What can an attorney do for a seller?
A lawyer can protect the seller's interests in the sale process by:
- writing or reviewing listing contracts and offers; and advising on
issues related to sale;
- helping satisfy conditions to the offer and resolving problems that arise;
- drafting deeds, transfer returns, and other transaction documents; and
- reviewing financial arrangements and assuring obligations are met at closing.
What can an attorney do for a buyer? The buyer's attorney can make sure the buyer receives what the contract provides by: - drafting or advising on buyer agency agreements and offers, including conditions and contingencies added for buyer's protection;
- examining seller's title (abstract or title insurance commitment) and explaining the documents affecting that title;
- answering legal questions about the property and its purchase including options for holding title;
- checking
the note and mortgage, deed, and other documents; explaining buyer's
legal rights and obligations under them at closing; and
- reviewing title after closing to make sure all legal requirements
have been met.
Can't the real estate agent handle the transaction? Real
estate agents are prohibited by law from giving legal advice and
representation. In Wisconsin, real estate agents act as intermediaries
in a sale or purchase but can't advocate for either side nor provide
legal advice.
In many transactions no real estate agent is
involved. In those transactions the attorney should be more deeply
involved in the negotiation and drafting of the offer and seeing the
transaction through to closing.
Should the same attorney represent the buyer and seller? It's
not a good idea. The buyer and seller have conflicting interests in a
real estate transaction. There also may be other parties to the
transaction (the lender and title company, for example) and their
attorneys represent their interests, which are not the same as the
buyer's and seller's interests.
How important is the offer to purchase? The
offer to purchase is critical. Buyers and sellers should seek legal
assistance in dealing with it. The offer is a legally binding contract
when both parties have signed it and its contingencies are met.
Contingencies (such as financing or property inspection) protect the
parties by setting conditions that must be resolved before the sale is
completed or "closed."
The offer establishes what property will
be sold, what it will cost, when the sale will close, how closing costs
will be allocated, and the other terms of the transaction. It also
determines if the buyer's earnest money will be forfeited or returned
if the sale does not close.
Many offers include a contingency
for attorney approval. This allows the attorney to review the offer and
recommend changes to it to assure the contract is valid and the
parties' interests are protected.
What information is available on the property's condition? An
offer to purchase includes representations about the property and often
contains a contingency to allow the buyer to have the property
inspected and to cancel the offer if major defects are found.
Professional home inspectors, regulated by the state, provide this
service for a fee. For most residential property, the seller must
provide a condition report disclosing defects of which the seller is
aware and a disclosure regarding lead-based paint. Some property is
sold in "as-is" condition, which makes the buyer's inspection even more
important. Real estate licensees also must inspect the property and
disclose defects. Nonresidential property transactions also may include
property condition reports as a contingency. Buyers may obtain a
history of insurance claims on the property through an insurance agent.
Parties should discuss property disclosure issues and questions with
their attorneys. The amount and quality of information that the parties
have will help assure the fairness of the transaction and prevent later
problems.
How do you hold title to real estate? Individuals
and entities (such as corporations or limited liability companies) may
own property individually or with another person as tenants-in-common
or joint tenants.
Married couples living in Wisconsin are
subject to the Marital Property Act, which affects how title is held.
Under that law, property may be: individual property of one spouse;
marital property (owned in equal shares by the spouses); or
survivorship marital property (marital property with a right of the
survivor to full ownership when the first spouse dies). Couples who
owned property before the Act went into effect (1986) may hold it
individually, in joint tenancy, or in tenancy-in-common, or may change
the title to one of the options described above under the Act.
Management and control of the property (including the right to sell) is
given to the spouse who has title as shown on the public records except
for "homestead" property (generally the couple's primary residence).
For homestead property, both spouses must sign deeds and most mortgages
affecting it.
An unmarried couple may own property together as
tenants-in-common or joint tenants, but it is advisable for them to
have an attorney prepare an agreement spelling out their respective
rights and obligations in regard to the property.
Does a buyer need title insurance? A
buyer wants to know if the seller has good title to the property. This
is generally done using title insurance. An attorney can determine if
title is good by reviewing the commitment for title insurance.
What's the difference between a warranty deed and a quit claim deed? A
warranty deed "warrants" or guarantees that the title is free of all
title claims against the property except those mentioned in the deed. A
quit claim deed transfers what title the seller has (if any), without
such guarantees.
What legal issues are involved in financing? Financing
is the key to most real estate transactions. Financing provides the
funds necessary to make the purchase. There are several financing
options, and an attorney can help a buyer evaluate them. Buyers should
contact a lender before writing the offer to purchase to determine the
lender's requirements and to get "prequalified" for a loan.
Buyers usually get financing from a commercial lender – a bank, savings
institution, or the like. To make sure the loan is repaid, the lender
will take a mortgage on the property purchased. The lender also will
look into the buyer's finances and credit history, and may require
mortgage insurance. If any problems arise, an attorney can help work
them out.
The documents surrounding a mortgage can be very
complicated. Buyers should seek legal assistance to understand these
documents and be sure their rights are protected under them.
What is a land contract? A
land contract is used when the seller finances the buyer's purchase of
the property. Rather than paying the entire purchase price at closing,
the buyer pays the seller in installments and receives a deed when all
payments are made.
For the buyer, the land contract may be the
only financing available depending upon economic conditions, the type
of property, or the buyer's creditworthiness. A land contract may have
a small down payment, fewer closing costs, and even a lower interest
rate than a mortgage. Often a land contract will have a short term and
involve a lump sum (balloon) payment of the balance when the buyer's
equity will allow mortgage financing of the property. For the seller,
land contract financing may be the only way to put the sale together.
Enforcement of a land contract is somewhat easier than a mortgage, but
the seller assumes the risk that it will have to retake the property
and resell it.
The land contract is a flexible financing
instrument that involves detailed negotiation. The parties need good
legal advice to assure that the land contract reflects their agreements
and that their interests are protected.
When can a lender foreclose on a property? A
significant breach, such as failing to make payments or damaging the
property, will allow the lender or land contract vendor to foreclose.
Foreclosure terms are stated in the mortgage or land contract.
Foreclosure may result in the sale of the property and loss of the
buyer's interest in it.
Under state law, the buyer may have the
right to be notified of his or her breaches and to correct them.
Because different provisions apply in different circumstances, buyers
should see a lawyer if they have been threatened with foreclosure.
Does the purchase and sale process vary with the type of real estate involved? The
basic process remains the same regardless what type of real estate is
involved in the transaction, but certain elements may have greater or
lesser importance. There are things to consider in buying or selling a
farm that differ from those involved in a resort condominium unit, a
factory, a home, or an investment property. An attorney can help assure
the different elements of the transaction are fully considered.
What do owners need to know about building a home? Building,
remodeling, or adding on to a home or property involves additional
contracts that an attorney should review and negotiate on the owner's
behalf. The owners must decide what they need and can afford, which
often requires the help of an architect or engineer with whom the owner
will have a contract. The owner and the builder will need a
construction contract covering what is to be built, changes to the
plans, performance standards for the builder (including time for
construction and delays, and warranties), and costs and extras. The
owner may need a construction or home equity loan. Construction can be
exciting and satisfying if the rights of the parties are clearly
spelled out and fully understood.
What about taxes? Most
real estate sales are subject to a transfer fee payable to the state.
Most first home residential sales are exempt from tax on capital gains.
Investment real estate is subject to capital gains tax but this may be
deferred by an exchange which an attorney can help arrange.
Last updated: September 2004
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