What Is a Real Estate Attorney, and Why Would You Need One?
You already have a Realtor—do you need a real estate attorney? Learn about the roles these professionals play in real estate transactions, and why it might be a good idea to hire one before you close on your property.
When selling or buying a home or other property, most people expect to see the real estate agents for both parties at closing, along with representatives from the title company and maybe even someone from the mortgage company. But a lawyer? It’s normal to wonder if it’s typical or necessary to see a real estate attorney at a closing. More than adding yet another expensive fee on top of the seemingly endless list of closing costs, a real estate attorney can have a vital part to play in the homebuying process.
Real estate attorneys can ensure that closings go smoothly.
It turns out that real estate attorneys do indeed provide a variety of important functions. Sarah Stitgen is a lawyer with Cook & James, an Atlanta-area real estate closing firm specializing in at-home closings. She says there are several areas of real estate law that attorneys may specialize in, although the general focus is on property and property rights. “Some examples include landlord and tenant relations, preparation of contracts, and litigation when disputes arise over property that cannot be resolved such as boundary disputes and other property rights,” Stitgen says. “Zoning and planning are also areas of real estate law, and a common sub area of real estate law is specific to closing transactions.”
Real estate attorneys can play a role in getting you to through the sale and to a closing—and ensuring the closing goes smoothly. “Depending on the facts, an attorney will either draft the initial agreement for sale or review the standard agreement,” says Matthew T. Eyet, principal of Eyet Law in New Brunswick, New Jersey. Even if standard documents are used, he says there are usually certain terms that both parties agree should be either added, removed, or clarified.
“Whenever a buyer or a seller wants to include specific terms—like a partial appraisal waiver, rent-back provision, or timeline requirements—it’s important that an attorney confirm the language used actually reflects what is intended,” Eyet says. He acknowledges that Realtors can provide sage advice regarding the negotiation strategy, but says they are not trained contract lawyers.
In addition to reviewing or preparing legal documentation, and serving as negotiators, real estate attorneys serve their clients in other ways. “We help buyers and sellers avoid issues and expenses associated with unmarketable titles,” says Eric N. Klein, principal attorney at Klein Law Group in Boca Raton, Florida, explaining, “We deal with issues related to inspections that find undisclosed fix-ups, and expose hidden costs.”
Some states require attorneys at real estate closings, but others do not.
A real estate attorney’s role in the closing process may depend on the state in which you’re conducting business. “In about half of the states in the U.S.—mostly states east of the Mississippi—buyers and sellers hire attorneys to represent them during the process,” explains Rebecca Larson, real estate attorney at Your Home Legal in San Diego. In other states, she says, attorneys are not generally used; instead, title and escrow companies facilitate the transactions.
“In states where attorneys are used, you’ll see them as your attorney, negotiating key provisions of the contract and making sure your position is protected,” Larson says. A secondary role of a real estate lawyer is to serve as a closing attorney. “This attorney handles the paper and money—they prepare loan documents, closing documents, the deed, and make sure everyone has done what they’re supposed to do in order to get to closing.”
In some states, you may have the option to hire a real estate attorney or not, but in other states, you’re not given a choice. “A number of states require real estate attorneys to be involved in transactions, as their participation in the process functions as a form of risk management to those involved,” Klein says.
Who does the real estate attorney represent?
So, does the real estate attorney represent the seller or the buyer, or do they each have their own attorney? It depends. “In states where the attorney is a closing attorney, the attorney doesn’t represent either party,” Larson says. Instead, this person is technically a neutral third party, and doesn’t give legal advice to either side. That’s why she recommends hiring your own attorney to represent only your needs. “There may be times when an attorney represents both a buyer and a seller, but this is rare and should be done with extreme caution,” she warns.
Larson’s concerns are echoed by Eido M. Walny, founder of Milwaukee-based Walny Legal Group, who says that both the buyer and seller can be represented by counsel. “However, it is generally not advisable that a single attorney represent both, because then the attorney is not truly representing either party at all,” he explains. “You cannot be a zealous representative of your client when you have directly conflicting interests on either end of the table.”
Why would an attorney be present and not advise either the buyer or seller? In some states, like Georgia, Stitgen says the closing attorney represents the lender in a loan transaction. “Buyers and sellers need to be aware that although they may be paying the fee, the attorney does not represent their interests.” She says there’s an ethical obligation to explain documents to the parties, but not necessarily provide legal advice. Stitgen concludes, “If a buyer or seller wants that type of representation, they should engage their own attorney to provide that.”
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Hiring a real estate attorney to represent you can save you money (and trouble) down the road.
Knowing that closing costs can be quite expensive, you might be tempted to forgo hiring your own real estate attorney. Klein advises against a DIY strategy. “Reading guides on the internet about how to handle the various processes involved in a real estate transaction is a poor substitute for the insight and counsel that a highly seasoned and experienced attorney accountable to a professional oversight board can provide,” he says.
Larson agrees, and says the cost of not knowing what’s in your contract (or how to protect yourself in the future) will far exceed whatever you will spend on having your contract reviewed. “Buying real estate is likely one of the most expensive things you’ll do in your lifetime, and a real estate attorney keeps you out of costly litigation, both now and in the future,” she says.
There’s another reason why having a real estate attorney can be advantageous: Realtors get paid on a commission, so if there is no sale, they don’t get paid. “That can cause an inherent conflict of interest with the client; on the other hand, attorneys generally get paid regardless of if a deal gets done, which allows the attorney to generally be more objective,” Walny says.
In addition, Realtors aren’t attorneys and don’t undergo the type of training attorneys do. “So if there are issues that are out of the ordinary, or the client simply wants a zealous advocate or services outside of what a Realtor generally handles, that is when an attorney can be of significant value, particularly when working hand in hand with a Realtor,” Walny explains. “A good real estate attorney can add a tremendous amount of value to a deal. Sometimes that value comes in the form of encouraging the client, whether a buyer or seller, to simply walk away.” Sometimes, Walny says, the best deals are the ones that never get done.
How much does a real estate attorney cost?
Attorney fees can range from a few hundred to a few thousand dollars. Larson says the amount is generally based on the value of the transaction. “Private attorneys bill hourly or on a flat fee basis: hourly rates can range from $200+ per hour and likely range in fees from $1,500–$8,000, and flat fee attorneys can range from $500–$600 or more.”
Since attorney fees are not set by a state agency, Larson explains they can also vary widely based on geography. She recommends interviewing several attorneys to find one who fits your budget and your personality.
Finally, don’t forget to consider the value they may be adding to the transaction. “Most of the time, real estate transactions either go smoothly or are canceled with minimal fighting, so it can be easy to forget the vital role real estate attorneys play,” Eyet says. “But much like title insurance, on these occasions when something unexpected happens, you will be glad you included an experienced attorney in the process.”