Buying or Selling a Home? Protect Yourself
Author: Murray EckellThe question constantly arises, for most individuals, whether or not a lawyer is needed when a residential home is being purchased or sold. Real estate agents and real estate brokers are, for the most part, honest, hard working and well qualified individuals who perform a very valuable service in assisting individuals with the sale of their home, and in finding a new home when that is the goal. Lawyers, on the other hand, are the only professionals qualified to deal with issues relating to the legal aspects of home ownership and sales which may include not only problems involving the real estate acquisition or sale, title issues, lien issues or environmental issues, but also related non-real estate issues such as tax consequences.
The retention of a lawyer to assist in the sale or purchase of a home should be looked at as an insurance policy to give the individual the comfort of knowing that should any problems arise which are beyond the scope of a real estate agent’s training, that a legal professional would be available to solve any problems.
Assuming, that you have concluded that it is prudent for you to retain a lawyer for your proposed real estate transaction, when should that lawyer be retained? Without a doubt, the most important time to involve a lawyer is BEFORE any listing agreement with the real estate agent or broker is signed, and certainly before any agreement of sale is signed either as a buyer or a seller.
A lawyer can be of assistance in reviewing a listing agreement with an appropriately licensed real estate agent to be certain that the seller is aware of limitations on their ability to terminate the agreement if they are dissatisfied with the agent’s services, or to extend the agreement if they are satisfied with the services, even though a sale has not yet occurred. For selling individuals, it is critical for the lawyer to examine how the agent is to be compensated in the event there is a default by a buyer who has paid a deposit that is being held in escrow. An issue often arises when the seller retains that deposit, what portion of it is appropriately paid to the real estate agent as compensation for the failed transaction. This is a particularly important issue where the seller incurs legal fees and costs in any proceedings involving the return of the deposit. The seller pays the legal expenses, the realtor does not, but depending on how the listing agreement is framed, the seller could wind up with little or no part of the deposit and the selling agent could receive his share without any attending liability.
Returning to the subject of when to retain a lawyer, it is even more important to retain the lawyer before the agreement of sale is signed than it is to have the lawyer attend settlement. The reason for this is simply, everything that occurs at settlement is controlled by the agreement of sale; and the agreement is the document that either presents problems or avoids them. At settlement, the lawyer’s responsibility is to see that every requirement in the agreement of sale is fulfilled. Additionally, at settlement, if it is a buyer’s transaction and it involves a mortgage, the lawyer will review and advise the buyer concerning the compliance of the mortgage documents to the original mortgage commitment issued by the lending institution. Many times when the loan documents do not comply with what the lender originally agreed to provide to the buyer; and absent a lawyer representing the buyer, such non-compliance would most likely be unnoticed.
Competent real estate lawyers will always check the legal description to see that it properly “closes”. That is to say, examine the legal description to be sure it does not contain any errors which falsely describe the property. This is important because title insurance policies have been known to exclude coverage of legal descriptions.
The above is just a brief and preliminary survey of issues which need to be handled by a lawyer should they arise. It is by no means, a complete analysis of all possible problems. Other issues are, for example, environmental issues, boundary disputes, condominium issues, and an explanation of how condominium living is different from traditional ownership issues as well as potential insurance and tax problems for which only the lawyer is competent to advise and resolve. Retain the lawyer first, then seek to sell or buy real estate.
About the Author: Murray Eckell is Chair of the Residential and Commerical Real Estate practice of Eckell Sparks. the legal team of the real estate department of Eckell Sparks helps clients in Delaware County and across the Philadelphia metropolitan area with their personal and business real estate matters. Eckell Sparks also represents real estate agents, brokers, appraisers, and real estate companies. Contact Eckell Sparks today to discuss your real estate needs.