Legal Representation For Real Estate Purchases and Sales

Legal Representation Real Estate Closings

The selection of a seasoned, competent and communicative attorney may be the single most important relationship in a real estate transaction. Now more than ever choosing an attorney who is sufficiently competent and whose fee is reasonable and customary is not the only two criteria to select a lawyer. A seller or purchaser should retain an attorney who is competent and experienced, who can protect your interests, who understands the market and who can help and not hinder the transaction. Remember, if your attorney fails to include important provisions or negotiate a provision properly, the only person that will suffer is the client.

1. Selection of Attorney

It is probably a smart idea to select an attorney as soon you know you are ready to buy or sell. Waiting until an offer is accepted may delay the contract preparation and negotiation. When interviewing an attorney to represent you, the following is a guideline of some of the questions you should ask:

  1. Is the Attorney admitted in the state of New York? An attorney not admitted in New York State may not know the state and local laws which will govern the transaction. New York State real estate laws are the most complicated in the country. Attorney must be current with new laws and statutes (ex. Foreign investors, non NYS resident gains tax, 1031 tax exchanges). In addition, New York State requires attorney representation (as opposed to escrow or title companies which is acceptable in other states)
  2. What is the attorney’s experience? Certainly you may inquire how long the attorney has been practicing law and whether they have extensive experience handling residential real estate sales and purchases (a commercial real estate attorney has different experience than a residential real estate attorney). Furthermore, the attorney should have experience in real estate in the area involving the transaction (ex. Co-op, condo, one to four family, townhouses/brownstones). The attorney must have the ability to negotiate the contract terms efficiently and be creative. When an issue comes up in the transaction, can the attorney think “outside of the box”?
  3. Is the attorney a solo practitioner or does the attorney work in a small or large firm? Will the attorney be available for questions and to deal with problems and attend the closing? A solo practitioner may provide the most personal approach as this will be the only one who will be handling the transaction. A small or large firm may pass on the work to associates or even paralegals.
  4. Does the attorney specialize in real estate or is the attorney a general practitioner? An attorney who is a general practitioner may be spread out on other types of matters and may not always be available (ex. Handling a litigation and always in court). Certainly, it is a plus if the attorney is familiarity with properties, developers, managing agents and opposing counsel.
  5. Is the attorney available and accessible to handle the matter? Always inquire whether the attorney has a plan vacation. The attorney must be available by email, cell phone, blackberry, secretary, etc.)
  6. Has the attorney published articles or lectured in the community? Attorneys who teach real estate related classes may have vast more knowledge of real estate than others.
  7. Can the attorney provide any references? Speaking to one or more satisfied clients
  8. What are the attorney’s fees and expenses? What is the fee structure? Will the fee be fixed or hourly? When is the fee due? Will there be a retainer? What will be the out of pocket expenses? The Bar Association requires a written retainer agreement if the fee is in excess of $3,000.00.
    Although many attorneys bill buy the hour, most charge a flat fee for a home closing. The amount may vary depending upon whether the attorney is representing a buyer or a seller, how much experience the attorney has, the size of the law firm, if there is financing and any complications. A client must remember you “get what you pay for.” It is not prudent to haggle over a few hundred dollars because a seasoned attorney who can resolve obstacles and is charging more.
  9. What is the attorney’s disposition? Is the attorney friendly and have a good “bedside” manner? Are you compatible with the attorney’s personality? An aggressive or abrasive attorney may be better suited for a tough business deal and may be a major impediment to negotiating and less suited for a selling or buying a home. This does not mean that your attorney should accept unfair changes and not fight for your interest – it is a balancing act. Having a good chemistry with your attorney is of key importance.
  10. Your attorney should be creative and be able to address road blocks – every deal has issues. Your Attorney should negotiate and not “litigate” a contract. Don’t expect your attorney to recommend or dissuade a transaction

    A purchaser or seller should be clear with his or her attorney what they want to accomplish. Don’t be shy to tell your attorney that the sale or purchase is important to you, and that you want the attorney to do everything possible to facilitate the closing. It is unlikely that you will switch attorneys in the middle of the transaction – so the client will need to select up front an attorney who has the skills, experience and personality to work with you throughout the transaction.

