Information on Real Estate Law

Q: What is the general process of buying and selling residential or commercial real estate?

The process of buying and selling residential or commercial real estate consists of multiple steps that could take weeks, even months, to complete. The first step is to typically draft and negotiate an Offer to Purchase Sale contract between a buyer and a seller. Once the contract is accepted and signed by both parties, the buyer then typically takes the contract to the buyer’s lender and attempts to obtain financing for this transaction. In addition, once there is an Accepted Offer, the buyer usually commences the inspection process of the property, which includes, but is not limited to a physical inspection of the building and the mechanical systems within the building, an environmental site assessment if it is a commercial property and a sewer and water test if there are not municipal services to the property. Once the buyer has obtained financing for the sale and the inspection process is complete, the seller typically provides a Title Insurance Commitment to the buyer and the buyer’s lender showing the condition of title and that the seller has good title to convey. Once the parties are satisfied with the Title Insurance Commitment, then the matter is set for a closing which is typically handled by the seller’s attorney, lender and/or the seller’s title insurance company.

Q: How can an attorney assist a buyer in purchasing residential or commercial real estate?

An attorney can assist a buyer in purchasing residential or commercial real estate in the following aspects:

•  Review and advise the buyer about dealing with the real estate, sales agent and any agency agreements associated therewith.
• Draft or review the buyer’s Offer to Purchase Contract and negotiate any Counter Offers or Amendments to the Offer to Purchase Contract.
• Assist in evaluating financing issues which may arise with a lender.
• Review the Title Insurance Commitment provided by seller to insure that the property has clear and marketable title.
• Answer questions and resolve problems during the course of the transaction dealing with financing, inspection issues and closing issues.
• Review closing documents provided by seller and buyer’s lender.
• Represent you and participate at the closing.

Q: How can an attorney assist a seller in selling residential or commercial real estate?

An attorney can assist a seller in selling residential or commercial real estate in the following aspects:

•  Write or review any Listing Contract involved with the real estate sales agent.
• Review an Offer to Purchase Contract submitted by buyer to seller.
• Negotiate and draft any Counteroffers or Amendments to the Offer to Purchase Contract.
• Help satisfy any contingencies to the Offer to Purchase Contract.
• Draft the deed, closing statement, transfer tax return and any other legal documents required to close the transaction.
• Advise the seller at closing to insure that all closing documents, including financial arrangements and others, are in proper order.
• Handle any legal conflicts or questions that may arise at any point during the course of negotiation or closing.
• Advise seller of any tax consequences of the sale of real estate.

Q: What is an Offer to Purchase?

The Offer to Purchase creates the legal contract between the buyer and the seller. It states the price the buyer is to pay for the property, the date of closing, terms of buyer’s financing, terms of buyer’s inspection of the property, earnest money and other important terms of the transaction.  Real estate agents are required to use State approved forms for Offers. Once the buyer submits the Offer to the seller, the seller can respond to the buyer’s Offer by rejecting it, accepting it or making a Counteroffer which presents different terms for the sale. The buyer and seller may go back and forth with Counteroffers before the terms of the transaction are resolved. When the buyer and seller sign the contract, it becomes a legally binding contract subject to satisfying any contingencies stated in the contract.  It is critical that the contract be complete and legally enforceable.  It is important to have your attorney review the Offer, Counteroffer or any Amendment prior to signing it to protect the buyer/seller’s interest.

Q: What happens at that closing?

When all of the contingencies are met and Amendments are signed, the transaction proceeds to a closing.  The Offer sets forth the date that the closing will occur.  It is wise to have an attorney present at closing to explain the documents and answer any questions that may arise.  At the time of closing, the buyer typically signs the buyer’s financing documents provided by the lender.  The buyer also signs miscellaneous closing documents provided by the seller.  The seller typically provides a closing statement, a deed, transfer tax return and other documents for the buyer to sign.  After the closing, the deed is recorded in the Register of Deeds Office where the property is located.  The deed transfers ownership from seller to buyer.  Once the deed is properly recorded, it is returned to the buyer for safekeeping.

Q: What is Title Insurance and why does a buyer need it?

When you buy a property, you need to be sure that the seller can transfer good title to the property. The seller typically provides the buyer with title insurance which protects the buyer against defects in the seller’s title.  The title insurance company checks various records and issues a Title Insurance Commitment that gives information about the title.  This information includes whether there are any liens against the property such as unpaid mortgages, judgment liens against the seller, mechanic liens against the seller, tax liens against the seller and unpaid real estate taxes.  The Title Insurance Commitment is an important and complex legal document that requires legal expertise to understand.  It is important to have a lawyer review the Title Insurance Commitment prior to closing to prevent any problems concerning the buyer’s ownership in the future.