Friends often ask me whether a purchaser should hire an attorney for a real estate transaction, even when they are represented by a real estate broker. The response is usually yes: an attorney’s input can be vital, especially when purchasing commercial real estate.

Attorneys provide objective advice because they do not earn a commission on “closing the deal.” A real estate broker often represents only the interest of the Seller and even when they represent the purchaser, they are not necessarily experts in the legal aspects of a real estate transaction. Real estate attorneys handle the following items:

1.  Purchase agreement

The purchase agreement dictates everything in a transaction. It is important that an attorney review the purchase agreement before it is executed. Attorneys focus on key terms such as the type of deed given to purchaser (a purchaser prefers a warranty deed) and the need for adequate title insurance. The purchaser’s attorney will also require “purchaser protections” such as a time period for objections to the title and survey.

2.  Survey

The purchaser’s attorney will likely recommend that the purchaser obtain a survey. Attorneys use a survey to discover encroachments and gaps and to see where title defects are located. Attorneys often recommend a high quality survey, rather than a simple mortgage survey, to provide more detailed survey information and to obtain greater title insurance protections.

3.  Title commitment

Attorneys review the “title commitment” which summarizes the purchaser’s expected title policy at closing. Attorneys use it to discover title defects such as restrictions on use of the property. The purchaser’s attorney will also request revisions to the commitment that create additional insurance and will draft documentation required by the title company.

4.  Property tax proration

There are a variety of methods for allocating property taxes. Attorneys request the method most financially beneficial to their client.

5.  Due diligence

The purchase agreement should give the purchaser the ability to inspect the property. This is similar to “kicking the tires.” The purchaser’s attorney will request that the purchase agreement provide an adequate “Inspection Period” with broad access to the property and related documents.

6.  Property transfer affidavit

Attorneys can file a required property transfer affidavit and explain the repercussions of not filing. The purchaser can be assessed a minimum of $200 for failing to file one timely with the municipality.

Real estate transactions can be complicated, particularly when a corporation and business tax issues are involved. Buyers and sellers should be open to the idea that an attorney can save time, trouble and even money for the parties involved.

For further information regarding these matters, please contact Ms. Beutler at 248.740.5690 or click here to send an email.