It looks quite simple when people decide about buying a property. In a typical deal, sellers contact a broker and give him or her authority of selling property in the form of a written document called brokerage contract. Broker starts searching for a potential buyer and negotiates with them acting as an intermediate party. Once the buyer gets satisfied with the property and shows intention of buying, the broker arranges an all-party meeting where rest all issues get discussed on the table.
After an informal deed, the broker prepares a formal contract known as purchase agreement. Buyer arranges the required amount from his sources or finds a suitable financer. After paying total purchase price the property gets transferred to the buyer. It looks quite simple and straightforward, but there are many slips between the cup and the lips. The consequences of a bad deal could be more severe than a stock investment that didn’t come out profitable or an automobile that turned out to be a lemon. Hence, experts suggest hiring an expert lawyer before the buyer and seller move forward for the deal.
It is a fact that buying a property isn’t a small decision. In some cases, it is the biggest financial dealing a person gets involved into. There are various intricacies and complications of the law that are transparent to not only buyers and sellers, but for brokers as well. A real estate lawyer is an expert of his field and possesses a vast knowledge of handling a variety of sales/purchase contracts. Some people refer them as “real estate specialists”, not real estate lawyers.
The plus points of hiring an expert lawyer
Hiring a lawyer at the first stage of property dealing is incredibly helpful in avoiding unpleasant disputes at a later stage. Inadequate knowledge and incomplete information may lead to critical legal complexities that take a long time to deal with it.
Using right formats: In the majority cases, realtors use standard formats in an anticipation of covering all salient features. However, it doesn’t solve the purpose because legal agencies need specific formats. Similarly, brokers sign a brokerage agreement without covering all necessary clauses. Sometimes, the contract omits a few common legal complexities. Hiring a lawyer ensures that right formats are being used for the right purpose. If the deal is happening across the states, then it becomes more critical from a legal compliance perspective.
Avoiding ambiguity: Sometimes brokers formulate contracts in such a way that their interests get fulfilled even if the deal gets through or not. For example, the seller becomes liable for payment even if the deal doesn’t happen. Lawyers know about all these tricks and hence, they dictate for changing ambiguous clauses conflicting with the interest of sellers or buyers. They deal with the disputes and handle the matter amicably.
Dealing with tax liabilities: Lawyers may not be a party during negotiations, but they are quite helpful while dealing with tax liabilities. Income tax consequences of a sale, management of profit, ways of claiming tax exemption, etc. are the areas where none other than a lawyer is helpful. A lawyer suggests investment options for avoiding tax liability on capital gain by investing in the right way.
Handling intricate aspects: People think that sales or purchase agreements are simple documents with standard formats. However, there are many hidden things that a buyer or seller can’t manage. A lawyer can add or modify existing clauses with respect to a particular deal. For example, he checks that whether there are any alterations to the original property. If yes, then has it been done lawfully? Are there any hazardous wastes in the property? Are there some portions of the property that may become a risk of life to the buyer? What if the deal does not get through? What will happen to the advance amount then? What will be the mode of payment? Like these, there can be various other complexities that only an expert lawyer can do it effectively.
In most of the cases, buyers arrange funds by a lending agency or by mortgaging the property. The purchase agreement has to be worded carefully that the mortgage is valid only when the buyer is obtaining a commitment for financing. A lawyer can only look into it carefully so that there is not a smallest loophole that goes against the seller. The pre-printed forms are not appropriate because of their inability to incorporate all practical scenarios. A lawyer drafts a comprehensive document covering all such aspects.
Title search is the most critical process for the satisfaction of financial institutions. Title insurance companies order for a title search in general. However, in some states title insurance is not a mandatory thing. Hence, a lawyer is essential for reviewing the status of the title and renders his or her opinion. The lawyer is capable of reviewing the title search and explaining the exceptions if any. He looks at the restrictions imposed by earlier owners as well. He can look at minute aspects of zoning prohibitions or modifications in the property that may violate zoning ordinance by earlier owners.
A lawyer prepares closing papers, and the title gets transferred when buyer pays the amount fully. Closing statement indicates that the deal has been over, and no party owes any claim from each other. A comprehensive closing statement eliminates possibilities of disputes regarding delivering possession of the property, various cost adjustments, etc. If there is no lawyer in the deal, then complexities may arise at the eleventh hour.
The most important role of a lawyer in the deal is managing the conflicting interests of all concerned which may odd with each other. Though a broker is a third party, he always takes care of seller’s interests. A lawyer hired by the buyer maintains the balance. In the case of legal complexities or unforeseen circumstances, he can take lead and offer guidance for reaching a common understanding. It is the reason experts suggest hiring a lawyer before purchasing a property.