REAL ESTATE BUYING OR SELLING …involves major financial and personal decisions

The purchase or sale of property can be filled with complicated details, tax implications and legal questions. Residential, Commercial, Investment or Recreational properties - each have their own unique considerations. It is not a time to make assumptions or engage in guesswork. It is a time to seek good professional advice.

Should You Seek Legal Advice Before Making an Offer to Purchade?
YES. It makes good business sense to plan your major personal and financial decisions before committing yourself to written agreements. Once signed by the buyer and the seller, the Offer to Purchase is a legal contract. The Offer to Purchase outlines the various provisions and obligations of both parties in the contract. It can settle questions such as:

• Legal description of property being sold?
• Selling price of the property?
• Conditions of financing and interest rates?
• Provisions for physical inspection of the premises?
• Representations regarding mechanical or structural defects?
• Right to inspect and test water or sanitary systems?
• Allocation of taxes or special assessments?
• Repairs to be made prior to possession?
• Date of possession of the property?
• Penalties for failure to comply with terms of the offer?
• Personal property included in the sales?
• Allocation value made to the personal property?
• Environmental concerns?

The Offer to Purchase is critical. It is the single most important document in the real estate transaction as it determines the entire course of the transaction and what other documents and actions are necessary.

An “Attorney Approval Contingency” is often used to get buyer and seller to sign a contract prior to attorney review. We strongly discourage the use of these clauses because they limit what your attorney can object to. We recommend that an attorney review the contract prior to you signing any document.

The decision to seek good professional legal advice before signing the Offer to Purchase may be the difference between hiring legal counsel to complete a real estate transaction and hiring legal counsel to prosecute or defend a lawsuit.

How Can an Attorney Help Me in a Real Estate Transaction?
Each real estate transaction differs according to its own unique considerations. However, in general, an attorney representing the buyer will:

• counsel with client, draft or review the initial Offer to Purchase.
• consider any additional proposals. Often the Offer to Purchase is a multi-page document which is the result of several offers and counter-offers.
• examine the title evidence and explain the exceptions/objections contained in it. (Some title defects can be removed and it is important to determine which, if any, would be appropriate in your circumstance).
• advise on zoning matters, conditional uses, licenses or permits that may be necessary or desirable given the intended use of the property, both present and future.
• inspect survey to determine if survey is acceptable
(a survey is the only way to determine if there are any encroachments).
• review the financing documents including note, mortgage, or land contract.
• examine the transfer documents including deed, real estate transfer return, affidavit of possession and liens, closing statements, and supporting documents.
• record the appropriate documents and arrange for issuance of final title evidence.

An attorney representing the seller will:

• examine and explain a listing agreement prior to its signing.
• review the Offer to Purchase, counsel client and prepare any Counter-Offers.
• advise client to consider tax ramifications.
• assist in procurement of evidence of title to meet the requirements of Offer to Purchase.
• review contingencies in Offer to Purchase to insure they are met by appropriate deadlines to preserve a valid contract for sale.
• prepare and assemble closing documents including satisfactions of liens or mortgage, determination of real estate taxes and other supplemental documents.
• draft or review a detailed closing statement itemizing all payments and disbursement of the transaction.
• prepare a deed, real estate transfer return, affidavit as to lien and possession and other closing documents.

What are Some Advantages and Disadvantage of Selling on a Land Contract?
A land contract is not only a way of transferring interest in real estate, but also a way of providing for financing of the sale. There are advantages and disadvantages to conveying property via land contract. In general, some are:

For the buyer:
less costly
• usually allows purchase with a smaller downpayment, lower interest and minimizes loan closing costs.
interim financing
• contract can extend for any period of time agreed to by the parties, but land contracts should usually be viewed as an interim means of financing a real estate purchase with the buyer required to obtain conventional financing at some point in the future.
strict foreclosure
• in the event of default, not all the protections available under a conventional mortgage apply - buyer should insist upon an adequate period of default because of potential “harsh” enforcement.

Experienced legal counsel should be sought prior to entering into such an agreement.

For the seller:
saleability
• may sell property more easily by presenting an attractive financing package to prospective buyers.
tax advantages
• may be able to minimize tax consequences and since a land contract is deemed personal property it can minimize estate tax problems at a later date.
default costly
• if a buyer fails to live up to the terms and provisions for the agreement, seller may be faced with the losses and expense of foreclosure as well as negative tax consequences.

It is, therefore, critical to carefully consider the credit status of the buyer and all the terms of the agreement which you may personally have to enforce at some future date.

A land contract can make a property easier to sell, but it has its own unique problems and characteristics.

What is Title Insurance?
The basis of Title Insurance is a title search, or an examination of the Deeds, Mortgages and other documents affecting the property, which recorded and made public record. Based upon the search, the title company certifies to you that the seller truly owns the property, has full authority to sell it to you, and that no one else has claimed any interest in it. In the event that you have a title problem in the future and you suffer a loss, the title company will reimburse you for that loss. Equally as important, as as a title problem is discovered, the title company steps in and assumes the burden of defending your interest, including the cost of legal fees. This is a one-time fee paid by the seller and protects you so long as you own the property. The cost of this title commitment is paid by the seller.

What is the Major Difference Between a Warranty Deed and a Quit Claim Deed?
A Warranty Deed guarantees or warrants that the title is free and clear of all encumbrances except those mentioned in the deed. The Quit Claim Deed transfers what title the seller has, if any, without guaranteeing the quality of title.

Defects in Your Title
There are several ways in which your rights of ownership in your property, your title, can be restricted or limited. Common defects in title include easements, covenants, and restrictions. Local and County zoning ordinances, and encroachments may also severely limit the uses you can make of your property. Your attorney can explain these title defects, and may be able to remedy, or cause them to be insured against.

Should Spouses Always Take Title to Land in Joint Tenancy or Survivorship Marital Property?
Not always. In some cases joint tenancy and/or survivorship marital property simplifies a transfer of property at death. Title in joint tenancy and/or survivorship marital property, however, makes it difficult for the owners to change their mind about what should be done with the property at death. Spouses should also consider tax consequences, which vary depending upon how title is taken. If the parties have entered into a marital property agreement, that agreement may supersede how the title is actually registered.

Survey
Is a survey necessary? Although it is not mandatory in many instances, it is in our opinion most desirable for both buyer and seller to have the benefit of the survey. A current survey would disclose any encroachments and also provide the buyer of property an opportunity to be insured against encroachments at the time of sale.

Why Hire a Lawyer?
The purchase of real estate may involve the largest investment in your lifetime. Real Estate agents, title companies, financial institutions and document preparation services are prohibited by law from rendering legal advice. Generally, they do not have the experience or training necessary to anticipate potential legal problems, and they do not actually “represent” your interests. In addition, non lawyers are not subject to the same standards and rules of ethics that lawyers are. Every legal matter is unique in some way. Be extremely cautious if you decide not to be properly represented by an attorney, especially with regard to signing any document that will affect your legal rights and responsibilities. Keep in mind the old maxim, “Penny wise, pound foolish,” and “You get what you pay for.”

For more information or specific questions you have, please contact us.

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This information which is based on Wisconsin law is issued to inform and not to advise. No person should ever apply or interpret the law without the aid of a trained expert who knows the facts, because the facts may change the application of the law.