Perhaps the most common transaction in the area of real property is the purchase or sale of a residential property. In many states, real estate brokers, title companies, and escrow companies routinely handle purchases of residential property, without the services of a lawyer, in other states, attorneys handle various parts of the transactions.

Should you have an attorney assist if you are buying or selling a house? Obviously, if you live in a state where attorneys play an essential role in the sale, you need an attorney. In states where an attorney is not required, it may still be worth a few hundred dollars to retain an attorney, particularly to draft or review the original contract and escrow instructions.

There are many instances in which having an attorney at the outset has assisted in a smooth closing process. Contrary to the popular view that attorneys will slow down or "wreck" a potential real estate sale, it is the author's experience that real estate purchasers or sellers should have legal counsel. Any deal that is not favorable to you should, in fact, not close. An attorney is likely to be the most independent party removed from the transaction, and after all is hired to represent only your interests.

Most Plan Attorneys have a long list of clients who were purchasers or sellers involved in lawsuits over real estate, and who did not bother to consult an attorney prior to making an offer to purchase a house or listing a house with a broker for sale.

Typical Steps Involved:

Generally the following steps are involved in a routine real estate transaction: (1) Listing by Seller; (2) Offer by a Buyer; (3) Counter Offer by Seller; (4) Contract between Both; (5) Escrow Instructions; (6) Financing; and (7) Closing.

The most important steps from a legal standpoint are the terms of the written offer, which may become part of the purchase contract. One must be careful to review the offer and the contract, to make sure that unlikely contingencies, e.g., the house having an infestation of termites, are provided for in the contract. Also, every one of the main items in the deal, such as what happens if escrow does not close on the specified date, should be addressed.

Because this is an area where good legal advice cannot be ignored, there is no attempt to discuss each and every aspect of the purchase and sale transaction. This task is better left to the lawyers. However, several common problems can arise in any real estate sale and are worth discussing.

Potential Problems in the Sale

1. Defects

   Often many sellers will not disclose a defect, such as a structural or foundational problem, which they know of prior to the sale. Current law in most states now requires that such defects must be disclosed to the buyer. Additionally, many state laws now place a burden upon the real estate broker to either make certain an inspection of the premises occurs, or, in some states, to actually perform an independent inspection of the house in an effort to discover such substantial defects.

   If you have purchased a house, and six months later you discover that the former owner called a roofer to survey damage to the roof from a storm, but did not disclose this fact to you during the purchase, you may have a case to recover your damages, or even in some instances rescind the entire deal. Any litigation or advice in this area would almost require you to have a detailed discussion(s) with a Plan Attorney to review all aspects of your case before deciding all of your options. This is usually one of the places where it pays to seek legal counsel early, and to avoid the temptation to even try to resolve the matter without a lawyer. The author has seen cases where even the first letter sent to the seller bringing the problem to his/her attention contained a fundamental flaw in the legal analysis and led to the entire case being weakened substantially.
   
   

2. Title

   The second most common "defect" is in the title to the property. The buyer should always insist on title insurance to ascertain whether the buyer is really obtaining "clear title" to the property. In many instances, the buyer will make an offer and reach an agreement with a seller, only to find out that the seller did not have clear title to the property, such that another co-owner existed who has since died, for example. Depending upon how title was held by the seller and the deceased co-owner, it may take many months to "clear title" to the property.

   Title problems are another area where legal advice can be one of your best friends, especially before any documents are signed.
   
   

3. Warranties

   Various warranties may be contained in the sale contract, or may be implied by the law of various states. Such warranties may come with new homes and should a problem be discovered after the sale, the manufacturer, contractor or developer should be called. Delay after the sale may affect coverage under the warranty.

   This area is a fertile ground for new state laws designed to protect buyers in real estate sales. Your Plan Attorney should be consulted if you believe a warranty problem may exist.
   
   

4. "Backing-Out"

   Often a purchaser, for various reasons, may desire to back out of a contract for a real estate purchase. This is precisely why an attorney is needed initially to draft or review the various legal documents. With properly drafted documents, a buyer may, for various specified reasons, be permitted to "get out of a deal." Unless these reasons are set forth in writing in the contract, however, a buyer may not be able to "back out" or may lose his/her deposit. Additionally, he/she may be subject to a lawsuit for any additional damages which the seller can prove, even if the buyer may not have anticipated these. For example, assume that a seller opened an escrow to purchase a new house, but because the buyer bails out of the sale of his old house, the seller has to back out of the second house. In turn, the buyer of the new house may choose to sue the seller, and the seller may, in turn, sue the original buyer who was the cause of the "bailing out." It is not clear that such a seller will always prevail at trial, however, and many other facts would have to be known before any predictions about the outcome of such a case can be drawn.

   Occasionally, a seller, after listing his/her property for sale and entering in an agreement with a buyer, may want to renege. This occurs particularly where, during the escrow, the seller reviews another higher offer for the property. Should a seller renege, the buyer usually has one of two options: (1) to sue for damages; or (2) to sue for specific performance.

   Such damages may include the difference between the price of this house and the cost of the new house which a buyer was forced to purchase. Damages may also include out of pocket costs which the buyer can prove he/she made.

   Specific performance is a lawsuit requiring the seller to sell the property to the buyer. You should know that timing is critical if this occurs in your house purchase. It is important to call your Plan Attorney for advice immediately. Handling such a matter without legal counsel may result in losing certain rights or advantages unless the aggrieved buyer is experienced in such matters.
   
   

5. One Last Problem - The $1,000 or $2,000 Deposit Which Is Not Being Returned to a Buyer

   Many sellers know that they may not have to return a deposit which they are otherwise obligated to return by law, since they know a buyer will not be able to pay the legal fees involved in a lawsuit for such amounts.

   Indeed, once in a while, however, a small amount of money involved makes it unaffordable to hire a lawyer. For example, if you paid a deposit of $1,500, and the seller decides to keep it. Naturally, no one wants to throw away $1,500, especially where your legal position is correct.