08.21.2024 PropStream
Disclaimer: PropStream does not offer investing or legal advice or make any profit promises. This article is for educational purposes only. We recommend doing your due diligence and/or consulting financial and legal professionals before investing in real estate.
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A real estate attorney can be a valuable asset to your investing team. But are they necessary? Read on to learn what a real estate attorney does, how they can help investors, and what to consider before hiring one.
What Is a Real Estate Attorney?
A real estate attorney is a licensed legal professional specializing in real estate transactions. They can provide legal advice before, during, and after a property sale.
Though they typically collaborate closely with one another, real estate attorneys and real estate agents are not the same. Attorneys focus on the legal aspects of a property transaction, while agents focus on the practical and sales-oriented aspects.
How Real Estate Attorneys Can Help Investors
Real estate attorneys can help investors in many ways:
Contract Drafting
A real estate attorney can help draft purchase and sale agreements and counter offers. This can come in handy during the negotiation phase when you may want to request or offer various concessions or contingencies.
For example, if a seller counters a buyer’s offer with a higher purchase price, the buyer might agree to the new price conditional on the seller covering closing costs. A real estate attorney could draft the appropriate language to amend the contract.
Contract Review
A real estate attorney can review contracts to ensure they serve your best interests. These include purchase agreements, mortgage documents, insurance policies, deeds, and tenant leases.
For example, a lender may charge you various fees on top of principal and interest. A real estate attorney can review the mortgage contract to help you understand the full cost of the loan so you know what you’re getting into.
Representation at Closing
The closing table is where money is transferred from buyer to seller and when the property title is officially transferred. A real estate attorney can help ensure this process runs smoothly and that the title transfer is legally binding.
Dispute Resolution
Sometimes, a disagreement over a property’s title, lot boundaries, seller disclosures, or tenant rights can lead to a legal dispute. A real estate attorney can help you and the other party settle the conflict or represent you in court.
Business Formation
Many real estate investors hold their properties in business entities like limited liability companies (LLCs) to separate and protect their personal assets. A real estate lawyer can help you form the appropriate business entity for your investing needs.
When Do Investors Need a Real Estate Attorney?
Many states require you to have a real estate attorney to buy property. They include:
However, even if your state doesn’t require you to hire a real estate attorney, it’s wise to do so anyway—especially if you face a complex transaction.
For example, a foreclosure or short sale may add complexity to the deal. Similarly, an easement on the property may present unique challenges. Legal counsel is very valuable in such situations, and foregoing it could be detrimental.
Benefits of Hiring a Real Estate Attorney
Hiring a real estate attorney has many benefits:
Expertise. A real estate attorney’s legal education and background uniquely qualify them to advise you on a property transaction.
Guidance. An experienced real estate attorney can help protect you from hidden liabilities and costly mistakes.
Representation. A real estate attorney can represent you at the closing table and in court if there’s a legal dispute.
Compliance. A local real estate attorney can ensure you comply with local real estate laws and zoning regulations.
Peace of mind. A real estate attorney can provide peace of mind that your best interests are represented so you can focus on investing.
How Much Does a Real Estate Attorney Cost?
Of course, a real estate attorney will cost you.
Many real estate attorneys charge an hourly rate of $150-$500 or more, while others charge a flat fee of a few thousand dollars.
If you hire a real estate lawyer to represent you in a legal dispute, they may charge a contingency fee, i.e., a certain percentage of the settlement should you win the case.
Lastly, some real estate attorneys charge a retainer fee, an upfront payment from which they deduct their hourly rate as they perform the work.
To get the best deal, shop around, ask for quotes, and remember that a knowledgeable and experienced real estate attorney is often well worth the cost because they can help you avoid costly mistakes.
What to Consider When Hiring a Real Estate Attorney
Before choosing a real estate attorney to hire, ensure they:
- Are licensed in the state where you are buying or selling real estate
- Aren’t representing the other party in the transaction (a conflict of interest)
- Have positive reviews from past clients and an overall good reputation
- Will put your best interests at heart
If a real estate attorney checks all of these boxes, they’re more likely to be a good hire.
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