For the final post in my series on buying residential real estate, I will discuss the Attorney Approval phase. This is the last step in the 3 phase Negotiation Stage for the purchase of a new home. If you’ll recall, the Contract Negotiation phase and then the Inspection phase occur prior to the Attorney Approval phase.
An Attorney’s Purpose In a Real Estate Transaction
You might think that an attorney’s role is in a courtroom, not in the middle of a real estate deal. That assumption is wrong. Speaking as an attorney who has guided many different real estate negotiations over the years, I can tell you that it is essential to have a legal representative on your side.
As I’ve explained in previous posts, my role as your attorney is to be your bodyguard, to protect your best interests. A real estate transaction is no exception. Although the purchase of property may seem routine on the surface, you’d be surprised at some of the pitfalls that can come up without notice. From issues that are uncovered after the inspection, to unexpected problems obtaining a loan or clear title to the property, obstacles may arise and require legal intervention. The Attorney Approval phase allows for a detailed examination of every aspect of the contract. By involving an experienced lawyer, you’re guaranteeing the removal of any loose ends or areas that could leave you in a vulnerable position before, during or after the sale.
My purpose in this phase of your transaction is to evaluate the sales contract that you and the seller signed in order to identify any potential issues and eliminate any concerns. Even though you’ve already come to terms with the seller, it doesn’t mean the contract is completely fair to you. That’s why it’s so essential to ask your lawyer to go over the agreement with a fine-tooth comb to make sure you’re not being short-changed in this arrangement.
For example, one of the issues I might see in a contract could involve the amount of the real estate tax proration credit that the homeowner provides to you at Closing. If I notice that the seller is not offering you enough of a cushion, this is a contract item that I will not approve but will re-negotiate with the seller’s attorney.
Another issue that might arise is the length of time allowed for you to obtain a mortgage. There are certain contracts that only permit the buyer thirty days to secure this loan. As your attorney, I would object to such a short time frame and instead, negotiate for a forty-five (45) day period instead. This gives you plenty of time to get the best mortgage without feeling the pressure of an unreasonable deadline.
The Attorney Approval Process
Throughout the Attorney Approval phase, it’s crucial to realize that the lawyers involved go back and forth in discussing your contract. You can think of it as a mini version of the negotiation you previously went through with the seller. But the negotiation between the attorneys is concentrated on certain specifics in the agreement, not big picture items such as the sale price. The price has already been established and won’t be touched in the Attorney Approval phase.
When the lawyers from both sides finalize the agreement, they each sign a letter that specifies all of the revised terms. While you and the seller will be informed of the activity between the attorneys, and you will both approve and authorize the acceptance of these revisions, you and the Seller will not be required to sign the Attorney Approval Agreement letter or to re-sign the original Real Estate Contract.
The Letter Agreement then serves as an addendum that modifies the real estate contract. Once the attorney approval period is completed, the most challenging parts of this real estate transaction are done. You’re now free to finish getting your mortgage and move forward to the Closing.
Hiring an attorney to look over your real estate contract is a smart decision. It will enable your transaction to be equitable for both sides and to proceed smoothly to its conclusion.