cases. Case 1: Client closes on the property without their lawyer and after a preclosing inspection. Next day the seller removes an installed heater in the garage, in violation of the parties’ agreement. Buyers’ lawyer had to jump in to resolve matters between the parties including the selling agent. Case 2: Clients are buying a condo and wish to avoid having their names on any public filing including the deed by which they took title. Buyer’s lawyer had to work with the title company providing the title policy on the necessary documents to make this work. Closing came off on time with the necessary privacy buyers’ sought.

    I can safely say that all commercial transactions, even transactions conducted by real estate professionals, require a knowlegable real estate lawyer from the point of the drafting of the purchase agreement through and post closing. The issues involved in these transactions are significant and include issues of title, zoning, use, financing, tenants, ownership (usually by a liability limiting entity) and tax and others. Without this expertise at the outset, things can and will go wrong and often are far more expensive to fix than if the lawyer was involved at the outset.

  4. I regularly refer my clients to lawyers when estate planning involving real estate is required. Many times a client may be wondering how to best leave their property to their kids if something should happen to them. Lawyers can answer that question and guide them in this important topic. Lawyers can also be of help in Notice of Default matters.

  5. An attorney is never “necessary” in a real estate deal in the same fashion that an attorney might be necessary to go to Court. However, given that a real estate transaction is likely one of, if not the most, substantial transaction that an individual will ever enter into, it is highly recommended.

    I liken it to purchasing an insurance policy. If you wait until you know you need a lawyer, it is likely too late to get one. And in the event that it is not too late, it will almost certainly cost much more to get a lawyer involved once the deal has taken a bad turn than it would be had the lawyer been involved since day one.

    I tell my residential clients: “My goal is that at the end of this process, you turn to me and say “”Brian, you and your staff are nice people but we didn’t really need you in this deal.”” If you’re fortunate enough for that to be the case, it means one of two things; either we did a good job of being proactive about possible issues and resolved them without the client even realizing OR there truly were no bumps in the road. Either one is good for my client.

    It would be great if all transactions went as smoothly as our purchases at the mall. But given the number of parties involved (buyer, seller, lender, title agent), that is just simply not the norm. And remember, the buyer or seller’s lawyer is the only person involved whose getting paid is contingent upon the closing happening.

    And that is not to say that you should refuse the lawyer recommended by your Realtor. Attorneys are bound by strict rules that govern the attorney-client relationship and those rules are very clear as to whom the lawyer’s duties lie– always to the client– not the Realtor.

    The stakes are even higher in commercial deals than they are in residential deals. It is never recommended that a party purchase or sell commercial real estate without an attorney. For instance, in a commercial deal, the attorney makes certain that issues with tenants, if any, are addressed. They can also make sure that the buyer’s proposed use is permitted. They assist with decisions such as whether an entity should be created to own the real estate.

  6. During a real estate transaction, when does it become necessary to contact a real estate lawyer?
    A Real Estate Lawyer becomes essential once an offer is accepted and the parties begin to draft the contract. Each clause in the contract is subject to negotiation and carries legal implications for the remainder of the purchasing process. It is for this reason that an each party must retain an attorney to negotiate on their behalf.

    What are some of the most common situations where a real estate lawyer is brought in?
    Real Estate Attorneys are brought into the Selling or Purchasing of a property. Whether commercial, residential or a mixture of the two, there is a tremendous amount of money at stake in many real estate transactions and Real Estate Attorneys ensure that their client is protected from any unnecessary legal risk or competing claims to the property.

    What sort of questions should I ask before hiring one?
    While many attorneys have the legal knowledge to help clients, I would recommend that one should ask an attorney’s availability and level of attention paid to clients. Many Real Estate transactions are time sensitive and a responsive and attentive attorney can save a deal.

    Should I let my realtor choose my real estate lawyer? How much interaction or overlap is there between my realtor and my real estate lawyer?
    There will be a significant amount of interaction between your Realtor and Lawyer, so if you know your Realtor has had success with a lawyer, it might be wise to stick with what has worked in the past.

