The real estate market is innately complicated. When coming into it anew (like when you’re buying your first property), it can seem bafflingly complicated. As soon as you find the place of your dreams, it looks as though costs and complications start to come crawling out of the woodwork.
All of a sudden it seems like a day doesn’t pass without someone calling or emailing you explaining why you owe them money. Between real estate agents, mortgage brokers and lenders it seems as though everyone’s showing up with their plate in hand wanting a piece of the pie that is your bank account.
As such, it’s little wonder that first-time buyers might want to make savings wherever possible by jettisoning services that they consider non-essential. Because real estate transactions are so standardized, it may seem excessive to hire an attorney. After all, you don’t need a lawyer holding your hand when you buy a car or a boat or any other kind of substantial purchase. Why would you need one when buying a home?
Here we’ll look at some of the reasons why, despite the costs, it’s in your best interests to ensure that you have a lawyer on-side when buying your first home…
It may be state mandated
Let’s start with the obvious. Depending on where you live, it may be a legal requirement to have a lawyer preside over the purchase. These states include;
- District of Columbia
- New Hampshire
- New Jersey
- New York
- North Dakota
- Rhode Island
- South Carolina
- Virginia and West Virginia
That’s almost half the country (although legislative changes are being made all the time and that list is subject to change. However, even if you live in an estate where having an attorney physically present is not a legal requirement (like, say, California), it’s still in your best interests to involve an attorney in the transaction. Here are just a few f the reasons why.
Not all realtors have the best legal knowledge
While there’s some overlap between realtors and real estate lawyers, they are two very different jobs which require very different sets of skills. Realtors are great communicators and are skilled in closing deals but they are, for all intents and purposes, sales professionals. While the nature of their job will ensure that they have an anecdotal knowledge of the legal side of making a purchase, they might not be so helpful if an unusual aspect of the transaction muddies the waters.
They can’t help you if the property has an in-law accessory dwelling unit attached with an incumbent tenant whom you’d want to get rid of. They can’t tell you how legally feasible any plans you draw up maybe should you wish to make renovations straight away. While some will be more lawfully knowledgeable than others, it’s always best to play it safe and use a lawyer, especially if the process will be atypical in any way.
They can help to guard against breaches of contract
Real estate law, like any branch of the law, can be extremely opaque and even the tiniest nuance in the wording of a contract can have far-reaching implications. Something that might seem perfectly innocuous could lead to an unintentionally breaking a real estate contract. When this happens, even if it happens in goodwill, the courts may order you to take a particular action, known legally as a “specific performance” to make reparations to the seller. These include, but aren’t limited to, the paying of monetary damages.
In this regard, taking on the additional cost of a lawyer now can save you a significant amount of money later on down the line. They can even help to work a contingency clause into the contract if you should need to back out of the purchase for any unavoidable reason.
They can ensure a satisfactory Purchase Agreement
Legally speaking, the Purchase Agreement is the most important document in the entire transaction. While your realtor will likely use a fairly standard template, a lawyer can be beneficial in explaining the form to you in terms that you’ll understand to ensure that you’re thrilled with the purchase. They can also assist in making changes and additions to suit your interests as a buyer. There are lots of different issues that may need to be addressed in the purchase agreement, depending on the property. Some common examples include:
- Have any additions or alterations to the property been made lawfully?
- What happens if an inspection of the property reveals evidence of asbestos, termites, radon, or lead-based paint?
- What will be done if the property is found to contain hazardous waste?
- What will be the legal consequences if the deal does not close, this is where a contingency clause can save your bacon.
Enlisting a lawyer to review and amend the Purchase Agreement can prove invaluable in ensuring that both you and the seller get a fair deal and that nobody encounters any nasty surprises.
They can assist with verbal easements
Easements are a very common example of when a lawyer’s intervention is warranted. Let’s say, for instance, that the property’s seller and the next-door neighbors have a verbal easement in place which allows the neighbors to access their car’s parking spot through the property’s driveway.
When buying the property, you’d want to ensure that you know what the neighbor’s rights and restrictions are under that easement and ensure that something is drafted in writing to ensure that no boundaries (quite literally) are overstepped.
They can provide useful advice on tax provisions later on down the line
Few people consider the possibility of selling their property when they’re in the process of buying it (unless they’re purchasing with the intention of flipping the property, of course). However, building a good relationship with an attorney when buying a property can ensure that you have a useful contact in your address book when the time comes to sell.
If you sell your home for a substantial profit this can have some pretty serious income tax implications. Your lawyer can help to ensure that you keep as much of the profits as possible while still honoring your legal obligations. They can advise on any tax provisions that you may be able to take advantage of which can allow for the exclusion of capital gains under certain circumstances.
For these reasons, a lawyer can be invaluable to ensure that your ascent up the property ladder gets the best possible start.