The Massachusetts South Shore Real Estate Blog: When to Retain a Real Estate Attorney

The Massachusetts South Shore Real Estate Blog: When to Retain a Real Estate Attorney

When to Retain a Real Estate AttorneyThe 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:

  1. Waiting Disadvantages your Negotiating Position: After the deal is set in stone, it’s very difficult for a late-comer to make significant changes.
  2. 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.
  3. 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.
  4. 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.

[whohit]When to Retain a RE Attorney [/whohit]

 

The Massachusetts South Shore Real Estate Blog: The Offer Part 3 – Negotiations 101

The Massachusetts South Shore Real Estate Blog: The Offer Part 3 – Negotiations 101

Arm Wrestle to Finish Negotiation

In Parts 1 and 2 of our three part series, we focused on the necessary considerations of Buyers and Sellers when approaching the Offer to Purchase. This week, in Part 3 of our three part series, we have come up with seven helpful tips to effectively negotiate the Offer.

  1. Use a Real Estate Professional to Negotiate: We’ve said it before, but we’re going to hammer it home again: using an experienced Real Estate Professional is critical. The reasons are three fold: 1) with rare exception, most of us have not negotiated a deal involving many hundreds of thousands of dollars, 2) the Real Estate Professional can act as the “bad cop” and disguise your deal seeking nature as zealous client representation (thus insulating you from looking like the “Bad Guy,” and 3) the Real Estate Professional knows “when to hold ’em and when to fold ’em.”
  2. Don’t Make Snap Decisions/Don’t Take Too Much Time: It is sometimes the case that a Buyer and/or Seller will make a rash decision. It’s difficult, uncomfortable, and often expensive to unravel a bad decision. Take your time, listen to your gut, do your homework, and talk with your Real Estate Professional before making a decision. By the same token, waiting too long to make a decision can mean the difference between reaching the deal and walking away empty handed. In a hot real estate market, agile, focused parties will succeed more often.
  3. Don’t Take Negotiations Personally: While the negotiation is for a home which is a very personal object, it’s sometimes hard to remember that you are still negotiating the sale or purchase of a thing. Pointing out faults with your home is not meant as an attack–it’s a bargaining tactic. Also keep in mind that the tactics that you use may be taken personally by the other side.
  4. Compromise: Trading terms is a great way for both sides to feel like they are getting something. If the closing date isn’t critical to the Buyers, consider offering a long or flexible date in exchange for a concession that isn’t important to the Sellers–everyone walks away with something. As Stephen Covey so eloquently stated in his 4th Habit, “seek a win-win.”
  5. Remind the Other Party that Neither Party Will be Completely Happy: It’s simply a fact of life that compromise will not always yield a result where each side is left smiling. It’s important to remember that an effective negotiation should end with both sides being equally unhappy.
  6. Put Things in Perspective (What’s $5,000 when the House is Worth $5,000,000): We all know a dollar is a dollar, but when it comes down to the nitty-gritty, that extra $5,000 is unlikely to break the bank, and it may be worth taking the hit to make sure the deal is consumated. Don’t walk away from a good deal due to pride or so-called “principle.”
  7. If all else Fails, Flip a Coin or Offer to Arm Wrestle: If neither side is willing to budge on that last issue (be it money or another term), consider disarming your opponent by offering to resolve the impasse with a game of luck or skill (the possibilities are endless: a footrace, pie-eating contest, game of HORSE, Blackjack, etc). Just beware: you may be challenging a world-renowned arm wrestling champion (trust me–personal experience).

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.

[whohit]The Offer Part 3 [/whohit]

The Massachusetts South Shore Real Estate Blog: The Offer Part 2 — Contingencies for Sellers to Consider

The Massachusetts South Shore Real Estate Blog: The Offer Part 2 — Contingencies for Sellers to Consider

Breaking BreadThe Offer to Purchase is often disregarded as a speed bump on the road to a Purchase and Sale Agreement. In Part 1 of our three part series, we focused on the Buyer’s considerations. This week, in Part 2 of our three part series, we are going to consider the Offer from the perspective of the Seller. Though undoubtedly important, sophisticated Sellers must consider more than simply the offered price.

