Questions and Answers — Contents

  • What can an attorney do for a seller?
  • What can an attorney do for a buyer?
  • Won’t the real estate agent represent me?
  • Can the buyer and seller use the same attorney?
  • How important is the offer to purchase?
  • What information is available on the property?
  • Should a buyer ask for title insurance or an abstract and title opinion?
  • What’s the difference between a warranty deed and a quit claim deed?
  • Are there legal issues in financing?
  • What about a land contract?
  • When can a foreclosure action be commenced?
  • Want to build a home

1. What can an attorney do for a seller?

A lawyer protects the seller from unexpected developments in the sale process and can:

  • draft listing contracts and offers; advise on issues related to sale;
  • help satisfy conditions to the offer and resolve problems that arise;
  • draft deeds, transfer returns, and other transaction documents, and;
  • review financial arrangements and assure parties’ obligations are met at closing.

2. What can an attorney do for a buyer?

The buyer’s attorney can make sure the buyer receives what the contract provides and can:

  • draft or advise on buyer agency agreements and offers, including conditions added for buyer’s protection;
  • examine seller’s title (abstract of title or title insurance commitment) and explain the documents affecting that title;
  • answer legal questions about the property and its purchase including options for holding title;
  • check the note and mortgage, deed and other documents, and explain buyer’s legal rights and obligations under them at closing, and;
  • review title after closing to make sure all legal requirements have been met.

3. Won’t the real estate agent represent me?

Real estate agents cannot provide legal advice and representation. Real estate agents act as intermediaries rather than representing the parties.

4. Can the buyer and seller use the same attorney?

It’s not a good idea. The buyer and seller have conflicting interests in a real estate transaction. One attorney cannot fully represent both.

5. How important is the offer to purchase?

The offer to purchase is critical. The parties should seek legal assistance in dealing with it.

It is a legally binding contract when it has been signed by both parties and its contingencies are met. Contingencies (such as financing or property inspection) are conditions that protect the parties and must be understood by them.

The offer establishes what property will be sold, what it will cost, when the sale will close, how closing costs will be allocated, and the other terms of the transaction. It also determines if buyer’s earnest money will be forfeited or returned if the sale does not close.

6. What information is available on the property?

An offer to purchase includes information about the property and often contains a contingency to allow the buyer to have the property inspected and rescind the offer if major defects are found. Professional home inspectors, regulated by the state, are available for this. For residential property the seller must provide a condition report disclosing defects of which the seller is aware. Real estate brokers also have disclosure duties. The amount and quality of information that the parties have will help assure the fairness of the transaction and prevent later problems. Some property is sold in “as-is” condition, which makes the buyer’s inspection even more important. Parties should discuss property disclosure issues and questions with their attorneys.

7. Should a buyer ask for title insurance or an abstract and title opinion?

While it may cost less to use an abstract, if one exists, most lenders require title insurance. This may be required regardless what the offer to purchase says. If the buyer contacts a lender before writing the offer to purchase, the lender’s requirements can be determined and included in the offer.

8. What’s the difference between a warranty deed and a quit claim deed?

A warranty deed “warrants” or guarantees that the title is free of all encumbrances except those mentioned in the deed. A quit claim deed transfers what title the seller has (if any), without guaranteeing the quality of title.

9. Are there legal issues in financing?

Financing is the key to most real estate transactions. It provides the funds to make the purchase. There are a number of financing options, and an attorney can help a buyer evaluate them. Buyers may seek loan prequalification to help evaluate what they can afford.

Financing usually is obtained from a commercial lender – a bank, savings institution, or the like. To secure the repayment of the loan, the lender will take a mortgage on the property purchased. It also will look into the buyer’s finances and credit history and may require mortgage insurance. If any problems arise, an attorney can help work them out.

The documents surrounding a mortgage can be very complicated. The buyer needs legal assistance to understand these documents and be sure the buyer’s rights are protected under them.

10. What about a land contract?

A land contract is used where the seller finances the buyer’s purchase of the property. Rather than paying the entire purchase price at closing, the buyer pays the seller in installments and receives a deed when all payments are made.

For the buyer, the land contract may be the only financing available depending upon economic conditions, the type of property, or buyer’s creditworthiness. It may have a small down payment, fewer closing costs, and even a lower interest rate than a mortgage.

Often a land contract will have a short term and involve a lump sum (balloon) payment of the balance when the buyer’s equity will allow mortgage financing of the property.

For the seller, land contract financing may be the only way to put the sale together. It allows a deferral of capital gains over the term of the land contract payments. Enforcement of a land contract is somewhat easier than a mortgage, but the seller assumes the risk that it will have to retake the property and resell it. The land contract also means that the seller does not get all of the sales proceeds on closing.

The land contract is a flexible financing instrument that involves detailed negotiation. The parties need good legal advice to assure that the land contract reflects their agreements and that their interests are protected.

11. When can a foreclosure action be commenced?

Foreclosure terms are stated in your mortgage or land contract. Generally any significant breach, such as failing to make payments or damaging the property in a way that reduces its value, can lead to foreclosure.

Under state law, the buyer may have the right to obtain notice of his or her breaches and to correct them. Since different provisions apply in different circumstances, you should see a lawyer if you have been threatened with foreclosure.

12. Want to build a home?

Building a home (or making other improvements to real property) involves additional contracts that should be reviewed and negotiated by an attorney. The owner must decide what it needs and can afford, which often requires the help of an architect or engineer with whom the owner will have a contract. There is a construction contract covering what is to be built, changes to the plans, performance standards for the builder (including time for construction and delays, and warranties), and costs and extras. Construction can be exciting and satisfying if the rights of the parties are clearly spelled out in contracts and fully understood by the parties.

See also…

Buying and Selling Property

Real Estate and Property Law