Do You Need A Real Estate Attorney To Buy A Home?

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November 18, 2020

An important aspect of the homebuying process is making sure you assemble the best team possible. While most homebuyers focus on choosing the right agent, it’s also a good idea to hire a real estate attorney. We spoke with Matthew Kobelski of Credentials Title & Escrow to explain why buyers need a real estate attorney and the pitfalls of skipping this step. 

What does a real estate attorney do?

A real estate attorney is tasked with making sure you’re protected during the homebuying process. In addition to negotiating contracts, they’ll safeguard your interests and uncover anything that may cause an issue with the sale. 

“We are going to take the worst case scenario and work backwards,” Kobelski explains. ”To make sure that doesn’t happen and protect you as much as possible and outline your risks.” He adds that a lawyer’s main role is risk assessment. Afterall, purchasing a home is typically the most expensive investment people make in their lives and not one that should be made hastily.

Do you have to hire a real estate lawyer?

Those purchasing a home in cash are not required to have a real estate attorney, but it is strongly advised. Just because you can forgo hiring a lawyer doesn’t mean you should. Skipping this step in the homebuying process opens you up to greater risk.

If you are financing your home through a mortgage lender or traditional bank, they will require you to hire a real estate lawyer. This is because all lenders require title insurance and will want to make sure the title is free from dispute.

“Title is making sure you have free and clear ownership of the property without other people staking a claim to it,” Kobelski explains. “We make sure you are not buying a lawsuit.”

While you may be pretty optimistic that nothing will go wrong, occasionally things do and you’ll want to be protected. Case in point is a previous client Kobelski worked with. The client had purchased a property with a newly built home. Initially, they were unsure about getting title insurance, but he convinced them it was the right thing to do. 

Although the building was new, the land it was on had been deeded out to six people in 1918. Four heirs were tracked down and two hadn’t been heard from. Since the other two heirs hadn’t surfaced to claim the land for over 100 years, the insurance company went ahead and issued the policy. Sure enough, after closing, the two missing heirs surfaced and sued for the full amount of the sale, now valued at half a million dollars. Luckily the insurance company was able to settle the dispute out of court. Had the clients not followed Kobelski’s advice, they could have lost their entire investment. 

“It’s like health insurance,” Kobelski says. “You wouldn’t want to get in an accident and not have health insurance and rack up millions of dollars in medical bills you can’t afford. It’s the same with your house. Most people’s entire bank accounts are in their homes.”

 A great attorney will conduct due diligence

While buyers may be aware that attorneys are responsible for negotiating contracts, the attorneys role also involves a ton of research on the property. They’ll analyze any financial or legal risks buying the property may pose. This is called “due diligence.” Some of the things they do include:

  • Researching the title: As illustrated in the example above, attorneys play a vital role in ensuring buyers can assume the title free and clear, not just from previous owners, but from mortgages, judgments, executions, and mechanic’s liens that could be costly. 
  • Condominium (or Co-op) document review & budget: If you’re buying a condo or co-op you’ll need to assess the building’s financials. “When dealing with the condominium association,” Kobelskii says. “We need legal certificates stating the condominium fees are paid in full. Because you don’t want a buyer purchasing a property where there’s $10,000 in condominium fees still owed on it when they buy it. Part of the due diligence is also looking to see if the condominium has any upcoming assessments for common area work.” 
  • Municipal bills: Another important task is making sure all taxes for the property are paid, in addition to the water and sewer bills. Is it a septic system? An attorney will check that it has a proper validation and clearance from the state.
  • Recording the deed: Also known as the “Conveyance Attorney,” real estate lawyers are responsible for recording deeds and disbursing funds to sellers and mortgage companies. They hold “escrow” which is all the money in the transaction, and assure the property is properly owned by the buyer before paying the seller.

“We work through a checklist and make sure every transaction is specific to that type of property and meets all the regulations required to make sure the buyer knows what they’re getting into,” Kobelski says.

Don’t wait until you’re ready to close to hire an attorney

Typically homebuyers don’t bring a real estate attorney in until they’re ready to close. Jumping in too soon without consulting an attorney could lead to complications closing the deal.

If the offer to purchase is already signed without an attorney’s review, you could miss mistakes written into the contract or be on the hook paying for a home way over market value, because there was no appraisal contingency. 

Most loans will require that the property is actually worth what you’re paying for it. Lenders are much more strict when it comes to appraisals because they want to know that they’re giving a person a loan for the value of the property. 

“Right now is one of the busiest times I’ve seen in real estate,” Kobelski says. “Buyers are outbidding each other over and over. The problem with that is they are bidding more than the bank may lend them and they’re getting themselves into trouble. They need to be careful with how the contract is worded and make sure they speak with the lenders as well as the attorney to make sure that their timelines are correct, because you cannot obtain a mortgage in a week.”

What to look for in a real estate attorney

Having a good attorney can greatly improve your homebuying experience. Here are the most important attributes Kobelski says you should look for when hiring a real estate attorney.

  • Responsiveness: Real estate is a very fast paced industry. From start to finish, it’s about 30 days to close on home. You’ll want an attorney that can easily handle the pace, field your questions, and adapt to any changes relatively quickly. 
  • Thorough and detail oriented: It’s important that the attorney does their due diligence and not just sends out boilerplate documents and contracts. Good attorneys will spend time on each contract, carefully reading through each paragraph to make sure everything is correct and that nothing is amiss.  

Most importantly hiring a lawyer is not the time to cut corners. As the saying goes, you get what you pay for. Kobelski notes that there’s a big difference from paying a few hundred dollars to close the deal versus spending more for someone who is going to take the time to make sure you are adequately protected. 

“It’s worth the money in the beginning to not have to pay a lot more in the end,” Kobelski advises. 

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