2. The Retainer Agreement

Once an attorney has been selected, you should ask to review the retainer agreement (sometimes referred to as an engagement letter). This usually takes the form of a letter from the attorney countersigned by the client. The retainer will set forth what services the attorney will provide as well as when fees are due and how they fee is calculated (hourly or flat), under what circumstances you can be billed for more and how out of pocket expenses are paid (messenger, overnight courier fees, photocopy charges, long distance calls). It is not unusual for the attorney to ask for a monetary deposit before work commences.

To protect yourself, ask if the attorney can put a cap on out of pocket expenses. It is impossible for the attorney to know in advance what problems will be encountered in a real estate transaction but certainly smaller consistent issues should be covered in the fee. If a major problem occurs, you should be entitled to know how much time it will take to resolve and how the extra time will be paid for. The retainer agreement should provide that the attorney must notify the client if he or she believes extra work will be involved BEFORE any extra time is expended.

3. Summary of Services for a Purchase Transaction

  1. Client intake must discuss all of client’s desires and concerns (example: close date, financing contingency, repairs, etc).
  2. Due Diligence is the most important part of a purchase and requires more work than a sale transaction. Prior to signing a contract in New York, the attorney must review all underlying documents affecting the property and advise the client if there are any issues (ex. insufficient reserves, deficits, lawsuits, repairs)
    1. Co-op Apartment – must review financial statements of the co-op corporation, offering plan and amendments, by-laws, proprietary lease, house rules, board application and confirm the correct name of the co-op, number of shares allocated, how much the monthly maintenance is and whether there are any assessments.
    2. Condo Apartment – must review financial statements of the condominium, offering plan and amendments, by-laws, condo declaration, house rules, board application and confirm the correct name of the condo, percentage of common elements, how much the monthly common charges are and whether there are any assessments.
    3. One to Four Family House/Townhouse/Brownstone – Review title, deed, survey, certificate of occupancy, real estate taxes, service plans and review home inspector reports.
  3. Address financing. How much will the Purchaser borrow and will the contract be contingent or non-contingent upon financing?
  4. Review Closing Costs with purchaser
  5. Review and negotiate the Contract of Sale. Add appropriate riders
  6. Meet with Purchaser to review due diligence and contract
  7. Work with banker/mortgage broker to secure the loan commitment and clear the loan conditions
  8. Order and review the lien search (co-ops) or title report (condos and houses)
  9. Assist with the preparation of and review of the co-op and condo application
  10. Provide preliminary closing instructions (insurance, final inspections, Con Edison)
  11. Schedule the closing
  12. Calculate final closing costs and provide a check break down for the Purchaser
  13. Attend the closing and carefully explain all documents that need to be signed
  14. Prepare and transmit a final closing statement with a financial summary and copies of all of the purchase documents

4. Summary of Services for a Sale Transaction

  1. Client intake must discuss all of client’s desires and concerns (example: close date, financing contingency, repairs, etc).
  2. Review Closing Costs with seller
  3. Draft and negotiate the Contract of Sale. Add appropriate riders.
  4. Meet with Purchaser to review contract.
  5. Arrange to payoff any existing loans on the property.
  6. Review title or lien search.
  7. Follow up on loan commitment and board application.
  8. Provide preliminary closing instructions to seller (moving, terminating electricity, water readings, etc)
  9. Schedule the closing
  10. Calculate final closing costs and provide a check break down for the Seller
  11. Attend the closing and carefully explain all documents that need to be signed
  12. Prepare and transmit a final closing statement with a financial summary and copies of all of the purchase documents

5. Sponsor/New Development Transactions

When purchasing a new apartment from a developer/sponsor, there are many several
Other considerations involved that your attorney will need to explain:

  1. Additional Closing Costs (transfer taxes, contributions to reserve funds, sponsor’s legal fees, super’s apartment)
  2. Risks regarding closing date and sold apartments

The selection of an attorney can be time consuming but in the end, working with an attorney who can protect your interest, handle unexpected problems during the transaction or at closing and who has the personality to abet rather than hinder the negotiations between the parties will well be worth the expense and effort locating the attorney.

*DISCLAIMER – Nothing herein is offered as legal advice. All information in this article is for informational purposes only. Please consult with an attorney before taking any legal actions.