Bar News - May 17, 2013
Real Property Law: The Buyer’s Gap: How Attorneys Can Help
By: Edmund J. Boutin and Lynne Guimond Sabean
Despite the frequency of home conveyances, the acquisition process can be complex, confusing, and isolating for first-time and experienced buyers alike. This is due in part to perpetually ongoing changes to government regulations of loan providers. But even when financing is not an issue, the process can still be daunting and frustrating. Buyers can feel like no one is in "their corner"... and too often, they’re right.
There is a certain level of inherent risk in a process where everyone else is a stranger to the buyer. The interests of these other parties all hinge on a quick and tidy closing, even if the terms of that closing are not necessarily in the buyer’s best interest. When this happens, the buyer takes on a higher risk allocation than he/she deserves. This is where an attorney offering buyers’ services can help.
Because buying a home is expensive and because many transactions close without the guidance and advice of a buyer’s attorney, it is tempting for buyers to see a lawyer as an unnecessary and expensive indulgence. However, the cost of having an attorney represent a buyer prior to closing is small compared to that of retaining one later to resolve problems which could have been addressed earlier in the process.
Many buyers do not think of obtaining legal counsel – especially early on – because they do not see the "gap" that exists in the home-buying process. They may think that their real estate agent, title company, mortgage company, and settlement agent are working solely on their behalf. Yes, those other parties have an interest in seeing the closing go through, because that is how they get paid. But what is acceptable to the lender for closing purposes, for example, may not necessarily be in the best interest of the buyer, who actually has to live in the house once the papers are signed and the keys are handed over. When all is said and done, these other parties have typically no duty to ensure that closing happens on the best terms possible for the buyer. A buyer’s lawyer – paid for by the buyer and representing only the buyer – can help minimize this gap at every step of the way.
Falling Into the Gap
The gap between buyers and other parties can begin even before a purchase offer is extended. For instance, when a prospective home buyer approaches a real estate agent to see some listed properties, he or she may be asked to sign representation forms. Buyers feel pressured to sign these forms, because if they do not, their agent has a duty to the seller to pass along any information the buyer may share (such as his or her financial situation and the top price he or she is willing to pay). Even though these agreements may be rescinded at a later date, they still have important consequences to the buyer.
The gap between an unrepresented buyer and other parties to the transaction can broaden quickly. The purchase agreement, financing arrangements, closing ritual, and deed recording process are all potential minefields for the unfamiliar and/or unprepared. If the property is distressed – such as a foreclosure, short sale, or real-estate-owned property – the buyer’s gap can grow exponentially. Additional delays, requirements, and "red tape" not commonly found in a "typical" closing make the acquisition of a distressed property particularly challenging and stressful. A buyer’s attorney can help make it less so.
Potential buyers of non-distressed properties can also benefit from retaining a buyer’s attorney. For instance, a real estate agent may insist that a standard purchase agreement form is adequate, even where it may not be optimal. This is because real estate agents, unless also licensed attorneys, cannot offer legal advice. They also cannot draft/revise legal documents, aside from filling in and making minor changes to standard, pre-printed forms. However, a standard purchase agreement form may not always fully reflect the intentions of the buyer and seller. A buyer’s attorney can explain the contents and implications of a purchase contract to the buyer and recommend tailoring it to the client’s needs.
Filling the Gap
A buyer’s attorney can fill the gap between buyers and other parties to a real estate transaction in other ways. For instance, he or she can track important deadlines and/or advise on how regulations, ordinances, deed restrictions, easements, and covenants may impact the buyer’s use and enjoyment of the property.
Because the buyer’s agent typically does not get paid unless there is a closing, he or she has a personal interest in ensuring that the seller will not walk away from negotiations (taking the potential commission with him or her). Also, the higher the purchase price, the higher the commission. This could lead to a potential conflict between the interests of the broker and those of a buyer, particularly as we progress once again to a seller’s market. A buyer’s attorney is removed from the emotions of the purchase, and his or her compensation is not typically tied to the purchase price, allowing the attorney to more objectively negotiate on the buyer’s behalf.
Also, loan commitments and other related documents can be very intricate. Condominium and homeowner association documents often involve use restrictions, financial commitments and allocation risk. Also, standard financing forms often fail to incorporate the understanding between the particular buyer and seller. A buyer’s attorney can review, explain and suggest appropriate changes to them. Moreover, even the best loan providers, title insurance companies, and escrow agents can, and do, make mistakes. While it seems obvious that buyers should have the chance to review closing documents prior to closing, it does not always work out that way. The closing process goes more smoothly when there is someone in the buyer’s corner to catch and rectify errors ahead of time. Also, by attending the closing, a buyer’s attorney can resolve last-minute issues about possession of the property or adjustment of costs.
The buyer’s use for an attorney does not end when the keys are handed over. A buyer’s attorney can verify that the deed is recorded correctly and help the buyer decide whether to file for property tax abatement. He or she can also assist with any post-closing contractual issues: for instance, if the seller agreed to do something at closing to salvage the conveyance, but later reneged on his or her obligation.
Without a lawyer to close the gap, buyers make their home purchase needlessly risky. The right lawyer can help buyers navigate through a complex, obstacle-ridden process and avoid the potentially expensive, long-term consequences of "going it alone."
Edmund J. Boutin, a member of Boutin & Altieri PLLC, practices in the areas of land use law, environmental law, public utilities, insurance coverage, professional liability, lawyer discipline defense, and municipal law.
Lynne Guimond Sabean, an associate at Boutin & Altieri PLLC, successfully minimized "the buyer’s gap" while purchasing her own home – listed as a distressed property – last year.