Having a real estate lawyer is a wise choice to provide valuable assistance and general advice for anything throughout the fix and flip process that investors may be unclear about, according to a recent report from RealtyTrac.
According to the report, there are five specific problem areas that investors would benefit from having legal counsel in. These include: creating entity documents, reviewing loan documents, evaluating purchase and sales contracts, understanding the closing process, and dealing with title issues.
When starting a real estate investing business, the report states that one of the first pieces of legal trouble investors can potentially fall into is creating entity documents. The report also states that because many investors choose to fill out these documents themselves, attorneys tend to find that the information provided is insufficient. The report notes that an attorney will make sure all these documents and paperwork are taken care of properly so investors can avoid having any closing issues or delays.
After an investor locates a property they wish to invest in, the report states that they will need to find the rest of the funding to finance their purchase, and when they are faced with the loan documents, a real estate attorney can be beneficial to help the investor review the documents. The report states that this is especially true for a first-time investor who has never seen a loan document before and is unclear on how to read it.
The report cites evaluating purchase and sales contracts as an important step in the buying process because it essentially is what will define the investor’s agreement with the seller to purchase their property. An attorney can help the investor negotiate these outs before something unexpected happens according to the report. It cites the example of how most buyers don’t realize that the short inspection period provided on standard real estate contracts can actually be extended. An attorney will be familiar with this and can request more time for a thorough inspection. The report says that better inspections mean better opportunities for having outs in the contracts or reasons to negotiate the price down.
Additionally, the report says that investors don’t always know what the process will look like when they get to the closing stage. Prior to even going to a closing, the report says investors should make sure that all requests made by the underwriting team are resolved and a lawyer can offer advice on this process and help clarify anything that the investor is not sure about.
During the closing stage, the report says investors may encounter title issues that could hinder their purchase including judgements, unpaid HOA fees, or outstanding taxes that have become liens against the property that now must be satisfied. The report emphasizes that investors need to know that unless these liens are cleared prior to closing, these liens will stay with the property, not the owner That is to say when the investor acquires the home, they are also acquiring these debts along with it. The report shares though that an attorney will understand how to negotiate with the seller to have any unpaid liens satisfied.