Why hire an attorney and pay legal fees when buying your dream home? What’s the point, you think, when you can do the due diligence yourself and save money. After all, the Internet offers free legal advice regarding steps to buy and sell a home, right? You simply cull generic recommendations in cyberspace, do the deal, and are on your merry way, moving van and all. But this may be penny wise and thousands of dollars foolish.
Here’s why. Going that route will only save you money in the short run. Buying a home can be a slippery slope because of the plethora of documents that you need to read through, carefully, and then sign before the new house is yours. For example: What are all these closing fees for? Why is my mortgage lender charging me so many fees? Why doesn’t the seller pay some of these closing costs? The list goes on and on.
From the moment you find your dream home and start shopping for a mortgage, it’s prudent to call in a legal eagle. Let’s face it, legalese can be tricky for a lay person to grasp, laws can change fast, and getting a problem fixed after the transaction closes (like an easement issue because of a neighbor’s driveway) may be more difficult and expensive to correct than if you and your attorney had negotiated a remedy prior to the closing.
These are just some of the reasons why you need a skilled lawyer throughout the process, even though many states don’t require one to be involved or at the closing. Following are other reasons it’s smart to engage in this partnership.
One of the biggest incentives to hire an attorney is to avoid surprises that may cost you money down the road, from purchasing a house with defects that need correcting once you’ve moved in, to a house with liens that didn’t show up in the title search.
Hire an attorney as soon as you find the house you want to buy. “Bring in an attorney and then to go over the contract or purchase agreement because once it’s prepared you have only a three-day right of attorney review in New Jersey, for example. Then you lose the opportunity to amend the contract as necessary,” says New Jersey attorney and sole practitioner Richard J. Kozel. And most attorneys, he says, will amend a standard boiler-plate contract to protect their client on any number of issues, from repairs to title search for proper execution, commission payment, appraisals – everything from beginning to end.
Your attorney may also verify that any remodeling work or additions were done to meet building codes, so you don’t have to make additional changes or worry about the work. Remember, if work was done improperly it could affect someone’s safety or health in the future.
If you’re mortgage shopping, an attorney can eyeball your loan estimate and closing disclosure to ensure the lender isn’t tacking on excess fees, says Florida real estate attorney Justin Clark. Kozel adds that he uses the commitment documents as a green light to order the title exam and have a property survey done, in the manner required by the lender or title underwriter to make sure all title issues are cleared before closing.
The home inspection requires more due diligence on the attorney’s part since it plays a vital role in relaying the home’s condition, just as a doctor’s visit does. If the purchase agreement was written properly, it will allow the buyer to get out of the contract if a major defect is discovered and the seller refuses to pay to correct it—or, at least deduct the cost from the listing price. And if an inspector fails to find a defect once you move in but quickly find something needs to be corrected that should have been detected, the attorney can seek recourse to get it done on the inspector’s dime. “If I find anything, I send the report and a letter to the seller’s attorney, and we negotiate. This is the single most difficult topic in the process, and things can develop to derail the transaction,” Kozel says. “You want to be sure repairs were made properly by licensed contractors and invoices paid, or will be at the closing,” he says.
If the home is brand new, other demands are required since contracts for these homes have become increasingly complex and are often written in favor of developers rather than buyers, says Clark. Kozel also wants to be sure the builder provides a warranty.
You also want your attorney present at the closing, the last step before you become a homeowner. A problem might arise at the 11th hour and an attorney can negotiate with the seller or seller’s attorney in a calm manner, dotting all i’s and crossing all t’s. The attorney can also verify that the deed and closing documents have been prepared properly, and view the title insurance commitment for exceptions that could lead to issues for buyers. “Having an attorney provides an extra, important final check,” Clark says.
Some homeowners shy away from hiring an attorney because of the fear of the cost, knowing it’s easy to ring up expensive hourly rates. Don’t! You are likely to find the money well spent in the years to come, and it’s usually just a fraction of your purchase price. And there’s another reason. You may be able to negotiate a flat fee instead of an hourly rate since many attorneys view this service as the equivalent of a loss leader, says Kozel. Expect in such cases to pay less $1,500, which is what Clark often charges, or even a bit less.
Remember, your home purchase probably represents your biggest investment, so be diligent and protect proceed with caution.