The role of an attorney in a residential real estate transaction in California
For most people, the sale or purchase of residential real estate is the single largest transaction they will ever be involved with. It is very important that buyers and sellers make sure that they are protected, especially those who are new to real estate transactions.
Do I have to hire a lawyer for California real estate transactions?
It is not always necessary to retain a real estate lawyer in California, and most real estate transactions in Southern California are finalized without any attorney involvement. However, it is important to remember that a broker or real estate agent does not have the same ethical obligations as a licensed attorney. Therefore, non-lawyer participants in a real estate action may not always be looking out for the interests of a buyer or seller. But an experienced real estate attorney has only your best interests in mind, and can help you navigate the legal nuances of buying or selling your home.
Then why would I want to hire a real estate attorney in California?
While California law does not require that you be represented by an attorney while completing your transaction, it is your right to hire a lawyer if you wish. In many states, it is common for both buyers and sellers to be represented by an attorney during the closing, and some states even require it. A California real estate lawyer can represent you for a transaction involving property in California, or located outside the state.
The main reason to use an experienced California real estate lawyer is to make sure that your interests in the transaction are fully protected. Real estate purchase or sale contracts are legally binding documents. Unless you fully comply with the terms stated in those documents, you could risk losing your earnest money or even being sued for breach of contract.
An experienced real estate attorney will review your contracts, explain all of the terms contained therein to your full understanding, and work to ensure that all parties to the contract are meeting their obligations.
How can a real estate attorney protect me from problems with the property title?
Another reason to hire an attorney in a real estate transaction is to help you decide how to structure the title to your property. Title documents, including the deed to the house need to accurately reflect your intentions with regard to who has legal rights and obligations to the property. These issues are legal decisions and should be explained by an attorney.
When more than one person will share ownership of the property, there are two ways to take title: Tenants in Common and Joint Tenants. Owning property as Tenants in Common means that two or more people own property together but when one person dies, his interest passes to his heirs, not the surviving owner(s). Joint Tenancy means that upon the death of one of the owners, that person’s interest in the property transfers to the surviving owner(s). In California, if the deed is missing the specific language to create a Joint Tenancy, Tenants in Common is presumed.
There are serious complications that can arise from having incorrect title documents so seeking the advice of an experienced California real estate lawyer before closing can eliminate costly mistakes down the road.
What kinds of problems can a California real estate lawyer prevent?
I have been called on numerous occasions where a buyer had a property in escrow, subject to the mortgage being approved no later than a certain deadline date. When that date passed and the mortgage still was not approved, the buyer or their agent failed to request a timely extension to secure the financing required to purchase the property. In this scenario, the seller is then free to sell the property to another buyer, or to cancel the sale.
In other situations, the buyer was unable to secure the necessary financing altogether. After the contract was terminated, and the buyers attempted to get their earnest money back, they found out that it was lost because they failed to complete or extend the contingency provision of the contract.
Sometimes when the housing market is hot and properties are quick to go into escrow, buyers will waive contingencies in the hope that the seller will select their offer over competing offers. But this practice can expose the buyer to greater risks. If the buyer’s inspection discovers a defect in the condition of the property that was not easily observable or disclosed when the contract was accepted, the buyer may decide to cancel the contract. But because the home inspection contingency was waived, the buyer’s earnest money is lost. Unless these issues are fully explained to the buyer in advance, he or she may be unaware of the legal ramifications of such decisions.
Having an experienced California real estate lawyer involved in the transaction can ensure that all contract terms are fully understood by the buyer or seller, all obligations are met, or time-sensitive provisions of the contract are extended as needed to ensure a smooth transaction takes place.
How can a California real estate attorney help sellers?
From a seller’s standpoint, making sure that the transaction goes smoothly is essential to your future plans. Do you need to negotiate possession of the property so you can move out? What happens if the buyer requests significant repairs or credits after the contract has been entered into? If you are selling an investment property and plan to use the proceeds to purchase new investment property, have you filed the proper documentation for a 1031 Exchange to avoid capital gains tax liability? Having an attorney who can provide appropriate legal advice on your side can alleviate many concerns sellers have.
If you are considering buying or selling residential real estate and want to ensure that your legal rights are protected and obligations are met, consider safeguarding yourself by hiring an experienced California real estate lawyer.
Do you have questions about a real estate transaction in California or out-of-state? Contact California Real Estate Lawyer Barbara Craig to schedule a free consultation. Serving clients in the South Bay area including Torrance, San Pedro, Lomita, Harbor City, Carson, Wilmington, Long Beach and other nearby communities.
Photo courtesy Dan Moyle