What to know if I'm buying? What to know if I'm selling? How can an attorney help?
The process of buying and selling a home consists of multiple steps that can take weeks, even months, to complete. This pamphlet can't begin to cover all aspects of home buying or selling. Rather, it focuses on specific stages in the process when a lawyer's advice would be helpful, even crucial, to get the best results for you.
By law, only an attorney can provide you legal advice – not a real estate agent, loan officer, or closing agent. Whether you're a buyer or seller, you need your own legal advisor who will look out for your interests. Because the buyer's and seller's interests differ, it's not a good idea for both parties to use the same attorney.
In time of chaotic real estate markets an attorney's assistance is especially important. Buying a foreclosed property, selling when the purchase price does not cover the mortgage amount, and seller financing are examples of situations in which the parties need sound legal advice.
For Buyers and Sellers
The Offer to Purchase states the price the buyer is willing to pay for the house, the date the sale will close, and other important terms of the transaction. There is a state-approved form for Offers used in nearly all home sales. It can be completed by a party to the transaction, a real estate agent, or an attorney. State-approved forms are revised periodically. There often are one or more attachments (or addendums), which add more terms to the Offer.
The Offer will usually include contingencies to protect the parties by setting conditions that must be met. Common contingencies include financing and professional house inspection. Depending on the transaction, the Offer might include other contingencies, such as septic and well inspections, land survey, sale of the buyer's home, and occupancy by the seller after closing. The attorney can advise the buyer or seller about which contingencies are appropriate. In most cases, the seller is required by law to provide a condition report disclosing any known defects in the property, and a disclosure regarding lead-based paint.
The seller can respond to the buyer's Offer by accepting it, rejecting it, or making a Counteroffer presenting different terms for the sale. The Offer/Counteroffer process may go back and forth until both the buyer and seller are satisfied. When the buyer and seller sign the contract, it becomes a legally binding contract, subject to satisfying any contingencies.
If the inspection discloses defects in the property there may be further negotiations on repairs or credits. The lawyer can advise the buyer or seller about the inspection provisions that are best for the client. The lawyer also can prepare an amendment if the parties modify their purchase agreement due to the inspection, or for other reasons.
It's critical that the contract be complete and legally enforceable. If your attorney didn't write the Offer, it's wise to at least have him or her review this document and any Counteroffers. If your attorney can't review the Offer before you submit it to the seller, insert a contingency for attorney approval.
When all contingencies are met and amendments signed, the transaction can close. The Offer provides the date when the closing will occur. At the closing, the buyer and seller must sign numerous, complex legal documents. It's wise to have your attorney there to explain the documents and to answer your questions. Attorneys often spot potential problems that can be cleared before the closing and assist with unanticipated problems that can arise at the closing. After closing, the deed is recorded at the register of deeds office for the county in which the property is located. This puts the buyer's ownership of the property on public record. Once the deed is recorded, it is returned to the buyer. The buyer also will receive his or her title insurance policy. Your attorney can review these documents for legal accuracy.
Real estate agents are frequently involved in real estate transactions and work under various arrangements, including providing limited services for reduced fees. If you see an advertisement for a house for sale, the agent is working for the seller, as you'd expect, under a "listing" contract. That agent has professional obligations to look out for the seller's interests.
In recent years, a new type of agent relationship has become increasingly popular – that is, the buyer's agent. The buyer's agent is professionally bound to represent only the buyer's interests and is paid by the buyer. The agent can tell you information about the seller or the property that might be useful to you. And the agent won't disclose information you prefer the seller not know about you.
Is a buyer required to work with a buyer's agent? No. Many buyers work satisfactorily under the traditional agent arrangements.
Whether the agent is primarily the agent of the seller (under a listing contract) or of the buyer (under a buyer agency contract), the agent owes a duty of "fair dealing" to all parties. Part of that duty is to keep confidential anything that someone wants or would reasonably expect to be kept confidential.
If you decide to work with a real estate agent, have your attorney review the agency agreement before you sign it, to be sure the arrangement is exactly what you believe it to be. For example, although a seller's agent may get paid only when the property is sold, a buyer's agent may get paid even if the property is never purchased. It is critical to understand how the agent will be paid before signing any agreement.
You also can buy and sell a home without working with an agent. Then it's even more critical to seek an attorney's assistance in the buying and selling process.
This arrangement is what’s known as "for sale by owner," or FSBO (pronounced "fizzbo"). By selling your house yourself, you save the commission you would have paid to a real estate agent. But count on investing more of your own time. You'll need to analyze the market, decide on a price, advertise the house and host open houses, handle all negotiations with prospective buyers, and so on.
Buying a FSBO is somewhat different than buying with a broker involved. The buyer will need to become familiar with area values to decide what price to offer for the home. It is wise to have a lawyer prepare the Offer to Purchase. The lawyer can suggest appropriate contingencies, and can guide you through the rest of the transaction.
It's unwise to tackle a FSBO transaction without legal advice. An attorney can review Offers, write Counteroffers, and guide you through the many steps involved in a FSBO transaction.
Last revised: 9/2013
This is one in a series of consumer information pamphlets sponsored by the State Bar of Wisconsin. This pamphlet, which is based on Wisconsin law, is issued to inform and not to advise. No person should ever apply or interpret any law without the aid of a trained expert who knows the facts, because the facts may change the application of the law.
The State Bar publishes a series of consumer pamphlets addressing common legal issues that many people face sooner or later in their lives, such as buying a home, going through a divorce or small claims action, and preparing a will or estate plan. Each pamphlet conveys basic legal information and answers frequently asked questions in easy-to-understand language. Pamphlets are available here.
Other titles include: Arrest; Bankruptcy; Buying/Selling Residential Real Estate; Choosing a Process for Divorce; Custody and Placement; Divorce; Durable Powers of Attorney; Guardians Ad Litem in Family Court; Health Care; Hiring/Working with a Lawyer; Landlord/Tenant Law; Marital Property; Personal Injury; Probate; Revocable Living Trusts; Small Claims Court; Starting a Business; Traffic Accidents; Wills/Estate Planning.
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