The question is often asked whether to hire a realtor or to sell your home as a “sale by owner”.
Believe it or not, hiring an attorney may actually be a more cost effective way to sell your house.
That’s right. You did not misread anything. It may be less expensive to hire a lawyer than a real estate agent. Let’s be clear however. The attorney will not be listing your house for sale or showing your house to prospective buyers as a realtor would be in the normal course.
Hiring a real estate agent has become maybe the most commonplace method for real estate transactions. However, people tend to forget about the word “hiring” in that sentence. Just because you may not have to physically cut them a check does not mean you are not paying for their services.
Real estate agents build their compensation into settlement fees and contract arrangements. These fees are typically a standard percentage of the overall transaction, which is tallied onto the total sale cost. Real estate broker commissions generally vary somewhere between 3%-7% of the sales price.
So, take as an example a house that sells for $200,000 and an average commission of 7%. That would yield a $14,000 fee for the brokerage. If there are two brokerages involved, they would typically split the fee and each earns $7,000.
Again, this is not to minimize the service a real estate agent can provide. Many people depend on real estate agents for the full spectrum of the services they provide. Besides the marketing of your home as a seller, a realtor can also assist a buyer looking to relocate to a new town with no familiarity of the area. That person might utilize a real estate agent to make recommendations on school districts, appropriate proximity to major roads, as well as all of the typical negotiations over price, repairs and other costs associated with closings.
However, many people do not need or utilize their real estate agents for many of the services they provide when buying or selling. Some people drive past a “For Sale” sign in a front lawn and are ready to sign a contract. Other people will perform much of the due diligence otherwise expected of an agent. Furthermore, technology introduced through internet websites makes home research and shopping more accessible than ever.
The fee charged by a real estate brokerage may be steep for someone who has already performed all of the due diligence aside from preparing and executing a contract.
Parties interested in buying or selling a home without a realtor may consider hiring a real estate attorney to assist with the purchase or sale. A real estate attorney can negotiate the finer points and draft the necessary paperwork to buy or sell property.
For example, an attorney may create provisions such as contingencies where a sale may only be completed upon one of the parties selling or acquiring another home. Buyers can buy the home “as is” or negotiate appliances such as the washer, dryer, refrigerator or freezer into the bargain.
Some of the issues that materialize when buying or selling a home may be mitigated with the counsel of a real estate attorney. For example, it is important to check if the home is part of a homeowners’ association with restrictive covenants. Often, these covenants outline acceptable paint colors, types of roofs, or restrictions on types of pets.
Real estate lawyers can also address elements of the sale like the deed, title, and proper inspections. Home inspections are very important in real estate transactions. Inspections should check for termites, lead paint, and radon. Home inspections should also check for structural, mechanical, or electrical issues. An inspector should be able to check the roof, walls and plumbing. An environmental inspection will check to see if the property is located on a well or septic system and if so, check the water quality. All of these elements can have serious financial impacts on the transaction.
Using a realtor or real estate brokerage may certainly be beneficial as a means to complete a real estate transaction. The use of a real estate attorney can also be helpful in some circumstances. Often individuals use a realtor to find or sell the home and then also have their legal counsel review the documents.
A real estate attorney can play a crucial part ensuring your transaction goes smoothly. Our firm has years of experience in preparing and negotiating contracts in real estate. Contact us with any questions or to set up a consultation.