A real estate attorney is a virtual necessity for anyone buying or selling land. The lawyer needs to be hired immediately following the signing of an offer to purchase real estate at the latest. Many times, though, an attorney’s advice is needed before signing on the dotted line to buy real property. There are many considerations that go into hiring a real estate attorney. Many of them depend upon the type of real estate purchase. Where someone starts depends upon where they are going. It is like hiring a criminal defense attorney. Seeking out a lawyer for a murder charge is much different than finding someone to appear in a shoplifting matter.
Let’s look at the different types of real estate transactions to determine how to hire an attorney in each one.
RESIDENTIAL REAL ESTATE
This includes the traditional purchase of a home as a primary residence. It also includes buying a second home for vacations. It would also cover a house or apartments for rental purposes. The purpose of the transaction is not the important factor. It is the type of residential purchase.
One consideration in hiring the attorney is whether you are the buyer or the seller. In most transactions there is more work for the buyer’s attorney. There are special considerations with the main one being the title search to determine if there are any liens or encumbrances on the property. While it always matters who you hire, a seller has fewer concerns. Check with your State Bar but there are probably rules governing hiring the same attorney to represent both the buyer and seller. If if there are no rules, it is always a good idea to have a different attorney represent each side. This would be the first question to ask. Make sure the attorney you are considering hiring has not already agreed to represent the other side. You would probably also be advised to ask if the attorney has ever represented the other side or any member of their family in any legal matter. Avoid any possibility of a conflict of interest.
You can always ask the realtor involved in the sale for a recommendation. There will be the listing agent who was hired by the seller. Then there is the selling agent who actually sold the property to the buyer. In some transactions it is the same agent but many times it is two different persons. The seller would probably ask the listing agent while the buyer would ask the agent who they dealt with in buying the property. Many realtors have their favorite lawyer or lawyers. You should consider that one of the main objectives of a realtor is closing the sale quickly since they do not get paid until the closing. They may prefer an attorney that moves quickly. While everyone wants to get the deal done, sometimes there is a legal problem that must be fixed prior to closing. It could be a problem with the title to the property. Everyone assumes that the seller has good title, but there are cases where that is not always true. They may be rare but you want your lawyer to get it right, even it that involves a delay. Find an attorney who moves quickly but covers all the bases.
Take the recommendation of the realtor as one example. Ask your friends and co-workers who they used when they bought a home or rental property. Contact the State Bar. Ask if they certify residential real estate attorneys as a specialty. If so, get a list of the lawyers who practice in your county or area. Put the lists together and see if there are names on two or more lists. Pick out two or three and make some calls.
The fee for a residential real estate transaction is most likely going to be a flat fee. The price of the home is not really relevant is setting a fee. It is just as much work to represent the buyer of a $100,000 home as it is for a $300,000 home. However, you may find some attorneys who charge more based upon the sales price. If so, ask why the fee is higher. They may well say it is based upon their liability which is greaater for the more expensive property. If the purchase is a rental or a different type of transaction like a condominium, ask if the lawyer routinely handles such matters. Experience in real estate is very important. Good real estate lawyers may close several properties each business day. You want someone who has dealt with almost every type of problem.
In almost every real estate transaction, the attorney fee is part of the closing costs. The client does not pay any money until the day of closing. The fee is included in the amount of money the buyer pays at closing. For the seller, the fee is deducted from the proceeds along with other closing costs. Make sure you know the amount of the fee prior to hiring the attorney. Ask if the fee is ever increased due to unforeseen circumstances after the lawyer starts working on the closing. A lender provides an estimate of the closing costs. IF you have that estimate, show it to your attorney and see if he or she agree with the numbers.
One more consideration is to ask who is the contact person at the law firm. When you call who do you ask to speak with about your case? Some lawyers or law firms will have paralegals do most of the work. An experienced real estate paralegal can do a fine job, but you need to know who is actually doing the work. In particular, ask who is performing the title search at the courthouse. While most title searches are routine, there is the occasional one that requires an attorney to make the judgment about some unusual problem.
The attorney will provide the title search information to a title insurance company. Ask about title insurance and find out what company the attorney uses and how much it costs. Title insurance is required by virtually every lender. It pays off if any title problem arises in the future. It is valuable protection. The attorney you hire needs to provide the coverage for not only the lender but also for the owner.
COMMERCIAL REAL ESTATE
Commercial real estate is different. There are many matters that do not come up with residential real estate. Check with your State Bar. Normally there is a separate specialization for commercial real estate. Many residential real estate attorneys will not handle a commercial closing. There are far more residential closings so there is less opportunity to gain experience in the commercial area.
A realtor who handles exclusively commercial sales will be a good source of a recommendation. Fees are going to be more so finding out fee structures is very important. Also find out what services the attorney is providing. Is there going to be any tax advice or is the client responsible for retaining an accountant or tax attorney? If you are purchasing a business that includes land and buildings, will one lawyer provide all the representation? You may find a law firm where one attorney handles the real estate while another handles the business part of the deal.
Again, take the recommendation of the realtor along with list of certified commercial real estate attorneys from the State Bar. If you know anyone who has purchased commercial property ask for names. Be prepared with questions. What about zoning? This is crucial in a business setting. Do not always rely on what you have been told. Ask if the attorney has experience with zoning, and with petitions to change the zoning. If you are seeking a zoning change, make sure the contract to purchase is contingent upon the zoning change being approved.
The fee in a commercial real estate transaction will probably be based upon a hourly charge with possibly a minimum fee. Find out the details of the fee agreement. In particular, will you be periodically notified of the fee. If you pay the fee as part of the closing costs, when you find out the total cost. Get the fee agreement in writing, and ask for an estimate. A lawyer who has handled many commercial real estate closings will have a good idea of the costs from prior closings. They cannot provide a guarantee but they should have a price range to quote. You also need to know the total closing costs
For most people purchasing real estate, whether a home, rental property or commercial, is one of the largest single money transactions in their life. It is therefore very important to be totally informed about the fee, costs, money to be brought to closing, and what the lawyer will or will not be doing for the client. Care needs to be taken when hiring a real estate attorney. Do not rely solely on a realtor, friend, or State Bar list. Ask for a free consultation. If an attorney will not give you a free consultation, you might consider taking him or her off of your list. Go with a set of questions like the following:
- How is the fee determined?
- Tell me about your experience.
- Who will be the contact person?
- Are you certified with the State Bar?
- What percentage of your practice involves real estate?
- Will I get a written fee agreement?
- Why should I hire you?
- Any other question you have.
You should have follow up questions based upon the answers to the above questions. Use the information provided herein to formulate your additional questions. Do not be intimidated. You are the client. You need to know everything that is going to happen.
It is a skill to know how to hire a good real estate attorney. Like any other skill, it takes practice. Go over all the questions. Be prepared when you talk to the attorney. Many attorneys will just want to explain real estate transactions in general. Do not let that happen. Make the most of your opportunity to get the best real estate attorney you can. Act like your large investment of money matters because it does.