Are you considering the sale or purchase of real estate, whether it be residential or commercial? There are many reasons why you should use an attorney to assist you through the process. Let us take a look at some of these reasons.
The purchase of residential real estate may be well the largest purchase, and investment in property, that you will make during your lifetime. Likewise, the purchase of commercial property on which to locate an operate your business may well be the most significant decision that you will make which could determine the success or failure of your business. Entering into such transactions involves financial and legal commitments and obligations which can be unfamiliar because of the infrequency with which they occur yet have deep and long-lasting impact because of the length and expense of the commitment. It should be obvious that using an attorney or other expert having familiarity with aspects of the transaction is justified to produce the best possible outcome!
The Listing and Purchase Agreements
The real estate transaction typically starts out with a listing agreement between the seller of property and a realtor or broker who will list and market the property for sale, or an agency agreement between a buyer of property and an agent selected to assist the buyer with location and purchase of the property. Because there are many forms and variations of the contract or engagement between the parties involved, it is usually best to study or consult with an attorney to have at least a basic understanding of the rights and obligations of the parties to such agreements. For example, in the case of a listing agreement, consider the following:
Who is the broker representing in the transaction?
What is their role or duties?
Is it an exclusive listing/agency?
What is the length or term of the agreement?
Are there any performance requirements which might allow for rescission of the agreement if they are not met?
Understanding the listing agreement and how it may affect the course of the transaction is an important part of producing a satisfactory result.
The purchase agreement is the single most important document in the transaction. It sets forth the rights and responsibilities of the parties for the entire transaction through closing. It is a contract and may be enforced in a court of law if material terms and conditions are not met by one or both of the parties. Most purchase agreements for the sale and purchase of residential property will be prepared using standard forms with some modifications to fit the circumstances. In the case of commercial property, customized or more specific agreements may be needed because of the unique circumstances of the property and the parties. In either case, using an experienced attorney to recognize, anticipate and address various aspects of the transaction can help to avoid or minimize serious problems which could arise, whether expected or unexpected. For example, what happens if there is a delay in closing, or a delay in obtaining loan approval? What happens if a lien has been filed against the property by a creditor? Many of these contingencies and how to deal with them may be addressed in the Purchase Agreement. Other issues to consider might include:
If the property has been altered or there has been an addition to the property, was it done lawfully?
If the buyer has plans to change the property, may it be done lawfully and in accordance with regulations and ordinances?
What happens if an inspector retained by the buyer discovers defects in the property, such as termite or insect infestation, black mold, or lead-based paint?
What are the legal consequences if the closing does not take place as planned, or does not take place at all- is the deposit returned or refundable?
These and other issues may arise during the transaction and, depending on the wording or language used in the purchase agreement, the rights of any party to the agreement may be affected.
Title Search and Commitment
After the purchase agreement is signed it is necessary to establish the state of the seller’s title to the property to the satisfaction of the buyer, and to the financial institution that may lend money to the buyer to complete the purchase. To accomplish this, the purchase agreement will typically provide that seller will provide a title commitment to the buyer following a title search, which is a search of the public records to determine the condition of title to the property. The title commitment is a promise that a title insurance policy will be issued which provides the buyer with some guaranties and warranties that the buyer will receive good and marketable title to the property following closing. In some areas, title insurance is not available and an attorney should be engaged to review the status of title and issue an opinion concerning its condition. In either case, an attorney should be used to review the title search and help understand the coverages and exceptions to coverage afforded by a title insurance policy. Just some of the issues that could arise and may be addressed in such a review include whether there are issues or disputes involving boundary lines, whether there are easements, restrictions or agreements which affect the use of the property, and whether there are liens or other encumbrances on the property. More-so in the case of commercial property, it may be necessary to review zoning ordinances and regulations as they pertain to the expected use of the property.
The Closing
The real estate closing brings all interested parties together to consummate the transaction. It involves the execution and delivery of all necessary documents simultaneously with payment of the purchase price and settlement of all closing costs for the transaction. But the closing also includes the final review and settlement of all phases of the transaction: financing terms and conditions between lender and buyer, examination of title and resolution of any title difficulties or disputes, completion and explanation of legal documents, and arrangements for exchange of physical possession of the property. The role which a closing attorney may fulfill at this stage of the transaction may vary depending on the party whom the attorney represents, as follows:
For buyers, attorneys:
Review and negotiate the specific terms of contracts;
Help assess financing options and explain loan terms;
Review and Evaluate all legal documents, such as deed, title policy, mortgage, survey, closing statements and seller disclosure documents;
Attend the closing, if necessary and make sure tile is transferred;
Scrutinize charges to make sure that they are consistent with estimates and agreements; and
Provide advice and consult if any problems or disputes arise.
For sellers, attorneys:
Review and negotiate the specific terms of contracts;
Request title searches, surveys, mortgage payoff letters, condominium documents and all other documents necessary for the closing;
May prepare the deed and other closing documents (if not done by the realtor or title insurance company)
Confirm closing arrangements;
Attend the closing and ensure that funds and title are transferred;
Review charges for consistency with estimates and documents;
Provide advice and consult if any problems or disputes arise.