Why You Need An Attorney For Real Estate Settlements
In this 4 part series, discover the 10 reasons why an attorney can save you time and money when purchasing real estate.
Part One – Reasons 1, 2 and 3
Just like Santa’s elves, after Thanksgiving real estate attorneys are busy. Money is cheap now and people realize that refinancing saves money. When speaking to my colleague, he confirmed that because money is cheap, he’s been busier now than in the last 10 years. Additionally, more people work from home due to COVID and many are finding that they no longer need to live in Manhattan, DC, or other expensive major big tax cities as long as they are connected to Wi-Fi and are wearing a suit and tie from the waist up. Welcome to the new world.
But with these settlements come many potential pitfalls. For example, you leave your brownstone in Williamsburg, NY, and move to the lovely countryside of Pennsylvania. You don’t know anybody there except for your realtor and you found her on the Internet. What you do know is the 1,000 square-foot charming pied-à-terre you had in Brooklyn, when sold, will buy you 5 acres, five bedrooms, 5,000 square feet, and perhaps a swimming pool. It’s like the iconic TV show, “Green Acres.” Trading Times Square for fresh air, the stores for the chores. It’s not for everybody, but my friend, the attorney who does real estate settlements, says that in the last three months New York, New Jersey, and Connecticut are 90% of his settlements. High taxes, low services, and unrest in the streets versus pastoral countryside. Many people are finding it an exceptional deal in more ways than one.
Getting back to the sole person you know in PA – the realtor. Where does that leave you? Real estate business is referral based, and though not overt, realtors get a type of kickback from the lenders and mortgage brokers. This is all above board. Here’s an example. When you contact the mortgage broker, they will, almost certainly, have a lenders title company and a homeowner’s insurance company ready for you. Federal law prohibits a direct kickback (cash) paying for a referral, so to help out the realtors who bring them the lending business and to get around the law, one of those companies might pay for the Zillow listing or make her the exclusive person in other social media advertising. Lenders and brokers sell to realtors, not you. Mortgage brokers don’t have a business unless realtors sell houses. So, those teams help pay for advertising, premier placements or even create an office for them in their own offices to help defray costs of doing business.
As a consumer, you are entering a world where everyone has a relationship with the realtor. You will get passed to all of their contacts. In turn, those contacts are loyal to the realtor. So, who is looking out for you? The realtor wants to get the deal done because that’s how she gets paid. “Say yes! Don’t worry about all that boilerplate. It’s just forms! That’s just standard contract language.” You get it.
The question remains: who’s looking out for you? Nobody just yet. Because of this here are the first three reasons that you need an attorney for real estate settlements.
Reason One
A knowledgeable and ethical attorney will have your best interests at hand.
Your attorney during the transaction will say no to something that isn’t in your best interest. This real estate contract needs to be tailored to your situation and your best interests. An attorney working for you knows the nuances of your sale or purchase and what he must look out for to make sure your interests, your money, in your real estate deal has no hiccups or unknowns that will come back and bite you. Many mistakes are made without malice, just lack of knowledge. How are you as the consumer going to know what’s missing or what’s not in your best interest? Probably you won’t because you don’t do real estate contracts every day. When you have had a consultation with your real estate lawyer, the one who works for you, she will know what to ask to determine how to look after you and your best interests. A realtor, albeit well-intentioned, doesn’t know the law and how it can impact you. This is the first reason you need an attorney for real estate settlements.
Reason Two
An attorney will know the local law.
Yes, realtors have to take an exam and get a license. However, when you start asking realtors about zoning laws, environmental regulations, home owners association rules, they often do not have a clue. Often new construction requires all kinds of municipal variables that realtors don’t understand. Sometimes you need a variance that requires an additional court filing and maybe a hearing in said court. That requires a solid knowledge of the local law, which a local real estate attorney will have. The law is very complex.
Back in the day, there were general practice lawyers like there were general practice physicians. Now, the concept of an attorney that can be all things to all people is pretty much gone. There are just too many different aspects of the law for any one attorney to remain continuously current in. So many attorneys tend to practice in one or two areas. A criminal lawyer defends you, a tax attorney keeps the IRS happy, and that family law attorney writes your prenuptial agreement to protect the assets you have going into the marriage- not an attorney who specializes in elder law. Makes sense, right? So why would you trust perhaps your greatest financial purchase to an attorney without the body of knowledge to advise you properly? That most definitely makes no sense.
Enter a real estate attorney. One who narrows his practice to real estate work knows the right questions to ask. Such as, is your main purpose for buying this property for it to become your primary residence? Do you intend to expand the property? Will you build an addition? Are you going to use your basement or maybe a garage as a dog grooming studio or a hair salon?
Someone who is advising you needs to know the laws of the community in which you are purchasing. What happens if you buy this house and then find out that in your Township there can be no additions to an existing property? Or, what if you are not allowed to have that dog grooming studio or hair salon? What about setbacks from the road? What number of vehicles will be allowed to be parked in your driveway? Are you allowed to put up a fence for all your dogs? Let’s say you buy the property without a real estate attorney. After closing, you discover that a permit for a fence is $800 plus the cost of the fence plus the cost of potentially having a hearing over obtaining permission to build the fence. Then, the Township says no fence on your property, now what do you do?
In addition, some states don’t survey, others do. Who then determines the boundaries? Some states survey before a property is sold. What do you know about the boundaries of this property and how this could affect you? Does someone have a right-of-way to use it, and if so, what for? Maybe to bring all the cement trucks for their business back to their barn every night? Not particularly the sounds you want to hear while you’re enjoying relaxing in your hot tub on your deck. These are things that you need to know and understand, and a real estate lawyer who understands the local laws is a wiser choice than a realtor who may only have basic knowledge of the area where you want to buy your forever home.
Reason Three
An attorney will look out for your financial options.
While you are thinking about everything while in the midst of purchasing real estate, you will go from one referral of your realtor to another, including what financial institution to use. No one looks at these financial institutions or the different interest rates therein. The focus of the realtor is on the sale price, the upfront rate. If they are tied into their lenders, they are probably tied into a lender, and that lender wants you with them. They don’t want you shopping for a better rate. This is our third reason in Part 1 of this series – you need to talk to a lawyer who will talk to you about financing options that are right for you, not the ones the realtor refers to you. There are myriad reasons why real estate decisions are not one size fits all, which tends to be the realtor approach. You might need to consider taxes or make the property part of a family trust for a potential inheritance. Whatever financing issues or questions you encounter, a real estate attorney can help you through them.
Lawyers not only have answers for you – they know the questions to ask that you may not have considered. Contact us at Goodman Law, PA, and let us give you peace of mind when purchasing real estate.
Next month – Part 2 in the series…