Navigating Attorney Review
The attorney’s role is to protect your best interests throughout the rest of this transaction. They will review and make any necessary modifications to the contract and paperwork related to the sale, ensure tax prorations are fair, help negotiate inspection repairs or credits, and more!
We collaborated with our trusted attorneys at Marneris Law to provide an overview & answer common questions about the attorney review process.
Hiring an Attorney
Selecting an Attorney
If possible, we recommend hiring an attorney with a concentration in real estate. This significantly improves the transaction process & success.
Real estate attorneys are paid at closing, & it is a flat fee for the entire transaction. That flat fee will generally range from $650-$900.
Your attorney will be responsible for the following:
- Drafting and submitting the contract modification letter including but not limited to:
- Cleaning up the mortgage contingency language and protecting the buyer if the appraisal comes back low
- Asking about any open permits
- Asking about code violations
- Asking about recent homeowner insurance claims the seller may have filed as that can interrupt insurance for the property.
- Reviewing the survey to make sure there are not any encroachments
- Protecting the buyer’s earnest money by extending all deadlines
- Drafting/preparing all lender-required addendums for both Parties to sign
- Reviewing tax prorations to ensure the buyer is getting a fair tax credit and the credit at closing is correct (figure is submitted by the seller attorney, so it needs to be validated)
- Confirming buyer is not paying any “junk” fees at closing
- Reviewing title commitment to confirm clean title is being transferred
- Facilitation of closing and reviewing all closing documents
As you can see, they are a critical part of the transaction!
One major role of your attorney is negotiating any requests from the inspection.
Your requests should be limited to major components of the property, such as central heating and cooling system(s), plumbing and well system, electrical system, roof, walls, windows, doors, ceilings, floors, appliances and foundation.
Here’s what the Multi-Board contract states with regards to the inspection:
- Your requests should be limited to major components of the property, such as central heating and cooling system(s), plumbing and well system, electrical system, roof, walls, windows, doors, ceilings, floors, appliances and foundation.
- A major component shall be deemed to be in operating condition, and therefore not defective within the meaning of the contract, if it does not constitute a current threat to health or safety, and performs the function for which it is intended, regardless of age or if it is near or at the end of its useful life.
- Minor repairs, routine maintenance items and painting, decorating or other items of a cosmetic nature do not constitute defects.
Inspection Credits vs. Repairs
When negotiating inspection items, you can request a credit or a repair.
- Credit: The seller provides you with money to fix the problem yourself. It will be deducted from the cash you need to bring to closing.
- Repair: The seller will resolve the problem before the final walkthrough.
The benefit to a credit is that you can hire your own trusted contractors to do the work, or do it yourself. With a credit, you won’t have any surprises at the final walkthrough that a repair was not made properly.
On the other hand, you may just want the work done. Then, it may make sense to request a repair. Your attorney should ask during attorney review that licensed professionals conduct any seller repairs with paid receipts provided before closing. You will also be able to inspect the repairs at your final walkthrough.
There is typically a maximum amount you can receive as a closing cost credit from the seller. This amount generally cannot exceed your actual closing costs and is determined by the type of loan you are obtaining. You will want to double-check with your lender that any closing cost credit is within your loan’s limitations.
Attorney Review Process
Attorney Review Timeline
There is a 5-business day window to send out the initial attorney review letter. It is very rare to actually complete attorney review/inspection negotiations during those 5 business days. Once the initial letter is out, negotiations are typically open-ended until all issues are resolved, or until it is clear that a resolution cannot be reached and one of the parties cancels the contract.
If you are not able to conduct an inspection or receive the report during this timeframe, your attorney can request an extension.
There is no set timeline for a response and negotiations are typically open-ended, at this point. However, it is common to see a response in 1-3 business days, depending on the complexity of your initial letter.
Cancelling the Contract
The contract is able to be cancelled, but the outcome depends on when the contract is cancelled:
During Attorney Review: If the parties are not able to reach written agreement with respect to the issues properly raised during the attorney review and inspection contingencies, the buyer’s earnest money will be returned, provided the buyer has acted in good faith during the negotiations.
After Attorney Review: Once attorney review and inspection are closed, it is much more difficult to cancel the contract. There must be some other contingency in the contract that protects you, such as the association or mortgage contingencies (if applicable). A buyer cannot simply cancel a contract because they got cold feet or had a change of heart. If this occurs, the buyer risks losing their earnest money and potentially being sued by the seller for additional damages.
Melanie Everett & Company provides the above Q&A in good faith, but each client should consult with a real estate attorney based on their own specific need. Melanie Everett & Company does not formally endorse any of the above, nor do they receive any financial compensation for referrals or for providing the above information.
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