Real Estate News

QUESTION:  WHY USE A REAL ESTATE ATTORNEY?

ANSWER:  BANKS!

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In years past, generally speaking, it used to be that buying and selling real estate fell into two categories, 1) straight-forward negotiations, a clean record title of ownership and a nice smooooooth closing; and 2) those transactions which had “issues” – quite often, they were very ugly and convoluted issues.  Fortunately, the second category was usually the exception.

However, as the daily headlines remind us, we now must navigate through the complexities of a market that consist as much of traditional sales as it does of bank-owned properties and short sales.  In today’s market, negotiating and closing transactions are as likely to be fraught with issues and hidden liabilities as they are to be clean and uneventful.

Simple and straight-forward transactions with banks are rare.  Where the property is owned by the bank, negotiating the agreement may involve a basic “As-Is” agreement, however, sorting through the property’s “Toxic Title” to ensure marketability and proper transfer is very complicated.  And should the property be a short sale, banks are both the first and last obstacles in negotiating the contract and closing the sale; not to mention the possibility that the mortgage insurance company enters the equation and insists upon a promissory note from the seller for some percentage of the “short” payoff.

Buying and selling real estate is the single most important transaction that occurs for many people in their lifetime, and over the past two years, it just became far more difficult to realize and far more complex in light of potential hidden risks and liabilities.

Now more than any time in the past, a real estate attorney is a vital member to your team that will help the client understand the legal consequences of these risks and liabilities.  A real estate attorney on the team plays the very important role to:

1. Provide legal advice on the contract and ensure that provisions and contingencies related to the bank are in order.
2. Review the “Toxic Title” and require appropriate legal remedies to ensure marketability.
3. Provide legal advice on what the title policy does not protect against, emphasizing marketability of the title when the client sells.
4. Negotiate with the bank and the mortgage insurance company the terms and provisions of appropriate releases and waivers.
5. Prepare, review and provide legal advice about the documents necessary to close – i.e. deeds, mortgages, satisfactions, releases/waivers (in short sales) and closing statements.
6. Assume the liability related to providing the above services; liability which other members of the team should not have to bear.

So, the question of whether to refer a client to a real estate attorney is not one of economics, for most attorneys will perform the closing services at virtually the same costs. The real question is who best can:

• Advise the client on legal rights, obligations, consequences arising from the purchase contract and related agreements with the banks, and ensure the client’s interests are fully protected;
• Recognize legal issues and title problems; and
• Promptly address these problems and quickly find solutions in order to make sure the deal closes.

The costs of not using a real estate attorney or engaging an attorney too late in the process (i.e. in the middle of a transaction to resolve an unanticipated problem), may be loosing the sale altogether and the parties having to engage in expensive litigation.