Written by Paula M. Zwiren, JD, MBA
Real property buyers frequently call and ask if they really need an attorney in order to buy a piece of property. My response is always “I could not personally imagine buying such a large investment without a specialist reviewing, understanding and explaining the entire transaction to me. Even I, an attorney who owns a title agency, use a separate attorney when buying real estate.” An attorney is the only true advocate with no conflict of interest that sees the entire integrated picture of the transaction and the property.
As an attorney, you probably hear the same question from buyers calling you to inquire about your legal services. I offer you the following four stories which illustrate the importance of using an attorney and allowing the attorney to complete the review process before proceeding with the purchase.
INADVERTENT FENCE STEALING
An acquaintance of mine recently bought a house in a state where it is not common to use an attorney for a residential real estate purchase. At the closing, a service provider (ie, lender, realtor, title person) told her that the fence was mistakenly placed on the neighbor’s property and that service provider arranged for the fence to be moved. The fence was successfully moved. However, two days later, an elderly couple who recently put the fence correctly on their own property was at her door asking why she stole their fence. My friend had to pay to move the fence back onto the neighbor’s property. I am certain this would have never happened had she consulted with an attorney, as the attorney would have suggested ways to confirm ownership of the fence prior to moving it.
An attorney client of mine was retained by a buyer who won a bid at Sheriff’s sale and put 20% down. The attorney advised she would order title and let her client know what the search revealed, including easements and restrictions, as well as to confirm the foreclosure wiped out all other ownership and/or lien interests. Immediately after ordering title, the buyer paid the Sheriff off, thereby completing the purchase. During our review a few days later, we noticed the foreclosed mortgage was recorded in the wrong county initially and another mortgage was put on before the foreclosed mortgage was recorded. Therefore, the foreclosure was of a second mortgage, which was meant to be a first lien. We called the attorney before even issuing the title commitment and thereafter found out that the buyer said someone said something about another mortgage at the time of sale, but that he didn’t understand. While in this case, the buyer hired an attorney, he still completed the purchase before obtaining her counsel and was stuck with the property and its liens.
In F. Bradford Batcha’s article in the Real Property, Trust and Estate Law Section Newsletter this month, he points out that there remains a limited amount of transactions where a one- or two-family property is subject to the bulk sales notice requirements. Specifically, sellers who are LLCs and corporations who do not meet the ordinary course of business exemption. Given that the real estate practice commonly does not involve real estate attorneys in southern New Jersey, he states that the danger to an innocent unrepresented home buyer might be cause for consideration in updating the law in this area to protect them. I concur. Unless the law is changed, bulk sales requirements continue to be a reason that a buyer should retain an attorney to represent them in a purchase transaction.
CLOSING TABLE DISRUPTION
A seller’s realtor created over an hour delay at the closing table by insisting the parties do not close until the title company removes the charge for an ALTA 9 series endorsement and accused us of stealing and overcharging the buyer. In Pennsylvania,the ALTA 9 series is a percentage of premium charge, which is often much more than the New Jersey charge of $25.00. The residential lender on the transaction required the ALTA 9 series endorsement and did not accept the Pennsylvania form endorsement often used in its place. We sent over a copy of the lender's attorney review letter and various forms that showed it was a lender requirement and that we, as the title company, did not have the authority to override the lender’s requirements. In order to get through the closing, I had to call management at the large real estate firm the realtor was from and advise them of the situation at the table. The realtor’s manager contacted the realtor about the matter and the closing continued to completion. Had an attorney been retained by either buyer or seller, this closing delay and slightly traumatic disruption at the closing table would have not lasted more than one minute.
-Paula M. Zwiren