Home Buying Attorney
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home buying attorney
Do you need to pay for a residential real estate attorney to help you through the home-buying and mortgage processes? That depends on how confident you are that title issues, paperwork mistakes and uncooperative sellers won't derail your closing.
You aren't required to pay for a real estate attorney when you are buying a house. But if you do, that attorney will represent you during the entire home-buying process. The attorney will also attend the mortgage closing, reviewing the loan documents you sign to take ownership of your home.
Closing your mortgage loan is far from a cheap process. You can expect to pay from 2 percent to 5 percent of your home's purchase price in closing costs, the fees your lender and other companies charge you to close your mortgage loan.
But is hiring an attorney worth the extra dollars for buyers? Not surprisingly, the answer depends, largely on how willing you are to take the risk that something might go wrong with what might be the most expensive purchase you make.
"The work that a real estate attorney does for buyers starts much earlier than the closing," said Michelle Chase, attorney at law with Naperville, Illinois-based Law Office of Michelle Therese Chase. "Taking on a mortgage and buying a house can be extremely overwhelming. My job is to make the transaction as smooth as possible for them. The language and terms are all foreign to them. My job is to help them navigate that."
At closing, this professional's job is to make sure that the loan documents you sign are prepared accurately and properly reflect the fees that you and the seller agreed to pay. Your attorney will also answer any questions you have during the closing and will negotiate on your behalf if last-minute financing problems pop up or if the sellers attempt to make changes with which you don't agree.
Not all real estate professionals agree that buyers should always hire a real estate attorney. Bruce Ailion, a real estate agent and attorney with RE/MAX Town and Country in Atlanta, said that most real estate transactions today, and most mortgage types, are fairly vanilla. In such transactions, buyers typically don't need to pay for an attorney to represent them, Ailion said.
"The title company or attorney represents the lender in the transaction but must be honest and complete in answering questions of the buyer," Ailion said. "If a buyer is unhappy with the loan provisions, an attorney representing them may be able to do a better job explaining the provisions. But negotiating something more favorable to the buyer is impossible. If you want the loan, you must accept the terms as presented."
Before closing, a real estate attorney can help you negotiate after the home inspection, an event that happens after you and the seller agree on a contract but before mortgage closing. If the inspector finds serious problems with the home you want to buy, you can work with your real estate attorney to negotiate repairs that the sellers must complete before the home sale can close. Your attorney might also negotiate a reduction in the home's sales price or credit that you'll receive upon closing to pay for the repairs yourself.
Real estate attorneys also study title documents to make sure that other individuals or governmental bodies don't have ownership stakes in the home you want to buy. If the sellers of your home failed to pay all their property taxes, your local government might have a lien against the home. Your attorney will search title documents to make sure that there aren't any unpleasant surprises waiting for you after closing.
Some states require that an attorney be present at a real estate closing. These states are Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and West Virginia.
It's important to note, though, that the required attorneys here all represent your mortgage lender at the closing, not you. If you want an attorney to represent you, you'll have to pay extra for those services.
How much will this cost? That depends. Chase said that buyers can expect to pay from $450 to $650 for the services of an attorney during their home-buying process, including the time that the attorney spends at the closing table. Chase said that her office charges buyers $495 for a real estate attorney who will represent them during the buying process.
An attorney will generally take over after you and the sellers agree on a sales price and each sign a real estate contract. Your real estate agent represents you through the negotiation process until this step happens.
James McGrath, co-founder of New York City real estate brokerage Yoreevo, says that the need for a real estate attorney can vary depending on where you are buying a home. He says that in his market, New York City, attorneys play an important role in the negotiations that take place after a real estate contract is signed.
Buying a home will probably be the largest and most significant purchase you will make in your life. It also involves the law of real property, which is unique and raises special legal issues and problems not present in other transactions. A real estate lawyer is trained to handle these problems and has the most experience to deal with them.
In the typical home purchase, the seller enters into a contract with a real estate agent, usually in writing. When the broker finds a potential buyer, they conduct the negotiations and most often act as an intermediary (the go-between) between the buyer and seller.
Once an informal agreement is reached, the buyer and seller enter into a formal written contract for the sale of the new home. This is known as the purchase agreement. The home buying process then follows the following steps:
A lawyer can help you avoid some common problems with a home purchase or sale. For example, a seller may sign a brokerage agreement that does not deal with a number of legal issues. This happens quite often as realtors often use standard forms, expecting that they will cover all situations.
It is thus recommended that the seller have the advice and guidance of an attorney with respect to a brokerage agreement. Even if the agreement is a standard form, its terms should be explained to the seller and revised, if necessary.
The purchase agreement is the single most important document in the transaction. Although standard printed forms are useful, a lawyer is helpful in explaining the forms and making changes and additions to reflect the home buyer's and the seller's desires. There are many issues that may need to be addressed in the purchase agreement, such as:
Most buyers finance a substantial portion of the purchase price for a home with a mortgage loan from a lending institution. The purchase agreement should contain a carefully worded provision (known as a "contingency") that is subject to the buyer obtaining a commitment for financing.
After the purchase agreement is signed, it is necessary to establish the state of the seller's title to the property to satisfy the buyer and the financial institution. Generally, a title search is ordered from an abstract or title insurance company. An attorney is essential to review the status of title and give an opinion of title in lieu of a title policy.
When it comes to obtaining title insurance, an attorney can help review the title search and explain the title exceptions as to what is not insured. They will also determine whether the legal description is correct and whether there are problems with adjoining owners or prior owners.
In addition, an attorney can explain the effect of easements and agreements or restrictions imposed by a prior owner, and whether there are any legal restrictions which will undermine your ability to sell the property.
The title search does not tell the buyer or seller anything about existing and prospective zoning. A lawyer can explain whether zoning prohibits a two-family home, or whether planned improvements violate zoning ordinances.
A closing statement should be prepared prior to the closing indicating the debits and credits to the buyer and seller. Here, an attorney can be helpful in explaining the nature, amount, and fairness of closing costs. Furthermore, once the deed and other closing documents are signed, an attorney can make sure that these documents are appropriately executed and explained to everyone.
The closing process can be confusing and complex to the buyer and seller. Those present at the closing often include the buyer and seller, their respective attorneys, the title and/or escrow agent, an underwriter or loan officer for any lending institution, and the real estate brokers and realtors.
The tax consequences may be of critical importance to a home seller. For example, the income tax consequences of a sale, particularly if the seller makes a large profit, may be considerable. An attorney can advise whether the seller can take advantage of tax provisions allowing for exclusion of capital gains in certain circumstances. 041b061a72