Buying? Selling? New to the Business? Why You Need a Lawyer Now

by | BiggerPockets.com

There is a popular misconception that you only need to call a lawyer when something has gone wrong. This simply isn’t true—at least not in the world of real estate.

In fact, the best time to hire a lawyer is well before you have a problem. Despite our training, we do not own time machines and what you don’t know can always hurt you. For this reason, it’s important for you to know when to call for legal help.

Here are four common situations where an investor like you may need the assistance of a real estate attorney. 

1. When You’re Buying a Real Estate Investment

A lawyer can be extremely valuable in helping you evaluate deeds, titles, and the terms of contracts. Too often, clients call for help after they’ve made a purchase or signed a contract that wasn’t in their best interest.

If you have a lawyer by your side throughout the buying process, you are less likely to make these types of mistakes. A good attorney can also identify potential legal problems with a property that would sail past you or even recognize a very competent (or incompetent) agent.

Most importantly, they can offer legal advice and will generally have more contract insight than an agent. Whether your state requires the use of an attorney for closing or not, a good lawyer can prove useful.

You may also need a lawyer’s help any time you’re making moves with unfamiliar legal implications. If it’s your first time attempting a property transfer or using a newly-created entity, have a pro help out.

two-story house with gray siding and white trim at dusk

Related: 3 Reasons NOT to Buy an LLC Online

2. When You’re Selling Your Investment Property

There are times when you may need a lawyer to assist with a sale. Generally, this will be when you are making a complex sale or one that has potential legal issues.

Examples may include selling interest in a land trust-owned property, portions of raw land, or sales with many parties or other possible complications. Similarly, a seasoned real estate attorney may notice opportunities for you to save on taxes and otherwise keep more money in your own pocket.

3. When You Need Asset Protection

If you plan to be in the real estate business for the long term, asset protection is a serious consideration. I tend to recommend that all investors have some type of asset protection strategy in place.

That said, the best way to get an asset protection strategy that is customized to your personal needs is to hire a sharp asset protection attorney. An experienced lawyer can ensure you’re setting up the best entities for you and effectively deterring lawsuits.

Note that while not all real estate attorneys assist with asset protection, most should be able to point you to someone who can. If this is your primary legal need, look for someone with the appropriate qualifications to help you.

gray stone gateway to property leading to courtyard with green grass and gray brick pathway

Related: Asset Protection in Real Life: How My Client’s Strategy Avoided a Lawsuit

4. When You’re Not Sure What You’re Doing

Does someone want you to sign a contract you can’t make heads or tails of? Alternatively, do you need to draft an effective contract yourself?

These, and many more mundane situations such as needing to hire or fire someone, are common scenarios that can trip up new and seasoned investors alike. It’s alright to not know everything about every facet of investing. Having a qualified real estate attorney by your side can make figuring out the best decisions for your business easier.

Keep in mind that this is not an exhaustive list. If you’re in any kind of situation where you think you might need a lawyer, spring for a consultation with a good attorney, and bring a list of your questions. Your preparation may save your backside—or keep it out of court entirely—in the future.

Any questions about any of these scenarios? When have you found it helpful to have been working with an attorney as an investor? 

Let me know in a comment below. 

About Author

Scott Smith

Scott Royal Smith is a real estate asset protection attorney based in Austin, TX. His firm, Royal Legal Solutions, designs asset protection strategies exclusively for real estate investors. As an investor himself, Scott is sensitive to the needs of real estate investors; as an attorney, he maintains a working knowledge of the best legal strategies available for preventing lawsuits. Connect with Scott here on BiggerPockets or visit his website, www.royallegalsolutions.com, for more information about asset protection for real estate investors. Check out all of Scott’s previous work for BiggerPockets here.

5 Comments

  1. Katie Rogers

    “Too often, clients call for help after they’ve made a purchase or signed a contract that wasn’t in their best interest. ” This is all too true despite the the fact that the buyer’s agent has a legal fiduciary duty to advise their clients according to the client’s best interest.

    • Scott Smith

      Totally agree! It can be quite a surprise to realize this, especially when people are just getting into real estate investing or even buying their first home. Over time people learn to run their due diligence to avoid these issues and find others to help, but early on many people just take things for granted.

      • Katie Rogers

        And yet what you are agreeing to is that agents commonly breach their fiduciary duty. It is not a matter of buyer’s taking things for granted. Buyers must sign a paper acknowledging that they understand their agent has a fiduciary duty toward them. Buyers are therefore allowed to expect that their agent will fulfill this fiduciary duty. However, the main effect of that paper is to lull buyers into thinking that their agent works for the buyer. The fact is the agent works for their broker, and buyers should never forget this. The buyer is mostly on their own in in the process with the seller, seller’s agent and broker, lender, home inspector and appraiser all arrayed against them in varying degrees. The whole system needs to be revamped to be fair to everyone. In my community, brokers are lobbying to get rid of the requirement that sellers get a zoning report when the put the house on the market. They already eliminated the requirement for a termite inspection.

        Homebuying is a minefield for people who may buy a home only once in their life. Nearly all of them are finagled into paying too much, and may discover expensive problems later. The legal recourse is too risky and expensive, so buyers usually eat the cost. Thus comparable sales are not an accurate indication of value. Agents know that comparable sales are too high, and that’s why they love to use comparable sale to persuade a buyer what they should offer.

        Even if you have experience, you can get taken. The last house I bought had some serious material defects that were cleverly concealed and of course, not disclosed. When these defects came to light, suddenly my buyer’s broker became incommunicado. What’s worse is the seller could probably successfully feign ignorance.

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