Vancouver, WA · Member since 2018 · 29 posts · 9 votes
Hello BP community!
As an out of state investor, if I'm working with a licensed realtor to purchase a property and then hiring a property manager to manage that property after closing, is there any need to hire an attorney? If so, what gap(s) would the attorney fill that the realtor and property manager couldn't cover?
If you vetted the realtor and property manager well, there might be little need from an attorney unless you don't know about any state specific issues. Does the state you are purchasing in use statewide or local approved forms from the realtor association? If so, these have been vetted by an attorney most likely.
However, an attorney might be needed for asset protection advice as well as a CPA for tax advice. Not sure what your exposure is at your price point, but keep in mind that your agent and PM will likely remind you they aren't a lawyer if you call them to complain later about something you didn't know about.
For instance, in Washington DC for example, many times tenants are required to get first right of refusal prior to the sale of their rental. Sometimes they are even allowed to sell their FROR (first right of refusal) to third parties who can afford to pay low market price for the building. Not sure that all agents would think to mention that as they might assume you know and the PM won't mention it unless he wants to know which resident is going to be paying him after closing.
An attorney would ask you what you strategy is so s/he can evaluate your exposure to lesser known housing laws.
If you vetted the realtor and property manager well, there might be little need from an attorney unless you don't know about any state specific issues. Does the state you are purchasing in use statewide or local approved forms from the realtor association? If so, these have been vetted by an attorney most likely.
However, an attorney might be needed for asset protection advice as well as a CPA for tax advice. Not sure what your exposure is at your price point, but keep in mind that your agent and PM will likely remind you they aren't a lawyer if you call them to complain later about something you didn't know about.
For instance, in Washington DC for example, many times tenants are required to get first right of refusal prior to the sale of their rental. Sometimes they are even allowed to sell their FROR (first right of refusal) to third parties who can afford to pay low market price for the building. Not sure that all agents would think to mention that as they might assume you know and the PM won't mention it unless he wants to know which resident is going to be paying him after closing.
An attorney would ask you what you strategy is so s/he can evaluate your exposure to lesser known housing laws.
Some states typically do closings with an attorney. I know NY and NJ are, I'm sure there are others too. To be honest, I don't know whether this is mandated, or just typical.
Well, you probably shouldn't get legal advice (whether you need an attorney) from BP. Having said that (I'm a lawyer), here's what I'll tell you (for informational purposes only not intended to be legal advice). As @Mike McCarthy properly points out, whether you'll "need" a lawyer will depend in part on where you are. NY and NJ are attorney states. Florida, for example is not. I do not think however this should inform your decision one way or the other. In states where lawyers are not "needed", title companies are often attorney owned and/or operated (like mine for example). They can't give you legal advice but are able to assist and explain what's going on. I wouldn't expect them to tell you that you "need" a lawyer but if you just have a question about what you are signing for example, they can help with that. So that leaves us with whether you need one or not and I would answer that this way. If you don't "need" one and hire one, it will cost you a few hundred bucks. If you "need" one and don't get one it could cost you thousands or more. The risk/reward would seem to mitigate in favor of at least an attorney consult. I can't tell you many times clients have come to me on a litigation matter that would have been avoided if they had spent a few hundred bucks for a legal consult. Govern yourself accordingly (sorry I couldn't help myself -- its what lawyers put in their letters all the time --lol) good luck !!!
I think, as everyone as eluded to, its a matter of personal preference. That being said, as a broker I recommend ALL of my clients have a Lawyer review their PSA's and Leases because at the end of the day I am not a Lawyer and me telling you "yes, that is the norm" or "This is the action I recommend you take" is very different from a Lawyer saying "Yes, we can fight and win if need be."
I find lawyers aren't cheap but sure a whole lot better to spend a couple grand today to be able to sleep at night. Good luck.
Thank you - all this feedback has been super helpful!
Since this will be my first out of state investment where I'm not at all familiar with the legal landscape, it feels like spending a few hundred on a legal consultation to review some docs up front (e.g. PSA, lease) makes sense.