  7. I am a real estate lawyer in NJ. I deal mostly with residential contracts,
    although my experience with commercial work is similar. Especially with
    residential deals, realtors have form contracts but the specifics need to
    be addressed in a certain way to maximize the interests of the seller and
    buyer. The real estate lawyer knows how to, and what to, modify in the form
    contract so that it meets the concerns and goals of their respective
    clients. Litigation, while not extremely common, is also a less foreboding
    prospect when a lawyer can be consulted for a client’s options and remedies
    in case a deal goes sour.

    Ultimately, the realtor provides most services to a client but the lawyer
    (at least in NJ) provides a low-cost specialized service to act as part of
    the team. If a client has no idea who to go to sometimes the realtor can be
    a good source of referrals; a client might want to be sure that the lawyer
    has the client’s best interest in mind rather than just keeping their
    referral source happy.

    For commercial properties it is more important to get an attorney because
    often the individual signing on behalf of the corporation will be required
    to give a personal guaranty of the payment of rent and other expenses. If
    the person does not want to do so that clause would need to be negotiated
    out, or else the person could be liable for the debts of the corporation,
    sometimes long after they were no longer involved.

  8. During a real estate transaction, when does
    it become necessary to contact a real estate lawyer?

    For the buyer or the seller as soon as the bid is accepted and the contract goes into “attorney review”, both
    parties should have lawyers look at the contract to make sure they get
    what they expect. During this window both sides can still walk away. A
    lawyer is relatively inexpensive especially when you consider what the
    real estate agent or appraiser is charging. The lawyer is probably the
    third or fourth highest fee. Hardly outrageous. And important to
    protect the rights of the buyer/seller.

    What are some of the most common situations where a real estate lawyer is brought in?
    In some states the bank requires a lawyer. Short sales can be very complicated
    and a good lawyer can help. I have been on the phone with banks
    helping to expedite short sales which can drag on for months. This can
    be a problem if a mortgage commitment expires. A lawyer can also help
    request an extension of a mortgage commitment.

    What sort of questions should I ask before hiring one?
    Always ask, how many closings have you worked on and may I have some references?

    Should I let my realtor choose my real estate lawyer?
    No. The lawyer represents the client not the broker/agent.

    How much interaction or overlap is there between my realtor and my real estate lawyer?
    The agent/broker is there to make sure the sale happens or there is no
    fee. The lawyer is there to protect the rights of the buyer/seller.
    Sometimes this means the sale is not a good deal for the client. It is
    a totally different lane with little overlap.

  9. Real estate attorneys are certainly advisable in every transaction involving
    real estate. Realtors are great at marketing and getting your property
    ready for sale so you can maximize the price for your property. But
    realtors are not knowledgeable in contracts or real estate law. Every sale
    of real estate involves a purchase agreement (a contract). Only a lawyer
    can give you advice regarding the legal ramifications of what is being
    signed. If a realtor tries to give advice regarding the legal aspects of a
    contract he/she is engaging in the unauthorized practice of law.

    As a buyer or seller of real estate you should see an attorney before you
    sign the purchase agreement. This agreement spells out the terms of the
    transaction. By the time it is signed, it is often too late for the attorney
    to do anything about a problem with the real estate. For example, if there
    is an “as is” clause in the purchase agreement and the buyer finds out that
    the basement leaks, the buyer is usually stuck with the problem, even if he
    or she had a lawyer at the closing.

  10. In Arizona real estate lawyers are used in commercial transactions or more complicated residential situations. Most traditional residential transactions are handled through a title company. There are times that the realtor/broker oversteps their limitations and gives the client improper legal advice.

    Certainly it is important for anyone to obtain appropriate counsel if they are wondering about foreclosures, short sales, deeds in lieu or deficiency actions. Arizona is an anti-deficiency state, but that does not apply in all cases to all property. Also, owners of real estate should obtain counsel regarding the effect of bankruptcy as related to real estate issues and tax consequences.

