Buying (or selling) a home can introduce many new legal concepts and uncertainties for a consumer. Often it can be wise to consult an attorney for legal advice in the process. However, a lot of advice we see from lawyers is counter-productive, often because the lawyers chosen have little or no experience with actual real estate transactions. A law degree does not equal real estate expertise. Here are some tips when introducing an attorney into your contract review process.
To start with, real estate agents are not lawyers and not authorized to practice law. I’m pretty sure this applies in all 50 states. While we can offer guidance and advice on negotiating a real estate contracts, there are many circumstances where the correct response from your real estate agent is “you should consult an attorney for legal advice.”
When you do consult an attorney, you should look for someone who has daily experience with real estate law and transactions. Many lawyers may list “real estate” in a list of unrelated specialties, but lack practical knowledge of how real estate deals actually come together.
- You paid me, so I had better edit something – I think many attorneys with marginal real estate experience will edit the contract as a means to show that they have added some value to the process. This doesn’t mean their edits are wrong or even bad advice, but sometimes it feels like they need to show that they did something for the $400 you just gave them and their edits don’t contribute towards your real goal, which is closing a transaction.
- Ignoring the practical realities of closing a deal – An attorney’s job is to advocate for you. Often they will make changes to a contract that are more favorable to the buyer, while ignoring that those changes are either not practical or not commonplace in the real estate market. For example, I’ve seen contracts come back with lengthened deadlines for 20 day inspections, which is way longer than needed and longer than sellers will accept.
- Changing lots of language in corporate contracts – If you are buying a home from a large builder, relocation company or a bank, they are going to provide you with their own contract language. Some of that language is going to be more favorable to the corporation and your attorney is going to want to change it. Your chance of getting detailed edits approved by a large corporation are slim to none. If Bank of America has standardized their contract for selling homes that they own, they use it thousands of times every day and your chance of getting their legal department to approve changes is low to non-existent. However, these are some of the more important contracts to have reviewed by a lawyer because of their custom language. The practical approach is to use your legal review to understand the risks of signing their contract, but realize you are not likely to succeed with edits.
There are some topics which scream for assistance from an attorney. If you are buying real estate with a group of people with a complex ownership structure, or if you are dealing with real estate issues during a divorce or estate sale, by all means seek legal advice. There are many other instances where legal advice is not only a good idea, it is critical.
Finding an actual real estate attorney is a bit of a challenge, as many generalist attorneys list real estate on their specialties. They may even have a strong background in real estate law as part of their studies. However, there is no substitute for the practical application of real estate law on a daily basis. You will find that a true real estate attorney is somewhat rare, and you may find that they are more costly than a run-of-the mill attorney.
Real estate attorneys can play a valuable role in a real estate transaction, but you need to remember that there are competing goals in a real estate transaction. You want your interests to be protected and want to engage in a deal that presents a minimum amount of legal risk. At the same time, you are negotiating with a seller who wants the contract to be most favorable to them, not you. By their nature, real estate contracts have to strike a balance between the two parties and have to acknowledge certain practical realities to getting a deal done. Your real estate contract is never devoid of risks, and often the best use of legal advice is to minimize those risks where you can, but also simply to understand the risks that you are taking when terms cannot be changed.