When you think of the term “attorney”, what comes to mind? Trials? Court? Felonies?
In legal situations, most wouldn’t dream of entering a courtroom without a lawyer by his or her side. Yet too often we forget that legal situations aren’t confined to courtroom activities. Adoptions, filing a patent, incorporating a business and drafting a will are all common scenarios where hiring an attorney only helps your cause even outside the courtroom.
Buying and selling a home may not feel like a situation when a lawyer is needed but as we pointed out when we talked about some common home buying mistakes, hiring a real estate attorney can save you time, energy and money in the long run.
While many people consider hiring a lawyer to help with legal problems after they arise, consulting a real estate attorney can nip problems in the bud *before* they happen.
In fact, hiring a real estate attorney is especially useful when…
Applying For A Mortgage
Suppose you’ve been searching the market for months when suddenly you find it: your dream home. Complete with the big bay window and in-ground pool you’ve always wanted, this house has been seemingly plucked off your wish list and put in front of you. Everything is absolutely perfect… except for the cost. Luckily, you’ve been approved for a home loan, and have worked out exactly how you’ll pay for the home. It’s all coming together nicely.
Until it isn’t. Often, homes can be listed for more than they are worth, which doesn’t present an issue until loans and appraisers come into the picture. If, for example, a home is listed at $250,000, but is appraised at only $242,000, then a lender may not qualify you for the full amount you need to finance the home. Depending on the type of loan and the amount of money you plan on putting down, lenders may only give you a percentage of the full amount, leaving you many thousands of dollars short of your dream.
Hiring a real estate attorney is critical in understanding the limitations of a loan and how any number of variables can affect your ability to qualify for the amount you need to buy that house of your dreams.
Because real estate attorneys specialize in property law, they are fluent in the financial and legal aspects that come into play when purchasing a home. Rather than going blindly into a meeting with a lender, a real estate attorney will know exactly how to negotiate with the bank to ensure the best possible outcome for you. Plus, your real estate attorney will help you recognize the realities that exist: sometimes you have to accept compromise in the face of adversity.
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Putting Money Down
When it comes to taking out a loan and putting money down on a house, juggling payments, minimums, and percentages can turn into a full-time job. Factor in the added stress that comes with buying a home and it’s no surprise when mistakes are made or things slip through the cracks.
Real estate attorneys can be extremely beneficial in taking a “big picture” approach that takes into account not only the sale and loan amounts, but their long-term impact on you and your family.
For example, if you intend to put less than 20% down on a home, you are required to pay Private Mortgage Insurance, or PMI, each month to the bank. PMI allows for the lender to be reimbursed if the loan is defaulted on.
What the bank may not tell you, however, is that PMI will take the same percentage out of every monthly payment, regardless of how much you put down. From a financial perspective, you may be tempted to put as close to 20% down as possible to minimize the loan, but since you’ll be paying PMI whether you manage 19% or as little as 3.5% (which is typically the minimum required), you may be leaving yourself strapped for cash for little or no benefit.
A real estate attorney will be able to guide you not only on what type of loan will best suit your needs, but also on how much money you can put down and pay back to better secure your financial future.
Managing Financial Impact
It’s no secret that purchasing a home is a large financial undertaking. While real estate agents are familiar with costs associated with the entire process, they may not be as knowledgeable about how these transactions will impact your finances.
Real estate attorneys can be essential when helping you plan payments on a home or property. They can advise you on issues such as closing costs, viable mortgage amounts and the timing of payments. They can also help you take other factors into account that may be overlooked during the stress and excitement of buying a home, including the amount of money you have left in reserve after a purchase, how you may be impacted by unexpected expenses and the effects and realities of taxes.
Real estate attorneys are well versed in avoiding surprising closing costs that can derail a purchase. Factor in costs such as escrow, quarterly taxes, or PMI, and suddenly your home is breaking the bank.
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Real estate attorneys will know to facilitate a conversation between buyers and lenders, giving the buyer a better understanding of the different fees associated with appraisal, credit reports, flood insurance, mortgage recording costs and more. Ultimately, hiring an attorney gives buyers a better picture of a home’s cost and paves the way for a more stress-free experience, sans unpleasant surprises.
Advising Sellers
Real estate attorneys aren’t just for buyers. Selling a home has its own unique challenges and requires an understanding of factors ranging from title searches to appraisals, contracts and more.
It’s tempting to list your home high and hope for the best, but that can set you up for problems finding a buyer for reasons we’ve already mentioned, namely that a buyer may not qualify for a loan to cover the purchase no matter how much they’re personally willing to pay.
If you need a minimum amount on a sale then you may need to look for a cash buyer who won’t be restricted to the limitations of a lender, and that can present its own contract challenges
Hiring a real estate attorney will help sellers navigate the pitfalls and negotiate the purchase for the best possible outcome. In the end, it makes the process easier for both parties and can save the seller time, money, and energy associated with the unknowns and unexpected.
If you or someone you know is buying or selling a home in New Jersey, let us know. Whichever side of the table we sit on, we always work in our client’s best interest and are dedicated to providing personal attention.