Tuesday, February 26, 2008

Hire an attorney before a real estate agent?


I was interviewed yesterday by a national publication for an article concerning advantages and disadvantages of using a real estate agent when you are buying or selling real estate. I highly recommend that people have real estate agents, but I am even more adamant that people hire an attorney to assist them with purchasing or selling real estate. I mentioned, somewhat in passing, that I always recommend that people hire an attorney before doing anything else in anticipation of buying or selling real estate. The interviewer was taken aback by this concept and reasonably asked why someone would want to do that.

Sure, it may be a bit self-serving for an attorney to suggest that buyers and sellers should hire an attorney. But let me explain.

Buying or selling real estate is, for most of us, the biggest financial transaction of our lives--tens or even hundreds of thousands of dollars and decades of financial obligation. You need someone by your side who represents only you. You need someone who understands the issues and problems. While lenders, real estate agents, appraisers, and title companies may be involved in your transaction, only your attorney is ethically bound to have an undivided loyalty only to you. If any of these individuals tell you that you do not need an attorney, you owe it to yourself to question why they would make such a recommendation to you. Are they trying to hide something? Are they afraid someone who is looking out only for you might question the transaction? Our website has a whole page of examples of what did go wrong for people who did not have an attorney, and things that did not go wrong but would have had we not been involved.

Most attorneys charge a flat fee for real estate transactions. So they are not interested in maximizing the purchase price to maximize their fee. Their fee is their fee whether your purchase price is $10,000 or $1,000,000. Their fee also is not dependent on whether or not you actually purchase the property. So a good real estate attorney is not afraid to tell you when it is appropriate to walk away from the purchase or sale. Reputable attorneys are never, ever, ever "dual agents." An attorney should represent the buyer or the seller, but not both.

A real estate attorney has the experience and expertise to guide you through a complicated process, from start to finish. What often happens, at least in this area, is that people hire a real estate agent first. They find a house (or a buyer for their house) and sign a purchase agreement. At this point, they are already obligated. If there is something in that agreement which would work to your detriment, there usually is not much that can be done by your attorney. Find an attorney first, and have them review the purchase agreement before you sign it. The best time to contact your attorney is before you even start looking for a home or when you are just preparing to sell your current home.

An experienced real estate attorney can even recommend lenders and real estate agents who have a demonstrated track record of reliability, integrity, and expertise, saving you a great deal of worry and frustration. As with any profession, the vast majority of lenders and real estate agents are reputable and work very hard for their clients, but there are a few who do not. A real estate attorney will have the experience to know who falls into which category, and will not be afraid to let you know--in fact, you attorney will be ethically obligated to let you know.

And for those of you who opt for the FSBO (for sale by owner) route, your attorney can be a wealth of information, and ensure that you comply with all applicable laws and disclosure requirements.

I honestly think that if everyone hired an attorney to represent them, there would be much less mortgage fraud, and much, much less predatory lending. If I had a nickel for every time I prevented a lender from taking advantage of one of my clients, I would have $4.35. Sure, I would be on the St. Patrick's Day card list of quite a few more people than I am currently if I would just "look the other way," but that is not a trade off I am willing to make.


Joshua said...


Just ran across your blog and from what I've read so far I'm loving it, particularly this article.

Question: You mentioned in the article that someone was intervewing you. Can you link us readers to that article? Thanks Tom and keep up the great work!

Thomas O. Moens said...

Thanks Joshua. You know, she never did email me a link to the article, or if she did I did not see it. I think it was someone from CNBC, but it has been to long to remember. I will try to search around and see if I can find anything on it. Thanks for asking.