The purchase or sale of Real Estate results in various costs. Among these is the cost of retaining an attorney. Some Buyers and Sellers elect to wait to hire an attorney until the Buyer’s home inspection is finished. The logic is understandable: why should I involve another party, potentially incur additional costs, for a transaction that may not happen? This week, we’ve decided to throw in our two cents and explain why retaining an attorney earlier in the process is cost neutral and can result in other important benefits.
In an ideal world, every Buyer and Seller would have their real estate attorney’s number saved in their cell phone as their number one contact. Before a Buyer submits an Offer, or a Seller accepts an Offer, an experienced real estate attorney can provide legal advice as to the consequence of, or the lack of, contingencies.
Since we don’t live in an ideal world, and real estate agents generally do a nice job advising their clients at this stage, we’re going to assume that the Offer has been submitted and accepted before either the Buyer or Seller calls the attorney–all of that said, we recommend reading a couple of our earlier posts: The Offer Part 1–Five Contingencies for Buyers to Consider and The Offer Part 2–Contingencies for Sellers to Consider.
When Sellers Should Retain an Attorney: Sellers should call a Real Estate Attorney prior to or as soon as they have accepted an Offer. After the initial consultation and quote, the Seller should ask their attorney to draft the P&S. The attorney-drafted P&S will generally include additional provisions that provide further protection for Sellers that are not included in the standard form P&S drafted by a Broker. Further, it allows the attorney to remove the administrative burden from the Broker acting as the “go between” for the respective attorneys. This allows the Broker to focus on other important tasks. In the event that the transaction falls through before signing the P&S, the Sellers will most likely find another Buyer. At this point, the attorney will simply modify the changed terms to reflect the new deal. Since this will incur very little or no cost, there is little cost-savings to wait to retain an attorney.
When Buyers Should Retain an Attorney: With Buyers, there’s a bit more gray area. A Buyer’s Offer is usually contingent on the home inspection. The Buyer may want to see the results of the inspection before investing any time on further negotiation; however, the same logic described above applies here. Stiles Law, with rare exception, will not invoice Buyers in the unfortunate event that the P&S is not signed and thus the transaction is not consumated. We assume that the Buyer will retain our firm for their soon to be purchase; therefore, retaining an attorney early is cost neutral.
Observations from Our Experience:
- Waiting Disadvantages your Negotiating Position: After the deal is set in stone, it’s very difficult for a late-comer to make significant changes.
- Waiting can Rush the Lawyer’s Review: The offer sets a deadline for signing the P&S. Hiring an attorney the day before this deadline can result in a rushed review that in some cases results in inadequate protection.
- Waiting Causes more Stress: It’s a terrible feeling for both Buyers and Sellers to look at the clock to see if their deal is about to fall apart.
- Mother Always said “You get What you Pay for”: If an attorney is willing to review this extremely important legal document for free, you should run away…quickly! You should find an attorney that is willing to represent your interests, not one that is simply willing to “look it over as a courtesy for your lender.” It is important that the attorney is representing your interests, not simply going through the motions in order to obtain the eventual legal engagement from your lender.
While the benefits of retaining a real estate attorney are clear, the optimal point to do this is less clear. Hiring an attorney early in the process is cost neutral, strengthens your negotiating position, allows for thorough review, and reduces everyone’s stress.
Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.
Copyright © 2014 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog and Bob Bonkley was compensated for his likeness and appearance in the same.
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