Why You Need a Real Estate Attorney on Your Investment Team
A real estate attorney is required at closing in many states. Even if your state doesn’t demand that a real estate lawyer appear, having a legal professional representing your interests is usually a good idea.
When you’re investing in real estate, finding the right lawyer is essential. Your real estate attorney assists you in navigating every aspect of the process. If legal issues arise in real estate transactions, you have someone who knows 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 generalists, when buying and selling property, you should hire a true real estate lawyer to advise you and protect your interests. Such an attorney is well-versed in property law concerning state laws.
If you are considering investing out of state, look for attorneys licensed to practice in other states.
What Does a Real Estate Attorney Do?
A real estate attorney represents you in all matters related to real estate law. Your real estate attorney’s role may include the following tasks:
Legal documents preparation
Even simple real estate transactions can involve substantial paperwork. More complicated situations only increase the sheer volume of legal documents.
For instance, a real estate lawyer arranges with a title company to conduct a title search. The property must have a clear title with no third-party claims. Once the title company provides a report, your real estate attorney reviews it and works with your mortgage lender or other relevant parties if any title issues exist.
Ensuring all legal documentation is correct is a primary role of real estate attorneys. Real estate is likely your biggest investment. Working with a licensed attorney is critical.
During the review process, your lawyer should catch any errors in closing and other documents involved in the real estate transaction. The start of the deal is the real estate contract.
Often, a real estate agent draws up the initial contract. Real estate lawyers must review the purchase contract carefully, as it sets forth the buyer and seller’s obligations. The attorney then drafts riders, also known as amendments, for their clients’ needs. These amendments may involve financing and appraisal contingencies, personal property included or excluded, and unique provisions affecting the property in question.
Real estate transactions don’t always run smoothly. Perhaps there is a lien on the property, a title issue, or a boundary question. Your real estate lawyer works to resolve these disputes so you can move forward with your real estate transaction.
Using the right business formation for investment properties protects you from liability. Your real estate lawyer will work with you to determine whether an LLC, partnership, or some 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 on related legal matters, such as tax implications when selling property.
Equity and debt investment structures
Real estate lawyers assist clients in the structure and management of their equity and debt, focusing on maximizing their returns.
Drafting tenant leases
Your real estate lawyer should draft a strong lease agreement for tenants to avoid potential disputes. All parties benefit from a clear lease agreement that protects their interests.
You could simply use a boilerplate lease agreement and save some money as a landlord. That’s a penny-wise and pound-foolish, as a professional with a thorough knowledge of real estate law ensures your real property is as fully protected as the law allows.
Dealing with tenant complaints
When a tenant complains, you must know whether that complaint is legitimate according to the terms of the lease or applicable local, state, or federal law. Your lawyer will explain landlords’ and tenants’ legal rights and responsibilities and whether the complaint breaches the lease agreement.
The attorney will act to resolve the complaint before it escalates into costly litigation.
Property tax advice
Real property ownership means paying property taxes. Your current property taxes may not reflect the realities of the market. Your lawyer can advise you about filing a property tax appeal to fight an overvalued assessment.
Benefits of Partnering With a Real Estate Attorney
When you partner with a real estate attorney for your investment properties, they can handle virtually all of the process. That leaves you, as the investor, more time to concentrate on obtaining a good return on the investment.
If problems arise before, during, or after the purchase of a property, you can rely on your real estate lawyer to sort them out.
Real estate attorneys will advise you about backing out of a deal and avoiding a costly mistake.
The bottom line is that the real estate attorney you hire is always working to protect your best interests.
How Much Does a Real Estate Attorney Cost?
A real estate attorney’s services may be inexpensive, but remember, 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 a lawyer for your investment team.
A real estate lawyer may charge you hourly or flat rates. 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. Googling is a great way to get started, but the goal is to find a good real estate lawyer, not an average attorney.
Your best bet is often asking 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 with real estate experience are another good source of advice.
Look for lawyers with experience in your particular field. For instance, if you’re investing in commercial property, look for attorneys specializing in that domain. Some real estate lawyers are generalists, doing whatever real estate work comes their way. Because the various realms of real estate investing are so different, these attorneys are more likely to make mistakes. They are not necessarily experts in real estate law.
Rather than go with a larger firm, check out smaller practices. You will work directly with one attorney rather than being delegated to less experienced associates at larger firms.
What To Ask a Real Estate Attorney
Conduct interviews before deciding on whom to hire as a real estate attorney. You seek a long-term professional advisor, so you must 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 either residential, commercial, or industrial real estate investing?
- How many real estate transactions have you closed?
- Do you go to court regularly to handle 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 a property due to an avoidable legal problem. After all, real estate investing aims to maximize profits while reducing risks. The right real estate attorney helps to fulfill both objectives.
By hiring a real estate attorney as part of your investment team, you should save money over the long term. That’s because the work of the attorney you hire can limit future problems.
Once a real estate attorney is hired, you have someone to advise you on every aspect of your investment strategy while protecting your interests. Smart investors know how valuable the services of a lawyer are when dealing with complicated legal matters pertaining to property.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.