Lawyers and Other Resources
The P&S and other legal agreements raise the issue of the selection and role of real estate lawyers.
Some real estate professionals believe that signing a P&S confirming the acceptance of your offer to purchase is standard, and therefore doesn’t require the services of an attorney. But generally speaking, because you don’t know what you don’t know, that’s not true.
What happens if you don’t get your financing, or you find major structural problems in the property? Under what circumstances can you cancel the deal and get your deposit back? Is there a time frame within which you can raise certain objections, such as the physical condition of the property? It’s important to spell out these and all other conditions in the P&S.
After the P&S is signed, your attorney will help you navigate the next stages of your due diligence process: assessing the condition of the land and the property; examining the terms and conditions of existing leases; confirming compliance with zoning, environmental, and other code restrictions; checking the validity of the owner’s title; investigating options for financing; and forming the legal entity that will own the property.3
In short, you will need a lot of help from real estate attorneys, who represent a separate, specialized breed within the legal profession. The key here, as with brokers, is to find the one who fits your needs. The person within the firm who actually will do much of your work is much more important to you than the partner who brought in your business. Again, don’t be afraid to ask for references.
A good lawyer knows the difference between providing legal advice and providing business advice—although if you’re just starting out, you may need some of both. He or she will know which points are important to negotiate, and which ones are unlikely to be an issue in purchase and sales agreements, tenant leases, loan documents, and other contracts. If you are working with a junior attorney in a larger firm—as is often the case when you’re starting out—make sure your attorney is not spending your time and money to impress the senior partners by preparing the “perfect” legal brief. (There’s no such thing, and you probably don’t need it.) Most agreements are variations upon forms that may already be in your attorney’s computers, although you can get in a lot of trouble if you and your attorney don’t understand the nuances.
Over time, you’ll find that from deal to deal, many of the same legal points come up again and again. You will still need your attorney, but you eventually should be able to do much of your negotiating with tenants and contractors yourself.
For really important matters, I often find that it is more cost-efficient to pay the higher hourly fees for an experienced, busy attorney than to work with one who, like you, is just starting out. Remember, however, that these experienced people are in great demand and might not always be willing or able to perform according to your timetable.
Although you occasionally will need to hire attorneys with special skills in areas such as zoning or property tax appeals, your relationship with your prime attorney is well worth cultivating. Besides, like a good family doctor, your prime attorney will know what specialists to send you to. In my own case, in almost 50 years of practice, I have had four prime real estate attorneys. The only reason I ever changed attorneys was because that individual 1) got seriously ill, 2) became a judge, or 3) moved out of town.
As a sidebar, one of the major roles of your attorney is to keep you from needing the court system to resolve disputes. Even when I’ve been proven right by the legal system, I have generally found the process to be very expensive and unpleasant, both in terms of money and lost time.
I’ve talked at some length about real estate attorneys, in part because they’re inherently valuable to your real estate career, but also because if you understand how to think about them, you’ll know how to deal with a host of other professionals who can be similarly helpful. You probably can’t afford the overhead of having your own in-house architects, contractors, mortgage brokers, or leasing agents. You will have to go through a similar selection process to find them as you did selecting a lawyer. Don’t hesitate to ask for references and, if applicable, to see examples of their work. You’ll pay more for experience, and sometimes it’s well worth that premium. Keep in mind that the right person for your last project might not be the right person for the next one.