Exercise caution when purchasing Real Estate

By Richard Kistnen, Esq.

A recent article indicated that in October 2012, home building has reached its highest level in almost four years.  Many of these projects may be new projects, while a number may be projects that were deferred due to the recession.  As lines of credit are slowly beginning to flow again, individuals may be tempted to take advantage of low interest rates that are in effect today.  This article is not concerned with the ability to obtain financing for real estate purchases.  What this article does is, address the need for professional assistance in the purchase of real estate – something many purchasers avoided prior to the recession.
The purchase of real estate, especially for the first-time buyer, will be both exhilarating and exhausting.  There is a contract that needs review and negotiation, negotiating over financing, title reports and insurance, and so on.  Whether on the advice of a real estate broker, mortgage broker, or otherwise, many individuals in the mid-2000’s avoided the use of their own lawyer.  That is, they were advised that their own lawyer is unnecessary, would frustrate the deal, and would be an unnecessary expense.
Many of these “one-stop” programs had an in-house lawyer, in theory and in practice, representing all sides of the deal, which is problematic.  No one, on behalf of the buyer would independently and objectively review the contract, the income and expenses stated, explain the mortgage, or explain what was being purchased.
As a consequence, many individuals ended up making real estate purchases that were well above their means, the price was increased at closing, fees were added and charged to the purchaser, and deeds may not have been accurate.
I was recently presented with a question concerning the deed to a certain property.  The purchasers are educated persons.  They decided against using their own lawyer in the purchase of this property some six years ago.  The question presented is relatively simple: what exactly do they own?  They were under the impression that they purchased a condo, but the deed indicates that a garage space may have also been transferred to them.  Unfortunately, to resolve this issue, if a settlement between the parties cannot be reached, it would be time-consuming and litigation very costly.
How is it that a garage space may or may not have been transferred?  Firstly, because the purchasers did not use their own lawyer, it is uncertain what exactly was bargained for in the contract of sale.  The contract of sale generally contemplates what is intended to be sold.  It often states exactly which blocks and lots, and the particular parcel addresses, and any appurtenances thereto.  Without their own lawyer to review, it is most probable that a standard, fill-in contract was used, and filled in by someone in the real estate broker’s office without appropriate review.
Next, the purchasers probably used the title company suggested by the bank.  More than likely, it was suggested that a survey is a waste of time and money, and that Schedule A would be copied from the last deed.  This is problematic because not everything contained in the seller’s title (generally declared in Schedule A) may have been sold to the buyer.  A survey would have created a new Schedule A and attached to the deed to clearly indicate what is being sold.  Finally, at closing, there may have been costs and fees shifted to the purchasers which are normally paid by the buyer.
Hopefully the message is clear.  In making major purchases, especially real estate, it is crucial to obtain professional oversight of the transaction.  The fees charged by a lawyer to do a real estate purchase are well worth the investment.  Moreover, they are generally far less than what it will cost if there is a problem that has to be remedied with a lawsuit.  Further, if there is a dispute, the lawyer is a point of immediate access to answer the questions you may have.  If you have any questions concerning this article, or would like to discuss other matters, please contact the Law Office of Richard Kistnen.