Getting Homebuying Assistance from Real Estate Attorneys

 

Buying real estate without an attorney is similar to representing yourself in a trial without an attorney: it happens, but it’s not very smart.

In fact, many lenders will refuse to proceed with a purchase closing unless you have attorney or legal representation.

Some buyers may resent this, as they sometimes perceive the attorney as doing very little for an often hefty fee.  However, this is a misconception, and the real estate attorney is the buyer’s most loyal agent and protector—or at least should be.

A good real estate attorney will cost you an average of $350-$700 for an average home-purchase closing, and they do earn it.  Attorneys and the services they provide are crucial for all buyers.

• Review the sales contract
• Review loan disclosures
• Monitor contingency dates
• Obtain & analyze title
• Arrange closing
• Review preliminary closing figures
• Prepare buyer for closing
• Review closing documents & final negotiations

So when should you get an attorney?  It’s a good idea to at least select an attorney prior to making an offer.  You will not have to sign any papers or go through lengthy discussions until you have selected a property.  However, the negotiation and contract phase will proceed more smoothly when you have someone you can consult immediately.

Review the Sales Contract

The first task that your attorney will perform is review the purchase contract you have just agreed to and signed with the seller.  You do not need to have your attorney’s approval before you sign a purchase contract — as long as the contract contains an attorney review clause.

Standard purchase contracts will contain an attorney review period, usually of five business days.  During this attorney review period, your attorney can propose and push through modifications to protect your interests or increase your advantage.

If there is one thing you should confirm before signing the purchase contract, it is that you should make sure that your contract has this clause before you sign it.

After this attorney review period, further modifications may prove difficult if they require much effort or expenses from the seller.

Review Preliminary Loan Disclosures

During the loan application, you will receive and acknowledge several disclosures, in addition to completing the application form.  You will receive copies of the two most important disclosures: the good faith estimate (GFE) and the Truth-in-Lending (TIL) disclosures.

You should immediately forward copies of these two disclosures to your selected attorney.  Your attorney will review these disclosures for potentially adverse terms and any unusual charges or fees that you may be charged.  Although your attorney has limited influence over the final loan approval, most lenders will at least listen to and consider any concerns expressed by your attorney.

Monitor Contingency Dates

The purchase contract will contain several important “contingency” dates, which are deadlines for certain actions that must be performed by the buyer, seller or related parties.  For example, the purchase contract will normally have a closing contingency date by which time the purchase transaction must be finalized.

Your attorney will be responsible for monitoring these contingency dates.  Extensions often can be obtained with a request from your attorney to the seller’s representatives, when certain deadlines cannot be met.  However, unless the buyer’s attorney requests such extensions prior to the contingency dates, the extension will be difficult to obtain.

The primary contingency dates your attorney will be monitoring include the following deadlines:

• Attorney review. The buyer’s attorney must propose any modifications to the purchase contract within the attorney review period.
• Mortgage contingency. A mortgage loan approval must be obtained within the mortgage contingency period.  If the applicant is denied for loan financing, the purchase contract may be canceled and the buyer can retrieve any deposits made.  However, if the buyer cannot obtain a mortgage loan and the mortgage contingency was not extended or observed, the seller may retain the earnest money deposit.
• Closing date. The buyer’s attorney must ensure that the transaction will close within the specified date.  If it cannot be accomplished, the buyer’s attorney must request an extension or risk forfeiture of the buyer’s earnest money deposit.

Obtain and Analyze the Preliminary Title Insurance Commitment

The seller’s attorney will be responsible for providing a preliminary title insurance commitment, which is the initial guarantee of clear title to the subject property.  Your attorney will review the preliminary title report and insurance commitment, to ensure that it will be clear of unnecessary easements, encumbrances and restrictions for legal transfer.

If there are any problems with the property’s title, your attorney will instruct the seller’s attorney to have those issues resolved prior to the closing.

Note that in some cases, the seller’s attorney will not order or provide the title until he or she receives a mortgage loan commitment from the lender for the buyer.

Arrange Closing

The seller’s party normally has the prerogative to schedule closing; however, they usually will consult your attorney prior to scheduling the actual closing.

Your attorney, in turn, will consult with you before scheduling the closing.

The closing is normally conducted at the offices of the title company selected by the seller’s attorney, although it sometimes happens at the offices of the lender or one of the attorneys.  Both attorneys usually will forward their preliminary figures to the closing agent prior to the closing, so that the closing agent may begin with closing preparations.

Review Preliminary Closing Figures

Prior to the closing, your attorney will receive a preliminary settlement statement from the closing agent.  This settlement statement will preview all the funds required from all parties, payments and disbursements that will be conducted at the closing.

Your attorney will compare these figures with the preliminary application disclosures received from the buyer and lender.  If there are any major discrepancies that were not previously discussed, you and your attorney should discuss possible remedies with the lender or service provider.

Prepare Buyer for Closing

Once the closing has been scheduled, your attorney will usually begin preparing you for the closing.  By this time, you should have already obtained hazard insurance coverage.

Your attorney will instruct you to obtain a cashier’s check for the balance of the down payment, closing costs and prepaid expenses, based on the preliminary figures provided by the closing agent.  Your attorney will normally inflate the amount required, so as to cover additional expenses that may arise at the closing.  If your funds are too much, the closing agent will reimburse the surplus immediately at the closing.

In addition, your attorney will assist you with the final walk-through inspection.  You are typically entitled to a final inspection of the property immediately before the closing.  This inspection is merely to ensure that the property is in essentially the same condition (as originally inspected), no fixtures have been removed without authorization and that all required repairs or improvements have been performed.

If problems arise from the final inspection, your attorney will handle negotiations with the seller’s representatives.

Review Closing Documents and Final Negotiations

At the closing, your attorney will review each of the dozens of legal documents and disclosures that you must sign.  As each document is reviewed, the attorney will explain its contents and significance to you prior to having you sign the document.

Your attorney will also review and approve the final transaction figures, to ensure that you will receive all necessary credits and prorated payments and to avoid any unnecessary charges.

Sometimes, the closing will entail additional negotiations between you and the seller ― and your respective attorneys. For example, if you discover problems or issues (such as missing fixtures or newly damaged items) during the final walk-through inspection, your attorney will negotiate for compensation from the seller ― instead of cancelling the purchase.

 

Go to next HomeBuyer Guide chapter: “13. Negotiating Your Purchase”