In most real estate transactions, particularly when buying or selling a house, a realtor is involved in the process and you may not need a lawyer. However, buying or selling your home or investment property can be one of the most significant financial events you’ll experience in your lifetime. Every transaction should include the creation of real estate documents, including a contract between the buyers and sellers.
Keep reading to learn when you may need an attorney for real estate when buying or selling a house or property.
Complex Language or Situations in Your Real Estate Contracts
The real estate contract consists of the purchase and sale terms between the parties. Most home sales involve a realtor who uses the standard contract for the Missouri county in which the property is located.
Since each real estate contract differs depending on your location, it is vitally important that you read the terms and pay particular attention to the timeframes set forth in the contract. If timeframes are missed, it can result in being stuck with certain contract terms you did not want or even your contract falling through. A real estate law attorney can recommend changes to the contract when deadlines need to be extended for whatever reason.
Sometimes, you may not understand the terms of your real estate contract. Your situation could require complicated wording changes or additions to the standard contract. In these cases, you should consider bringing in a real estate law attorney.
No Realtor Involved
There may also be instances in which a realtor will not be involved, such as when a house is “for sale by owner” (FSBO). So, it may be necessary to hire an attorney to prepare the real estate contract. Owners with a for sale by owner situation are not required to hire an attorney, but it is highly recommended.
The attorney will represent the best interests of the party who hired them. If one side has an attorney, both the buyer and seller would be wise to seek legal advice from their own separate attorneys.
Non-Traditional Sales of Real Estate
As the American economy evolves, issues qualifying for a loan and changing interest rates have caused buyers and sellers to consider entering into non-traditional sales of real estate. Instead of selling a property to a buyer who obtains a traditional loan from a lending institution, owners may find alternative solutions for buyers. There are many factors to consider. The best option for you depends on the circumstances of your transaction and whether you are the buyer or seller.
There are a couple of popular options available to the seller and buyer trying to work together on a solution not involving a traditional lender:
1. Seller Becomes the Lender
For sellers with a property that is fully paid off, they may wish to deed the property to the buyer and then finance the loan themselves, which is called a “seller carry-back.” The primary benefit for using this method is that the seller no longer owns the property and will not have any liability for actions of the buyer on the property. However, in order to re-gain ownership if the buyer stops paying, the seller would have to foreclose the loan much like a traditional lender.
2. Contract for Deed Versus Lease with Option to Purchase
With a seller who desires a monthly payment structure but either cannot (because of a loan on the property) or does not want to deed the property to the buyer, they may wish to create a “Contract for Deed” or “Lease-Purchase” arrangement.
With a Contract For Deed, it is generally just an installment contract to purchase the property. Traditionally, a title company would be used to hold deeds in escrow to distribute one to the seller if the buyer defaults or a different one to the buyer once they pay in full. For several years, using a Contract For Deed became very popular, but it proved to often lead to expensive contract disputes.
Recently, a more popular option is to instead use lease-purchase agreements. A regular Lease Agreement can be used with payments applying fully or partially to the purchase price. In addition, a document is created called an Option to Purchase Agreement which creates a set purchase price for the buyer to pay once they are ready to fully purchase in cash or by taking out a traditional loan. Many sellers prefer the lease-purchase option because it can often be easier to simply evict a buyer who has not made their monthly lease payments. The upside for a buyer is that a large down payment is usually not required and the purchase price will not increase.
A real estate law attorney can help you with a non-traditional real estate transaction.
Contact Our Attorneys for Real Estate Transactions
At 417 Business & Elder Law, LLC we can provide the legal advice you need from the time you decide to sell or buy real estate until the actual closing.
Please call our office at (417) 887-4170 if you have any questions or need a consultation.
This article was also published in the printed version of the Volume 6 Jan-Mar 2017 Newsletter (PDF).
Please call our office at (417) 887-4170 if you have any questions about this article or would like to receive our mailed newsletter.