ATTORNEYS AND REAL ESTATE CONTRACTS

See an attorney before signing any contract for selling or buying real estate. A quick – and often inexpensive – consultation with an attorney can save buyers and sellers heartache, worry, time, and money. Problems typically arise when an individual, after entering into a contract without the benefit of counsel, realizes, only too late, that something is not right but that it is too late to undo or change it. In many instances the direction of the transaction was determined the moment the client signed the contract without having had an attorney review it first.

Is working with a real estate agent sufficient to protect your interests? Quite honestly, there are certain legal aspects of real estate sales that real estate agents are not trained or educated to deal with. Real estate agents serve very valid roles in the buy-sell process. One thing to remember, however, is that if the sale does not go through, the real estate agent does not get a commission. This is not to mean that the agent is not honest or truly looking out for the buyer’s or seller’s best interests. In fact, all the real estate agents I have worked with are truly dedicated to serving the clients they work for. However, there are legal aspects of every sale that should be reviewed by an attorney, who has no vested interest in whether the sale is completed or not, and who will be looking at different aspects of the contract than the real estate agent’s area of expertise.

Buyer and seller predicaments arise from so many various circumstances, it is impossible to address them all. Common mistakes include the failure to adequately define the inventory of personal property or appliances included in the sale, too little (or excessive) time having been given to accomplish tasks such as due diligence, financing, or inspections. Sometimes too much – or too little – deposit money has been put down, not protecting the interests of one of the parties. At times a buyer will realize that he or she does not have adequate contingencies and can lose a deposit unnecessarily. Or a seller can find that he is bound by the terms of a contract that has overly-liberal contingencies on financing, inspections, time-frames, etc. and wastes time in the process of trying to conclude a sale that actually is never going through, while other, more-qualified buyers may be missed.

Quite frankly, it is risky to sign any contract without a brief consultation with an attorney. What if too little deposit money has been put down to encourage the buyer to go through with the sale if he changes his mind? What if there are unreasonable and unnecessary provisions that, having been eliminated, would have better protected your interests? Another important area that sellers should address is the tax implication of the sale. Would it have been better to wait before selling? Will the taxes that the seller has to pay on the proceeds of the sale outweigh the benefit of selling? Is there a way to prevent having to pay excessive tax? Failure to understand either the contract, or the implications of the sale, can lead to unpleasant surprises or disappointment.

A buying or selling party should permit the other to add a provision allowing for getting the advice of an attorney within a brief time (a few days). A well-written provision can clearly state that the contract is subject to the review and approval of the buyer’s (or seller’s) attorney. The job of the attorney should not be to negotiate a better deal for the party or otherwise change the business transaction. The role of the attorney should be to advise the client as to the legal requirements of the contract and advise if there are ambiguities or issues not addressed.

The purchase and sale of a home is a major event in one’s life. Retaining an experienced real estate attorney in advance of signing a contract for sale or purchase can protect your investment and assist in ensuring that the transaction proceeds smoothly and in accordance with the party’s expectations. Once a contract is signed, however, obligations are defined – whether or not that party understands the details of the contract. The best and most practical advice is simple: See an attorney prior to signing the contract, or make sure that any contract you sign includes the right to seek counsel before it becomes binding on you.

Jeffery J. McKenna is a local attorney licensed in three states and serving clients in Utah, Nevada, and Arizona. He is a partner at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite. He is a founding member of the Southern Utah Estate Planning Council. If you have questions or topics that you would like addressed in these Wednesday articles please email him at jmckenna@www.barney-mckenna.com or call 628-1711.