A real estate attorney is required upon closing in many states. Even if your state does not require the appearance of a real estate attorney, having a legal professional represent your interests is usually a good idea.
When you invest in real estate, finding the right attorney is essential. Your real estate attorney helps you navigate every aspect of the process. If legal problems arise in real estate transactions, have someone who knows the real estate laws fighting for you.
What is a real estate attorney?
As with doctors, lawyers have their own areas of specialization. While some attorneys are general, when buying and selling real estate you must hire a real estate attorney to advise you and protect your interests. Such an attorney is well versed in property law in relation to the laws of the state.
If you are considering investing out of state, look for attorneys who are licensed to practice in other states.
What does a real estate attorney do?
A real estate attorney represents you in all matters relating to real estate law. The role of a real estate attorney may include the following tasks:
Preparing legal documents
Even simple real estate transactions can involve significant paperwork. More complex situations only increase the sheer volume of legal documents.
For example, a real estate attorney arranges with a title company to perform a title search. The property must have clear title with no third party claims. Once the title company submits a report, the real estate attorney reviews it and works with the mortgage lender or other related parties if there are any issues regarding the title.
Making sure all legal documents are correct is the primary role of a real estate attorney. Real estate is probably your biggest investment. Working with a licensed attorney is crucial.
During the review process, your attorney should discover any errors in the closing documents and other documents related to the real estate transaction. The beginning of the transaction is the real estate contract.
Often, the real estate agent will prepare the initial contract. A real estate attorney should review the purchase contract carefully, as it sets out the obligations of the buyer and seller. The attorney then drafts knights’ drafts, also known as amendments, to their clients’ needs. These adjustments may include contingent financing and valuation, personal property included or excluded, and unique provisions affecting the property in question.
Real estate transactions do not always go smoothly. Perhaps there is a lien on the property, a title issue, or a boundary question. Your real estate attorney works to resolve these disputes so that you can move forward with your real estate transactions.
Using the correct trade formation for investment properties protects you from liability. Your real estate attorney will work with you to determine whether an LLC, partnership, or other type of business entity is best for your legal needs.
Financing and refinancing
A real estate attorney may advise you on mortgage financing and when to refinance your mortgage loan. They may work with a mortgage lender or commercial real estate lender to help with financing.
Real estate attorneys also guide you in related legal matters, such as the tax implications when you sell the property.
Equity and debt investment structures
Real estate attorneys help clients structure and manage equity and debt, with a focus on maximizing their returns.
Drafting lease contracts
Your real estate attorney should draft a strong tenancy agreement for your tenants to avoid potential disputes. All parties benefit from a clear lease agreement that protects their interests.
You can simply use a standard lease agreement and save some money as a landlord. This is foolish and sterling, as a professional with a thorough knowledge of real estate law will ensure that your real property is fully protected as the law allows.
Handling tenant complaints
When a tenant complains, you need to know whether that complaint is legitimate under the terms of the lease or applicable local, state, or federal law. Your attorney will explain the legal rights and responsibilities of landlords and tenants and whether the complaint violates the lease agreement.
The attorney will work to resolve the complaint before it escalates into costly litigation.
Property tax advice
Real estate ownership means paying real estate taxes. Your current property taxes may not reflect the realities of the market. Your attorney can advise you to file a property tax appeal to fight an overvaluation.
Benefits of partnering with a real estate attorney
When you engage a real estate attorney for your investment properties, they can handle almost all of the process. This leaves you, as the investor, with more time to focus on getting a good return on your investment.
If problems arise before, during, or after purchasing a property, you can rely on your real estate attorney to resolve them.
Real estate lawyers will advise you about backing out of the deal and avoiding a costly mistake.
The bottom line is that the real estate attorney you hire is always working to protect your interests.
How much does a real estate attorney cost?
The services of a real estate attorney may be inexpensive, but remember that you get what you pay for. How much you can afford in legal fees is one of the first things you should determine when considering hiring an attorney for your investment team.
A real estate attorney may charge an hourly or flat fee. Remember that while a more experienced real estate attorney will charge higher fees, their expertise is worth it.
How to find a real estate attorney
You can always find a real estate attorney online. Searching Google is a great way to get started, but the goal is to find a good real estate attorney, not your average one.
Often your best bet is to ask for recommendations from those in the real estate industry, such as a real estate agent or fellow real estate investor. They know the best real estate attorneys in your area. Friends or family who have real estate experience is another good source of advice.
Find attorneys with experience in your field. For example, if you are investing in commercial real estate, find attorneys who specialize in this area. Some real estate attorneys are generalists, doing whatever real estate business comes their way. Because the different areas of real estate investment are so different, these attorneys are more likely to make mistakes. They are not necessarily experts in real estate law.
Instead of going with a larger company, check out smaller practices. You will work directly with one attorney rather than being delegated to less experienced colleagues in larger firms.
What do you ask a real estate attorney?
Conduct interviews before deciding who to hire as a real estate attorney. You are looking for a professional advisor for the long term, so you should know exactly what to expect. Ask the following questions:
- What is your fee schedule? Do you charge a flat fee or an hourly rate?
- Where did you go to law school?
- What is your experience with residential, commercial or industrial real estate investing?
- How many real estate transactions have you closed?
- Do you go to court regularly to deal with evictions?
- Do you have any potential conflicts of interest?
Save money in the long run with a real estate attorney
Legal fees aren’t cheap, but they are far less expensive than losing property due to an avoidable legal issue. After all, real estate investing aims to maximize profits while minimizing risk. The right real estate attorney helps achieve both goals.
By hiring a real estate attorney as part of your investment team, you should save money in the long run. This is because the work of the attorney you hire can limit future problems.
Once you hire a real estate attorney, you have someone to advise you on every aspect of your investment strategy while protecting your interests. Savvy investors know how valuable an attorney’s services can be when dealing with complex property legal issues.
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Note by BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.