Attorneys

 

In many parts of the country, attorneys play a central role in residential real estate transactions. They draft purchase contracts, help negotiate contracts and inspections, review title documents, and draft or review loan documents and closing documents. For better and for worse, attorneys typically have a more peripheral role in most Colorado residential transactions. I would guess that lawyers are involved in less than 5-10% of residential real estate transactions in Colorado, and I wouldn’t be surprised to learn that the actual number is actually as low as 1-2%. In Colorado, most buyers rely primarily on their real estate broker, rather than an attorney, to help them draft and negotiate contracts as well as to help them review title, loan and closing documents.

The fact that Colorado real estate agents assume much of the work carried out by attorneys in other states does not mean that Colorado’s real estate agents are smarter or better educated than agents elsewhere in the country. To obtain a real estate license in Colorado, you need to have a high school education, complete less than 2 months of classes, and pass a marginally difficult test on the content of those classes. In these classes, real estate brokers receive little or no training on reading or drafting legal documents, nor do they get any substantial training on reading or understanding title documents, loan documents or most other closing documents. Many brokers take classes or receive other additional training after they’ve received their real estate licenses, but these classes don’t even begin to approach the rigor of a mediocre law school.

As I’ve noted elsewhere (Making an Offer), the reason that Colorado real estate brokers can assume this role in producing and interpreting legal documents is that the Colorado Division of Real Estate requires brokers to use standardized contract forms. They require that brokers use these standard forms not only in putting together purchase contracts, but in establishing listing agreements, buyer agency agreements, and so on. In addition, most Colorado real estate companies have these standard contracts reviewed by real estate attorneys and then supplement the standard contract in accordance with their attorney’s recommendations. As a consequence, your real estate broker doesn’t really draft a contract for you. He or she merely fills out the pre drafted contract and adapts it to the circumstances of a particular transaction.

Should You Hire an Attorney?

So, do you need to hire an attorney to help you buy real estate in Colorado? The Colorado Division of Real Estate takes the position that you should. Many of the standard forms contain recommendations that the buyer and seller should consult with “legal and tax counsel” before signing. But most consumers don’t seem to take these admonitions very seriously. But consider:

  • Neither the Commission’s standard contract forms, nor the substantial standardization of title, loan and closing documents, will magically transform your real estate broker into an expert on real estate law or legal writing. If you encounter circumstances that require extensive revision of the standard documents, or if serious legal issues emerge, you should hire a knowledgeable real estate attorney to help you review and draft the appropriate documents. Many real estate brokers reach the limits of the competence very quickly when writing contract language is involved.
  • If you’ve read a document carefully, and the document is either unclear or seems to be saying something other than what you’re being told it says, you should hire a real estate attorney rather than relying on you real estate broker’s advice. Always remember that your broker probably doesn’t have any more training in reading and interpreting contract language than you do.
  • Before you sign a buyer agency agreement, your real estate broker should review the contract with you and explain its implications. But remember that this broker is the “other party” in this contractual relationship. Your interests and his do not always coincide here and this contract will be the basis for any future legal disputes you may have with your broker. If you have any doubts about the contractual obligations that you’re getting into when signing a buyer agency agreement or a listing agreement, you should absolutely have it reviewed by a real estate attorney before you sign it. It shouldn’t take long or cost much.
  • If you are working with a broker who is working as a transaction broker rather than in an agency capacity, whether this is because you have failed to sign a buyer agency agreement or because you are involved in an “in-house” transaction, you need to remember that this broker is legally prohibited from working to advance your interests over those of the seller in the transaction (see Agency Law in Real Estate ). He has no legal responsibility to protect your interests. Here, it is no longer a question of whether your “agent” has the skills required to properly protect your interests. This broker is legally prohibited from using whatever skills they do have to protect you. Here, you need a real estate attorney, and sooner rather than later.
  • If you are buying a new home directly from a builder, or having your new home built from the ground up, you should almost certainly have a real estate attorney either draft or review the contract for you. Most builders use standardized contracts of their own rather than the forms drafted by the Colorado Division of Real Estate. These contracts are usually very heavily weighted toward the protection of the builder’s interests, not yours! With a custom builder, your attorney may be able to negotiate substantial changes in the language of the builder’s contract. With a tract builder, this will rarely be the case. Still, whether or not you can negotiate changes to the builder’s standard contract, a good real estate attorney will help you understand what you’re signing onto and will explain the nature of the risks you’re assuming.

Make Sure You Hire a Real Estate Specialist

A final very important note. If you decide to hire an attorney to work with you, make sure you hire someone who specializes in real estate law. An attorney who specializes in family law or environmental law may not know much more about real estate than you do. And they will certainly know less than many competent real estate brokers. When they review any of the standard contracts, they will have to read and analyze every word. They may even have to do some background research to make sure they understand what they’re reading. What would take a good real estate attorney 15 minutes may take a non-specialist 10 hours to get through, and they will charge you for every minute of it. Equally important, a non-specialist won’t know what they need to know about Colorado real estate practices or about the local market. They need to know this to give you good advice. So, if you need an attorney, make sure to get one who knows what she’s doing.

 Posted by at 3:07 am