Originally posted in International Living
December 14, 2011
Dear Reader,
It’s not every day that you get a freebie.
And the usual advice is to take the freebie and run, before the giver changes their mind. But when it comes to real estate, you need to analyze why you’re getting the freebie, and what you’re missing out on if you take it.
I thought of this when speaking to an attorney we work with a few weeks ago.
There had been a recent surge in property sales in the area this attorney works in. I asked if he had seen a similar surge in buyers asking him to check out their property purchase.
He said no. I figured another attorney had set up shop and taken a chunk of his business. But that wasn’t the issue. The problem was that property developers and real estate agents in the area had started to offer a new freebie.
Buy a property…and we’ll cover your closing costs.
Sounds very tempting, doesn’t it? But the agents and developers weren’t just calculating the projected closing costs and giving you a credit, or picking up the tab at closing. Both are common, acceptable practices that I’ve seen before. In this case, they simply said that they would “take care of closing for you”.
At face value, it’s attractive. It can save buyers a lot of time. It can save the headache of trying to find a local attorney. It can save thousands of dollars. So what’s the catch?
The catch is that you don’t get to choose the attorney.
Instead, the agent or developer chooses one for you. He’s most likely the real estate agent’s or developer’s attorney. He may have carried out the original due diligence on the property. He may have worked with the developer’s or agent’s family for years. Sometimes he’s the developer’s or agent’s paid employee.
If you think this won’t happen….that there are rules governing attorneys representing both sides of a transaction…think again. In many countries that’s not classed as a conflict of interest. The attorney may not even have to disclose that he represents the developer or agent, or is their employee. But when push comes to shove, he’s the developer’s or agent’s attorney, not yours.
He won’t necessarily have your best interests at heart.
Even if he scrupulously flags any potential problem, it’s still not ideal. He may have overlooked something when he did the original checks on the property title. He may not have included all the standard clauses in the sale contract. He might not realize that the development needs one more permit.
It’s not that the developer’s or agent’s attorney is dishonest. But one of the most important benefits of having your own attorney is the check-and-balance that you get…that “second pair of eyes” on the transaction.
If you use your own attorney, he’ll flag up these problems. He may also suggest changes to the contract to protect you as a buyer. He’s 100% on your side. He’s not trying to keep the developer or agent happy.
My advice if you’re offered the “we’ll pay your closing costs” deal is to ask what that means. If the developer or agent gives you a discount on the purchase price, or pays the fees – and you hire your own attorney, that’s great. If the deal means using his personal attorney, or one that he chooses, I’d turn it down. Instead, I’d ask for a straight discount. It might not cover the full closing costs, but you'll get an attorney that's only looking out for you.
Margaret Summerfield
This entry was posted on May 21, 2016 by Jim and Iris
Lesley-Anne Goodfellow