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Our offer has been accepted, and we're currently waiting for inspection. Meanwhile, I'm reading through our mortgage loan application. My credit is excellent, and we've been offered the best rate. We also have the 20% down payment + required fees. This is a pretty normal sale so far, and I expect it to remain smooth, especially from my end.
It has been recommended that we should definitely have a Real Estate Attorney, but I hesitate bringing so many players into the game.
What am I missing by not having a Real Estate Attorney besides a bit of assurance? I'm comfortable reading my own contracts before signing and I also understand that the contract will be created in the best interested of the lender. In my view, I am not sure how a contract can be modified to reflect my best interest. With this understanding, should I get an Attorney?
You are in the Boston area, correct?
Maybe MikePRU can chime in about the common local practices, since he is in your area.
I am confused by your note: " I'm comfortable reading my own contracts before signing and I also understand that the contract will be created in the best interested of the lender. In my view, I am not sure how a contract can be modified to reflect my best interest."
So, it appears to me that you should have engaged representation prior to writing an offer and having it go to contract.
The main area of concern for me is the loan application/contract. I have not signed this yet. The buyer agent walked us through the offer, and any questions I had, I asked the opinions of my more legally inclined colleagues.
The main area of concern for me is the loan application/contract. I have not signed this yet. The buyer agent walked us through the offer, and any questions I had, I asked the opinions of my more legally inclined colleagues.
It is hard to imagine a lot of negotiating room regarding the terms of the loan application. You should have a variety of loan programs to consider, but the loan agreement will be the bank's way or no way, I suspect.
How does an attorney help on the mortgage side? Texas tradition is not to use attorneys, but I know other states use them, but I've never heard of the attorney helping on the mortgage side. They have no control over a person's credit and what they qualify for. What would an attorney negotiate on the loan?
I agree with MikeJaquish -- there is ZERO room for modifications to the MORTGAGE offered by any reputable lender. No seller's real estate attorney would do other than give that a cursory read as it 99% boilerplate to comply with Federal regulatory language.
If the seller is represented by a qualified listing agent and the buyer has a very competent buyer's agent and therw is no lease back agreement, delayed possession, transfer of personal property, sellers credit, holdback or arrangements that are non-standard an attorney is not really a necessity. That said for the couple of hundred bucks it is often good "peace of mind" to have a third party that will compensated regardless of the deal closing -- in a very literal sense the attorney is the ONLY party that won't lose out if they shout "hey pal, EVERYBODY is trying to stick it to you on this deal -- walk away". Now that almost NEVER happens but I will put it out there as I have seen folks that absolutely SHOULD have had an attorney like that in their corner and now are stuck with some underwater house and crummy loan that has messed up their credit...
Thank you! I wasn't sure if there was any involvement of the real estate attorney with the mortgage process, and it seems like there is not. This is all very helpful. It boils down to whether or not they add $1k+ worth of services to the purchasing process.
I'm more than comfortable walking away if permitted. Attorneys that have been suggested to me seems to be paid on success of closing, which seems to work against my interest if they prioritize closing.
In the state of MA, it is traditional for both sides of the transaction to have attorney representation but it is not mandatory. I always recommend it for two reasons:
1. For conveyancing real estate, in MA we use attorneys unlike many other states that use title companies, escrow agents, or whatever you want to call it. So, an attorney will perform your closing. Whether that attorney works for just the lender or both you and lender is typically up to you, but either way you are paying the attorney to perform his duties. So personally, I would rather have an attorney at the table who is working for both myself and the lender since I'm footing the bill. Not all lenders will allow you to pick the closing attorney though. So, an important question to ask your lender about prior to committing as in my experience most people seem to prefer a lender who allows them to pick their own attorney all other things being equal. I have on rare occasion also encountered attorneys who represent the lender but are not willing to represent you as well. So if you use a lender who insists on their attorney, I would recommend before committing to anything that you make sure the attorney is willing to represent you as well.
