Introduction
Buying a home is likely the largest financial transaction of your life. Whether you need an attorney to guide you through the process depends largely on the state you live in, the complexity of the transaction, and your own comfort level with legal documents. This guide explains when an attorney is required, what they do, and what to look for in a real estate purchase agreement.
Is a Real Estate Attorney Required?
The requirement for a real estate attorney varies by state. Some states — including New York, New Jersey, Massachusetts, Connecticut, Georgia, North Carolina, South Carolina, and several others — require an attorney to be present at closing. In other states real estate transactions are routinely handled by title companies, escrow companies, and real estate agents without an attorney.
Even in states where an attorney is not required, having one is strongly advisable in the following situations:
- The property has title issues or liens
- The transaction involves a short sale or foreclosure
- You are buying commercial property
- The contract contains unusual or complex terms
- There are disputes between the buyer and seller
- The property has easements, boundary disputes, or zoning issues
- You are purchasing a co-op or mixed-use property
- You are a first-time buyer unfamiliar with the process
What Does a Real Estate Attorney Do?
- Review and negotiate the purchase agreement on your behalf
- Conduct or review a title search to ensure the seller has clear title
- Review title insurance commitments
- Review mortgage documents and loan terms
- Identify and resolve title defects, liens, and encumbrances
- Prepare or review the deed
- Attend and manage the closing
- Ensure all documents are properly executed and recorded
- Handle the disbursement of funds
What to Look for in a Real Estate Purchase Agreement
The Agreement of Sale — also called a Purchase Agreement, Sales Contract, or Real Estate Contract — is the legally binding document that governs the transaction. Here are the key provisions to review carefully:
Purchase Price and Deposit
Confirm the agreed purchase price and the amount of the earnest money deposit. Understand the conditions under which your deposit is refundable — and the conditions under which you could forfeit it.
Contingencies
Contingencies are conditions that must be met for the sale to proceed. The most important contingencies include:
- Financing contingency — allows you to back out if you cannot secure a mortgage
- Home inspection contingency — allows you to negotiate repairs or withdraw if serious defects are found
- Appraisal contingency — protects you if the property appraises below the purchase price
- Title contingency — allows you to withdraw if title issues cannot be resolved
- Sale of existing home contingency — allows you to withdraw if you cannot sell your current home
Never waive contingencies without fully understanding the risks. In competitive markets buyers sometimes waive contingencies to make their offer more attractive — but this can expose you to significant financial risk.
Closing Date
The agreement should specify the closing date. Understand what happens if the closing is delayed and whether there are penalties for failure to close on time.
What is Included in the Sale
The agreement should clearly specify what is included — fixtures, appliances, window treatments, outdoor structures, and so on. Items that are not explicitly listed in the contract may be subject to dispute.
Property Condition and Disclosures
Most states require sellers to disclose known material defects in the property. Review all seller disclosures carefully. Your contract should also specify the condition in which the property will be delivered at closing — typically “as-is” or subject to agreed repairs.
Home Inspection Rights
The contract should specify your right to conduct a home inspection within a set period — typically 7 to 14 days. Understand your rights if the inspection reveals problems — can you negotiate repairs, request a price reduction, or withdraw from the contract?
Closing Costs
The agreement should address which party pays which closing costs. Closing costs typically range from 2% to 5% of the purchase price and include lender fees, title insurance, transfer taxes, attorney fees, and prepaid expenses. Buyers can sometimes negotiate for the seller to contribute to closing costs.
Default Provisions
Understand what happens if either party defaults. If the buyer defaults, the seller typically retains the earnest money deposit. If the seller defaults, the buyer may be entitled to the return of their deposit plus additional damages.
Dispute Resolution
Some purchase agreements include mandatory mediation or arbitration clauses for resolving disputes. Understand how disputes will be handled before you sign.
Title Insurance — Do You Need It?
Title insurance protects you against defects in the title to the property — such as undisclosed liens, errors in public records, or competing ownership claims — that existed before you purchased the property. There are two types:
- Lender’s title insurance — required by virtually all mortgage lenders, protects the lender
- Owner’s title insurance — optional but strongly recommended, protects you as the buyer
Owner’s title insurance is a one-time premium paid at closing and provides protection for as long as you own the property. Given the relatively modest cost compared to the purchase price, most real estate attorneys strongly recommend it.
How Much Does a Real Estate Attorney Cost?
Real estate attorneys typically charge either a flat fee or an hourly rate for residential transactions. Flat fees for a standard residential closing typically range from $500 to $1,500 depending on the complexity of the transaction and the region. Given the size of a real estate transaction this is a modest cost for significant legal protection.
The information on LegalConsultants.com is provided for general informational purposes only and does not constitute legal advice. Always consult a qualified real estate attorney for advice specific to your situation and state.