WHY DO I NEED A REAL ESTATE ATTORNEY?

John C. Flanders and Kathleen S. Mara

Buying a house (especially for the first time) or selling your home, farm or business real estate is complicated, and the amount of paperwork involved can be overwhelming. In fact this may be the largest financial transaction of your life. Nevertheless, most people cringe at the thought of spending even more money to hire a real estate lawyer to guide them through the process. How exactly can a real estate lawyer help you?

1. Every contract is negotiable – before it is signed. Often people believe that, because a contract is a Colorado Real Estate Commission "approved" form, its terms are set in stone. Not true. A real estate lawyer is an expert in understanding contracts, and how the various parts of contracts relate to each other. She can explain the contract to you in understandable terms, and can suggest changes (before the contract is signed!) to protect you. A good example of a standard contract provision that a buyer may want to change is the financing condition. The standard form contract provides several blanks (for maximum acceptable interest rate, points, monthly payment, etc.) that the buyer often feels he must fill in. His real estate lawyer, on the other hand, may suggest replacing the language entirely. Instead of "filling in the blanks", the buyer’s attorney may suggest a statement in the contract that provides that "this contract is conditional upon lender's approval of a new loan, on terms acceptable to buyer in buyer’s absolute discretion." Such a provision gives the buyer maximum flexibility in negotiating his loan, and provides him with an absolute "out" if he is unable to secure a loan he likes by the loan commitment deadline.
2. A lawyer can provide you with maximum flexibility – and restrict the other party’s flexibility. As a buyer, you want to have every possible opportunity to get out of the contract – without penalty – before closing. A good real estate lawyer can draft a contract allowing you to have a "free look" for a certain amount of time, and to terminate that contract (and receive your earnest money back) for any reason during that free look period. If you are a seller, your goal is usually the opposite. You want your buyer "locked in" at the earliest possible time, where a cancellation of the contract after such time will constitute a default under the contract, resulting in the loss of the buyer’s earnest money.
3. A lawyer works only for you. When you hire an attorney, you are the boss, and your attorney’s job is to represent you in the transaction, period. A lawyer can provide independent, expert and objective analysis of issues that may come up – either before or after the contract is signed – and can help you solve them. Although the vast majority of brokers are highly ethical, and do not let the thought of a commission sway their advice to you, there is an inherent conflict of interest at play when your broker’s compensation depends on the success of the deal.
4. A lawyer can provide you with a reality check – and can solve problems. You may be a first-time buyer, and so excited about the dream home you just found that you might not look, as carefully as you ought to, at the contract or, once the contract is signed, at the title insurance commitment, the title documents or the survey. A friend of mine (a non-lawyer buying his first home) commented to me recently on the value of having me take a look at his contract and, once he entered into the contract, his title documents and survey: "So a lawyer isn’t there just to help you make the deal, she’s there to stop you from making a deal you shouldn’t make!" Yes – and no. A good lawyer will certainly help you "make the deal", and is most certainly not there to unnecessarily obstruct the bargaining process. But a good lawyer will help you to understand the risks that may be hidden in the documents, to evaluate the seriousness of such risks, and in many cases can act as a problem-solver, helping you eliminate (or reduce) the risk so the deal can close. For example, a survey (or improvement location certificate) may show that the seller’s newly-constructed driveway encroaches onto the neighbor’s property. As a buyer, you could simply be "buying a lawsuit" if this situation is not recognized and resolved. A real estate lawyer will, first of all, bring the problem to your attention in time to terminate the contract within the time period provided in the contract. However, the best solution to the problem may not involve terminating the contract at all – it may involve negotiating a solution to the problem so that you can move into your dreamhouse without the worry that your new neighbors will sue you when they discover the encroachment.