Me and my partners have started our "non-traditional" real estate investing LLC and we are looking to generate a contract for all of the deals we will make in the future. However, I am curious is it mandatory that we get a real estate attorney to create and review all of our contracts? Have any of you just done it yourself? Please help....
If you are a principle in the transaction you can use whatever form you want as long as it contains the elements necessary to make a valid contract in your state. Is that advisable, probably not.
Unless/until you feel you are 100% comfortable with all aspects of a real estate transaction and the legal issues surrounding real estate transactions, I highly recommend you use a great real estate agent and/or attorney to assist you.
Be careful! Even a skilled real estate investor can get themselves in trouble, and sometimes solely because they prepared their own documents. Here is a link to an Ohio case where a real estate investor was found to have practice law without a license when he prepared documents used in his OWN transactions. http://www.scribd.com/doc/237528735/2014-Ohio-515-...
As an attorney, I don't agree with the decision, but you must know there are always eyes watching, and from what I've heard about California, its even more onerous. So while I believe in freedom of contract and having the freedom to do it yourself - whether good or bad - the State may see it from another viewpoint.
Divina K. Westerfield, Esq.
Indiana Attorney 2095-49
@Amanda Cadena ONE contract is not likely to cover all your deals especially if you are doing "Creative" investing.
I use a different contract for buying as opposed to selling for example. I regularly make changes to my contracts, as I feel very comfortable with contract law.
I suggest every one in this business learn some of the basics of contract law. Even if every contract you ever use is created by an attorney you should learn what some of the terminology means. It amazes me how often people sign agreements that the do not understand.
@Divina Westerfield I am not sure that case is on point. The issue wasn't the investor simply creating contracts for his company, he was creating lots of different legal documents that obviously need to be created by an attorney including court filings. Perhaps this is relatively new in OH (I doubt it) but in MD it is clear an attorney needs to represent an entity in court. In MD all deeds need to be created by an attorney.
Miller was practicing law 'for another', not for himself. As Ned observed for MD, CA I believe is the same, an entity needs to be represented by an attorney.
I wonder if he was signing as an individual or in the capacity of the entity he owned? If it was in the capacity of the entity, it's hard to understand how he could be acting on the behalf of another. My not being an attorney myself this seems wacky.
@David C. and @Ned Carey
If you read the Ohio case I posted, although there were charges that the investor could not represent his own corporate entity in court, the main reason the charges of practicing without a license were brought were due to the investor approaching homeowners to transfer properties to his entity "subject to" the mortgage, then his entity failing to pay the mortgage.
Due to homeowner losses in credit standing and bankruptcy, these homeowners complained and the Ohio Bar saw that because he prepared the documents for signature by the homeowners, the Ohio Bar could find he was practicing law without a license because he had prepared the documents for the homeowner's signature. The Ohio Bar likely INFERRED that he gave advice, even though he could have easily have said, "here are documents, please sign them." - which of course is no legal advice. But remember, Courts and Bar authorities will INFER based on the homeowner's statement, not necessarily on what actually took place. (I speak from my own difficult experience here.) And in addition, ALWAYS GET A SIGNED STATEMENT AT CLOSING THAT THE HOMEOWNER WAS ADVISED TO SEEK LEGAL ADVICE AND EITHER DID GET SUCH ADVICE OR WAIVED GETTING SUCH LEGAL ADVICE AND THAT THE INVESTOR PROVIDE NO LEGAL ADVICE OR LEGAL ASSISTANCE TO THE HOMEOWNER.
Frankly in other states, such as Florida, when you don't pay the underlying mortgage its called "Equity Skimming" and you can be charged with a felony. Most states don't have this "equity skimming" law so they seek other means to go after a "wayward" investors who don't pay underlying mortgages, such as in the Ohio case.
This is a good argument for ALWAYS using a title companies to close ALL your deals; title companies are usually ran by a local attorney. In other words, NEVER CLOSE AT THE KITCHEN TABLE!!! Spend the extra to close with a title company. And while you, as the investor, could prepare sample documents for the title company, which could then be reviewed by the title company's staff attorney to review and use as their own, at least this puts the investor at arms length (at least as best possible) from the homeowner. And don't forget that legal waiver.
Again, authorities will infer whenever possible to get the conclusion they are seeking. Know this. Plan for this. Always do business with this mind. Protect yourself.
Divina K. Westerfield, Esq.
Indiana Bar No 2095-49
Agree on professional closings, however this is not going to preclude an equity skimming incident. Subject too transactions in the hands of those with less than better intentions and or lack capital and experience and are following some guru techniques is a really dangerous transaction all the way around but especially for the seller as you note.. The poor sellers in these transactions lose control of their properties and end up in all sorts of financial turmoil. Good for OHIO and Great for FLA making it a Felony... If the US just followed Floridas lead that would put an end to newbie wannabees and out right crooks partaking in this activity.
My guess is that those who lost their homes would have filed civil action against this guy... hopefully that's the case. The Ohio State Bar Association Board's recommendation for a $7,000 civil fine in this case is only for unauthorized practice of law.
I negotiate contracts for a living, if we are doing something "different', I write a contract and send it to attorney for review,,we work together to get something that accomplishes what I want, and still is legal and offers the protection he wants.
If I am making very minor changes to that agreement I go ahead and make them (minor terms etc), but if any change is very complex, I run it back by the attorney.
I have read and reviewed thousands of contracts in my life, and I very rarely miss anything, but I am not an attorney, and am constantly surprised by some small change an attorney will make that gives us better protection.
If you didn't go to law school, don't play lawyer
I did read through it quickly. It seemed to me he was creating docs not as a principal but as an unlicensed third party between the homeowner and Diversified Inc. Why his being an officer of Diversified wouldn't qualify him as a principal is a mystery to me.
If we were to take that case at face value it would seem in Ohio anytime two principals entered into a contract without a lawyer's involvement and that contract went wrong in any way the party that brought the templates to the party could be convicted of practicing law without a license. I guess this case pretty much precludes two parties contracting without lawyer involvement.
Seems the bottom line here is that courts decide who should win then find evidence to support that conclusion, as has been said by attorneys here and elsewhere many times. Not being an attorney myself makes it hard to accept this. That being said this particular guy sounds a little slippery.
This post has been removed.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing