Q. I am buying a house. Do I need an attorney to review the purchase and sale agreement and represent me in the transaction?
A. A home purchase or sale is likely the biggest transaction of your life. Hiring a real estate attorney to review the purchase and sale agreement and represent you in the transaction may prevent a costly mistake. Having an attorney will provide independent advice and represent your best interests.
Real estate agents often prepare the purchase and sale agreement by completing a contract form template. An attorney is better suited to drafting the contract as he or she understands the legal issues in the matter. An attorney also assists with other aspects, including negotiating and drafting contingencies, reviewing title, and loan documents. Other legal issues that may call for an attorney include easements, restrictive covenants, rights of way, boundary disputes, or other title matters.
A well drafted purchase and sale agreement protects both the buyer and seller, and ensures all expectations are clear. Key terms in the purchase and sale agreement include:
1. Proper identification of the property, including the legal description and title reference.
2. Proper identification of the seller(s) and buyer(s). Buyers often prefer to take title to property in a trust or a business entity so it is important to identify the buyer properly or reserve the right to nominate a title designee.
3. State the form of deed to convey title to the buyer as well as permitted exceptions. Title may be held as joint tenants or tenants in common if not held by an entity. Joint tenants enjoy the right of survivorship and tenants in common each own a share of the property, which are not always equal and may be transferred freely.
4. The agreement should include the earnest money deposit, identify who will hold the deposit (preferably in escrow), the purchase price and how it will paid to the seller.
5. The agreement will also provide for certain contingencies or conditions which must be met before the property is sold. Common contingencies include: inspection, financing, appraisal and title. The seller must be able to demonstrate that he or she actually possesses title to the property and can convey good, clean and marketable title to the buyer.
It is important that you understand the terms in the purchase and sale agreement before you sign. Hiring a real estate attorney will help you understand your rights and obligations under the agreement and protect your interests throughout the transaction.
Know the Law is a bi-weekly column sponsored by McLane Middleton, Professional Association. Questions and ideas for future columns should be emailed to [email protected]. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.