Two Initial Points to Consider:

  1. The aid of an experienced real estate professional, whether an attorney or an agent, is the best means of protecting your interests. In addition to helping you to understand the terms of an offer, a seasoned professional will also help you to respond appropriately.
  2. Sellers routinely negotiate the terms proposed by a Buyer. This means more than rejecting a proposed purchase price. Careful, exhaustive negotiation at this stage helps to make for smooth negotiation of the P&S.

The Two Most Important Contingencies Sellers Should Consider:

  1. Suitable Housing: So you’ve received an offer on your current house before you’ve found a home to purchase; simply put, this contingency makes the Seller’s obligations under the P&S conditional on the Seller finding a suitable property to purchase or rent. Prudent Sellers may elect to add this contingency to avoid the sticky situation of being forced to sell without a place to live. Without such a clause, inconvenience alone will not excuse the Seller’s non-performance under the contract.
  2. “Kickout Clause”: Many Buyers plan to use the proceeds from the sale of their current home to purchase the Seller’s house. Many of those Buyers will elect to protect their deposits by conditioning the Buyer’s performance on the sale of their current home. Sellers should consider proposing what’s known as a “kickout clause,” whereby the Seller is permitted to continue listing the house for sale. In the event a Seller receives a bona fide offer (that is a real, non-sham offer), the Buyer is given some amount of time, usually 48 or 72 hours–though we prefer a certain number of business days to avoid ugly deadlines like Saturday at midnight–to either waive the home sale contingency or exercise their rights under the contingency to terminate the P&S. In the event the P&S is terminated, the Seller may now sell the property to the new Buyer. This helps minimize the risk of a Seller having their house off the market for a deal that will never be consummated.

Thoughts on Common Contingencies Proposed by Buyers:

  1. Inspection Contingency: Sellers should consider setting some threshold dollar amount to this inspection. Out of fairness, a Buyer likely should not be permitted to “walk away” because of some minor defect with the home. For example, no Seller will be willing to take the home off the market for any amount of time if the Buyer is willing to walk because of a loose toilet flange.  A common, fair amount to set  as triggering the Buyer’s right to terminate under this contingency is $1,000.00.
  2. Appraisal Contingency: This is a popular contingency that protects buyers from a “bad deal”; however, Sellers should consider what will happen if the appraisal comes back low. Prudent Sellers will specify that in the event of a low appraisal, the Buyer agrees to reduce any closing cost credit to bring the purchase price in line with the appraised value. Further, Sellers should consider setting this contingency to expire on the same date as the mortgage contingency.
  3. Flood Zone Contingency: This is currently a “hot” area of real estate practice. Buyers are reluctant to purchase properties that are in federally designated flood zones which would require flood insurance. With horror stories of enormous premiums, Buyers often attempt to condition their performance on the lender’s flood zone determination. Technically speaking, a property can be within a “flood zone” without requiring insurance. An experienced attorney will advise their clients to adjust the language of any proposed contingency to make performance conditional on a flood zone determination that would require purchasing insurance, not simply whether the property is in a “flood zone.”
  4. Mortgage Contingency: For those Buyers without sufficient cash to purchase a home outright, most will apply for a mortgage loan or loans. Buyers often condition their performance under the contract upon obtaining a “clean commitment,” that is a commitment by the lender to lend without any conditions that the Borrower cannot easily satisfy. Sellers should strongly consider the amount that is sought to be financed in comparison to the purchase price. Lenders are more likely to approve a loan where the Buyer is bringing a large proportion of the purchase price in cash. Further, sophisticated Sellers will know the difference between pre-approval, pre-qualification, and pre-underwriting to effectively gauge the likelihood of the Buyer successfully obtaining the desired financing–for a brief discussion of these differences, click the link to read: 5 Tips to Thrive in a Thawing Real Estate Market (Part 2 of 2).

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.

[whohit]The Offer Part 2 [/whohit]