2. Here in MA, we practice what I like to call a "two contract real estate transaction." The first contract is your accepted offer. In this state, offers are in writing, signed by both parties, and there is consideration paid (you probably put either $500 or $1,000 into escrow upon acceptance - different amounts are considered traditional in different parts of the state) which makes it a binding and legal contract. Traditionally, we move on to the inspection at that point if that is part of the offer. Then inspection results are negotiated and should the transaction move forward from there we move on to the second contract called the Purchase & Sale contract more commonly referred to as the P&S. The P&S is a much more customized and more free form contract than the offer sheet. Most attorneys have their boiler plate addendums that they like to add but each one seems to have a different one. Some of the old school RE agents will write a P&S for you and in some areas it's still traditional for the RE agent to make the first draft of the P&S. However in my opinion since you're developing a contract at this point for a very, very expensive purchase, it's best to have someone trained to deal with contracts especially RE contracts at this point. It won't cost you a ton of money and cheaping out by not paying an attorney a few hundred dollars to represent you at this stage is penny wise but pound foolish. The last thing you want is to end up with a contract favoring the seller.
I would also recommend staying away from the advice of "legally inclined colleagues." Even if these people are attorneys and members of the state bar, I've seen first hand that there's a huge difference between knowing the law and practicing it. Some of my clients in the past have foregone my recommended attorney list and instead sought out their own council. Some of these people have opted to hire general practitioners who are willing to dabble in RE. Most have no idea what they're doing and if I don't catch what they've done wrong it can open my client up to huge amounts of risk. So, make sure you hire a RE attorney and not just any attorney who will pick up the phone.
Thanks again MikePRU! I will digest this information as well.
As possible examples, what could they include in the contract that would favor the seller? I'm trying to weigh the value a real estate attorney would add, and the type of risks they might alleviate. I don't have a very good understanding of this, which is why I am having a difficult time assigning value to a real estate attorney.
Edit: Just as an additional note - this is a traditional sale, though it does involve a relocation company.
Double Edit: I just inquired with our potential lender regarding the attorney situation. Thanks for the suggestion!
Thanks again MikePRU! I will digest this information as well.
As possible examples, what could they include in the contract that would favor the seller? I'm trying to weigh the value a real estate attorney would add, and the type of risks they might alleviate. I don't have a very good understanding of this, which is why I am having a difficult time assigning value to a real estate attorney.
Edit: Just as an additional note - this is a traditional sale, though it does involve a relocation company.
While many attorney's tend to have their own version of the contract and addendums that they use over and over again, this contract is written specifically for your transaction. So, the seller's attorney (and there will almost definitely be one if this is a relocation situation) can really put whatever they want in the contract. You and even your RE agent may or may not know what is typical in a contract I say RE agent as well because many MA RE agents I know just leave the contract to the attorney and probably couldn't tell you what one said if you asked. I actually worked in a RE attorney's office at one time so unlike many agents I'm well versed in what the contract typically says and I often make suggestions if I'm working with an unfamiliar attorney. A lot of agents don't have that background though.
Since the seller's attorney is under no obligation to put any protections in the contract for you, I could come up with 100 examples of where you could have a problem. Here are a couple of quick ones from off the top of my head:
Most contracts state a dollar limit for how much a seller is required to spend to cure title if any problems are uncovered. Without your own attorney, how do you know if this limit is too low? Once you sign if this problem comes up, you either buy or you lose your deposit which I would imagine is around 5% of the purchase price. Quite a bit of money here in MA where RE values are higher than most of the country.
Most contracts also state the condition the home is to be delivered in (this section is often one where the attorneys negotiate a bit on the wording). If you don't have the right wording in there, you might be left with a basement full of trash. If you don't want the house because of it, then you'll lose your deposit.
Here's a good one . . . many homes in MA use oil for heating. What happens if the tank bursts and the basement is contaminated with oil? That's quite expensive to clean up. Is that covered in the contract? If so, are you sufficiently protected?
Basically what I'm telling you is that an attorney will cost you a few hundred (although some will work the P&S phase for free if they do your closing which you'll have to pay for regardless) while a lack of protection in your contract could cost you hundreds, thousands, or even tens of thousands of dollars.
Quote:
Originally Posted by minnus
Double Edit: I just inquired with our potential lender regarding the attorney situation. Thanks for the suggestion!
No problem!
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