Buying or selling a home is one of the largest financial transactions in your life. There can be a lot of players involved in the transaction: buyer, seller, lender, realtor, title company, appraiser, State government, Federal government, IRS, inspectors and sometimes contractors, with their own competing interest. The entire process can be complicated with turns and options that can cost or save you money. With years of experience and training and only your interest to serve, the attorney can guide you from the start with the important contract to the finish with the transfer papers and closing.

If you are selling your home by owner or if you are a buyer purchasing a home without a realtor there should be no doubt that you both need your own attorney representing you. If you are selling your home yourself you are already savings 7% of the sales price in a realtor's commission. For your protection don't try to sell or buy without an attorney when attorney fees are a small part of the total transaction costs.

Most realtors do a good job on finding a buyer, completing the basic contract and guiding the sales process. If I had been asked ten to fifteen years ago if a seller or buyer represented by a realtor also needed an attorney, I would have had to acknowledge that then most residential home sales with the form realtor's contract concluded without an attorney. I would have also acknowledged that when the lender required good title insurance for their mortgage they would indirectly be obtaining good title insurance for the buyer.

Home Sale Contracts are now more Complicated

My opinion has now changed. Contracts for residential home transactions now rarely contain just the basic provisions of ten years ago. The mandated disclosures for lead paint, radon and the Illinois Residential Disclosure form (with its questions on the condition of the house and the right of the buyer to sue based on the disclosure) have been added to the paperwork and require careful preparation. As buyers have become more knowledgeable about the pitfalls of radon, lead, mold and environmental concerns and less willing to purchase a home with hidden problems that require major work in the foundation, plumbing or electrical systems, contracts now will almost always include inspection provisions.

Standard Inspections Paragraphs don't do a good job

HOWEVER, MOST STANDARD CONTRACTS PROVISIONS ARE INADEQUATE IN THE INSPECTION, REPAIR AND REMEDIATION AREAS ESPECIALLY FOR THE PROTECTION OF THE BUYER. AND MOST DISPUTES OVER INSPECTIONS AND REPAIRS NEED AN ATTORNEY TO RESOLVE. 

Almost every dispute I am involved with in a residential sales contract situation involves the use of the standard inspection and repair paragraphs found in most basic contracts. Many times I will find handwritten provisions or changes in the margins of the contract which are unclear. There is a disagreement between seller and buyer on what is necessary for repair and how the costs are to be paid for and if either party can cancel the contract without liability due to serious and costly problems revealed by the inspections. If the inspections reveal structural or mold problems you will likely need an attorney to clarify the terms for removal, remediation or repair or to successfully extract you from the decision to sell or purchase.

The seller and buyer must be willing to allow the attorney to do a good job by preparing a good contract to start with. The contract and disclosure forms are primarily for the seller's protection while the inspection paragraphs and warranty paragraph are for the buyer's protection. A good contract for the seller can head off potential problems with the sale. The seller does not to find they have some liability to a buyer after the sale if the buyer finds some major problem that was not adequately disclosed or contracted against. Some buyers only want an attorney to rubber stamp a form contract because they have fallen in love with the home and don't want to see its flaws. As the buyer, you don't want to find out in a few years that you have to spend considerable money to fix a problem that could have been found with a good inspection paragraph or worse have exposed your family to an environmental problem that could have been tested for and remediated at the time of purchase.

For the buyer's protection I have developed my own inspection and repair paragraphs that much more clearly define the inspection process and allow a much clearer "out" or cancellation for serious problems. A buyer must be specific on repairs or they will find the repairs done in the cheapest way possible. The parties must have sufficient time to resolve repair issues. An example: my inspection paragraphs give the buyer the absolute right to cancel the contract if asbestos or aluminum wiring is found in the home or if certain molds levels exceed triple the outdoor levels or if the amount of estimated repairs exceeds a certain dollar limit. I have never seen these and similar provisions elsewhere and certainly not in form contracts which just involves the parties in the repair process.  

Buyers need an Attorney for Title Protection

I also don't feel now that lenders, when protecting their mortgage interest, will indirectly protect a buyer on good title to the home. This is for several reasons. First, lenders are many times not local anymore and these nation wide lenders appear to lack the concern and sometimes the skill to review title insurance when they are simple going to sell the loan immediately to a third party. Lenders do have underwriters that review title commitments but I rarely have a lender contact me on a title commitment with a concern. Second, lenders may feel their mortgage is sufficiently protected even though there is some title defect such as an easement encroachment. If lenders do raise a title concern they routinely accept being  "insured over" from the problem by the seller paying an extra premium to the title company and the lender is satisfied. However, the problem remains on the buyer's title insurance policy.  Third, the lender's title policy has fewer standard objections than the buyer's policy. I have never seen a lender attempt to protect a buyer on the standard objections because that is not their job. An attorney can seek to remove standard objections, or, as is more common, prepare what is called a Seller's Affidavit, designed to offer some protection to matters not covered by the buyer's title insurance. For new constructions or where there has been extensive remodeling I always require extended coverage on the buyer's  title insurance policy as protection against mechanic liens. I have never seen a lender or realtor request this on behalf of a buyer.  Fourth, as an attorney, I always copy all plats, easements, restrictions and matters shown on the title commitment so that the buyer will be aware of all matters affecting the land. I have never seen a realtor or lender do this.

When should an attorney get involved?

Consult with an attorney as soon as you consider buying or selling for sound advice on your options but definitely before the contract is signed. Some contracts allow for the buyer’s attorney to suggest modifications of the contract within a short period of time - generally 5 days - but it is easier to prepare a contract right the first time instead of trying to modify one once it is signed and then getting everyone involved to agree to the changes. If you sign a contract that does not contain an attorney review provision you will have tied the attorney's hands to add needed protection for you. The contract is your main protection on the warranties connected with the house and house systems such as heating and plumbing. Warranties are a major source of after closing lawsuits that can be avoided with a well drafted contract and real estate disclosure form. The contract also sets forth your protection on default and conditions to the sale.

What is title insurance?

Title insurance is a guarantee by a title company according to the terms of the policy that you have good title against almost any title problem. The policy includes the requirement of defense and payment in case of a valid claim not shown on the policy. It is a one time payment on sale. Title insurance however does not cover every possible title connected claim. For example, title insurance does not protect against unrecorded repair or remodel claims incurred by the seller that are filed as mechanic liens after the purchase, nor does it protect you against boundary disputes. Attorneys will give consideration to these potential problems not covered by title insurance. You may need special steps such as a survey or attorneys will use what is called a seller’s affidavit to add some protection for these concerns. To properly review title insurance you need an attorney who if familiar with real estate title. I have more than 25 years experience in reviewing and writing title insurance and am a registered title agent for Attorneys Title Guaranty Fund.

Does the attorney's fee cover costs?

No, attorney fees are for work the attorney performs on your behalf. It does not include standard and customary closing costs a seller or buyer has on the sale of real estate whether they have an attorney or a realtor or not. Please see closing costs under the Service Section.

Conclusion


The home is a special place for everyone. Put time and effort into this decision for the sake of yourself and your family. Saving on attorney’s fees, which is a minor cost of the sale or purchase, is not a smart move.