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A lawyer who specializes in real estate can ensure the legality of a property transaction, review and explain the documents involved, resolve conflicts and, most importantly, keep you from making costly mistakes. Here’s more on a real estate attorney’s role, who the attorney represents, expected costs and how to find one you can trust.
What does a real estate attorney do?
A real estate attorney specializes in matters related to property, including the buying and selling of homes, ownership, management, compliance, disputes and title issues. In a transaction, they also ensure that the agreement for their client accurately reflects their understanding of the deal, explains attorney Elizabeth Whitman, managing member of Whitman Legal Solutions in Potomac, Maryland.
To accomplish this, a real estate lawyer has several responsibilities, says Bruce Ailion, who is both an attorney and a Realtor with RE/MAX Town & Country in Atlanta.
These services can include:
- Confirming that ownership is appropriately vested in the seller of the home
- Identifying any unpaid loans, liens, litigation or other claims against the property and working to clear them, as well as uncovering deed restrictions and covenants and any breaks in the chain of title
- Arranging for title insurance
- Negotiating as well as reviewing the real estate contract to determine how money will be allocated
- Preparing the deed, disclosures, the mortgage or note to secure debt following the mortgage lender’s instructions and explaining the terms to their client
- Searching for obligations like taxes, utility charges and homeowners association fees, and prorating them based on how they were allocated in the contract
- Preparing a settlement statement showing the funds from the buyer (or provided on the buyer’s behalf) and the charges to all parties involved, such as agent commissions, attorney’s fees, underwriting fee, taxes, title search fee, loan discount points and more
- Facilitating the closing and potentially hosting the seller and buyer to sign documents and collect official identification
- Confirming that the parties have fulfilled their obligations under the contract and assisting with conflict resolution
Real estate attorneys can also provide valuable advice to a buyer and seller engaged in a for-sale-by-owner (FSBO) transaction. In this scenario, the lawyers can draft and review the purchase contract and help shepherd the transaction to closing.
Who does a real estate attorney represent?
There are typically a few attorneys involved in a real estate transaction: one representing the buyer, one representing the seller, one representing the mortgage lender (if financing is involved) and potentially one representing the title company.
“One real estate attorney cannot represent both the buyer and the seller at the same time,” says Whitman. “In most home purchases, it’s common for at least the buyer to have a real estate attorney. In some states, an attorney must be involved in at least part of a real estate transaction, usually to address title or deed issues.”
When do you need a real estate attorney?
Both buyers and sellers can benefit from hiring a real estate attorney, whether the transaction is related to a home for personal use or an investment property. Investment properties in particular “involve tax considerations that most buyers and sellers aren’t equipped to handle on their own,” says Whitman.
Many states actually require that you hire a real estate attorney, at least to assist with closing duties. These states include:
- Maine (you may be able to hire a title company instead of an attorney)
- New Hampshire
- New York
- North Carolina
- North Dakota
- Oklahoma (required only for title examination)
- Rhode Island
- South Carolina
- West Virginia
Whether mandated or not, however, a real estate lawyer can be an invaluable ally, particularly for the buyer, says Shavon Jones, an attorney based in Miami.
“There are many risks involved with forgoing the services of a real estate attorney,” Jones says. “I’ve had people come to me when deals fall through, fighting over the deposit money or who’s going to pay for a leaky roof or crack in the foundation. I’ve had sellers receive better offers and look for ways to back out of the agreement they signed with the current buyer, too.”
If you do plan to work with an attorney, enlist him or her well before you sign a purchase agreement. “Many sellers and buyers wait until after they have signed the purchase contract to hire an attorney, but by then they may have committed to unfavorable contract terms that the attorney could have helped them with,” says Whitman.
When hiring an attorney, be clear about exactly what you want them to do (for example, help you draft an offer). Also, ensure you understand what their caseload is like with respect to handling yours in a timely manner, how they bill and what they bill for.
How much does a real estate attorney cost?
The cost of a real estate attorney varies depending on the amount of work required, the lawyer’s level of expertise and their location. Most attorneys charge an hourly rate, but some might agree to a lower flat rate if they have only a limited role in the transaction, says Whitman. There are some attorneys who strictly handle closings, typically for a fixed fee.
“For soup-to-nuts representation on a small home purchase, including transactions that don’t involve a real estate agent, look to spend about $2,500 to $3,000,” Jones says. A real estate attorney hired to simply review and edit a contract might be had for around $500 or so, she says.
In the Atlanta market Ailion serves, an attorney’s fee typically ranges from $550 to $1,150 for a standard closing. If the transaction involves complicated title issues, that fee can increase to $195 to $595 per hour.
“In some cases, the attorney might end up charging significantly less money than the typical 6 percent sales price commission that you’d otherwise pay to a real estate agent,” adds Jonathon Byington, a commercial law professor at the University of Montana.
No matter how much your attorney charges for services, you’ll be expected to pay the fees either before or at the closing.
Should you hire a real estate attorney?
Because a home is such a large financial commitment, there are inherent risks. While going without an attorney saves you money now, there could be costs or losses down the line.
“People who don’t hire an attorney risk contract revisions that aren’t in their best interests, errors in their mortgage loan documents or title or survey problems that aren’t covered by title insurance,” says Whitman.
“If the transaction is complex, it’s never a good idea to engage in this deal on your own, as the risk of loss is too great,” says Ailion.
“In one case, a couple was attempting to purchase their first home — a historic house that originally was built without a bathroom,” recalls Whitman. “When they received their survey, they learned that part of the only bathroom in the house was built on the neighbor’s property. A real estate attorney was able to address the situation so that the buyers wouldn’t have to worry about their neighbor or the local zoning officials requiring them to move their bathroom.”
In another scenario, a different first-time buyer didn’t receive all of the condominium documents from the seller as required by state law. “The attorney identified the problem and requested the additional documents,” Whitman says. “After reviewing them, he saw that the condominium association was underfunded and that condominium fees would need to be significantly increased soon. The buyer was able to use this information to negotiate a reduction in the purchase price.”
How to find a real estate attorney
Ask for referrals from family, friends or coworkers, or ask your real estate agent for a recommendation. You could also contact your state bar association or a local title company, or do a simple Google search (albeit with proper vetting), Byington says.
Screen at least a few real estate attorney candidates carefully with the following questions:
- Are you experienced in this type of real estate transaction?
- How many real estate deals have you closed in the past year?
- Are you a member of the real estate section of your local bar association?
- Which title insurance company are you authorized to represent?
- Are you on the approved attorney list for closing loans for several large banks?
- How much do you charge, and is this a flat fee or hourly rate?
- Is there a difference in what you charge for an all-cash transaction versus a financed transaction?
- What is your availability? Are you available on weekends (generally when the buyer is house-hunting)?