  11. During a real estate transaction, when does it become necessary to contact a real estate lawyer?

    Well it depends on the facts of each case, but, I agree with one of my other colleagues on here in that it is usually best to have one involved early on in the transaction—if not, before you start. Real estate people are great for handling the practical parts of the transaction, many times much better than attorneys. However, they are not and should never act in the capacity of one’s attorney or CPA, e.g., giving out legal, financial or tax advice. If you are involved with a realtor doing that, it is time to find a new realtor.

    For example, problems experienced right now in the real estate market can be contractual, but, in these economic times the problems homeowners are encountering most deal with the defaults on their most prized and important possession—their home. When looking at the loss of, or to strategically default on one’s home there are two questions you must answer for yourself: (1) what is my deficiency liability to the lender going to be if my home is short sold, or foreclosed upon; and (2) what is my debt relief tax liability to the IRS and State going to be upon losing my home, either at a short sale or foreclosure?

    These are not questions that your local realtor can, or should be answering for you if they are professional and looking out for your best interest. Instead, if you are going through this situation you should be seeking the advice of a real estate attorney and local CPA and if your local realtor is smart, they should be referring you out to seek same, or have a relationship with one already to conveniently refer you to.

    What are some of the most common situations where a real estate lawyer is brought in?

    A real estate lawyer should always be consulted from the outset when dealing with a strategic default situation, or the unavoidable loss of a home. A realtor might know enough to identify a potential issue is present, but, are never qualified to give legal advice.

    Contractual disputes are also instances that necessitate the involvement of an attorney—but, they usually occur when one is already involved deep in the transaction.
    Term interpretation or writings designed to protect one party to the transaction, such as, an addendum to a real estate purchase contract. In these instances, it is important, as either a seller or buyer, to have an attorney draft language into the contract that either triggers, or does not trigger certain things according to case law that interprets those provisions. Certain rights and responsibilities are triggered, or not triggered, by the incorrect use of language all of the time by the courts. That language use usually stems from sloppy terms used in writing up the transaction in the first place. If you have an attorney involved that result can be avoided.

    What sort of questions should I ask before hiring one?

    First and foremost, ask yourself what is important to you, and/or what are you concerned about and ask about those things. Next, ask about the person’s experience, education, publications, hourly rate, and practice areas.

    As with many practice areas, several things are encompassed within one area of law. For example, in real estate, what areas of real estate do they specialize in—commercial, residential, lease, purchase, foreclosure, mortgages, negotiation, litigation, and/or transactional.

    Also, ask what type and/or percentage of clientele do they represent in their practice, e.g., plaintiff, defendant, landlord, tenant, homeowner, contractor, lessor, lessee, mortgagor, mortgagee.

    After all of that, finally ask yourself the gut-check, or feel good question, e.g., how does this person make me feel? Am I comfortable with them, do I trust the advice they are giving me? Do I feel like they are looking out for my best interests or their own? Remember, seeking the advice of counsel creates a fiduciary relationship of the highest caliber. So you need to trust that person.

    After all of the above, you should have a pretty good handle on who this person is and what they can do for you and your legal problem.

    Should I let my realtor choose my real estate lawyer?

    Going back to what I said previously, hopefully your realtor, as a professional, has someone to refer you to. But, you should never let them choose your lawyer for you. Speaking with a lawyer creates a fiduciary relationship that you must feel comfortable with. Do not let someone else make that choice for you.

    I have several realtors that have worked with me over the years and based upon that experience they refer their clients to me for consultation on legal matters. That past experience acts as a reference point for clients to come see me and trust that I have performed well in the past. Having someone force you to see a specific person for consultation purposes smells of impropriety and illegal compensation, or referral fees which are improper for a lawyer to pay to a non-lawyer. That is not the person you want to represent you in your legal matters.

    How much interaction or overlap is there between my realtor and my real estate lawyer?

    Depending on the matter and set of facts there can be a lot, or a little. Their relationship and interaction is factually dependent on one’s circumstances and the type of matter you are involved in.

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