What Questions Should You Ask a Real Estate Attorney?
Apr 30, 2020 Attorney,lawyer
A Guide to Finding a Real Estate Attorney in NYC
You might not expect us to say this but having a good real estate attorney on your team is arguably more important than working with a vet buyer’s agent when you’re buying in Brooklyn.
That’s because in New York City, buyers’ agents are only responsible for matching buyers and sellers on price and working out the key transaction terms. After an offer has been accepted, that’s when the real estate attorney takes over and handles all aspects of contract negotiation, legal and financial due diligence and the closing process.
CLICK HERE TO WACTH A SHORT CLIP ON THIS TOPIC FROM OUR RECENT BUYING INTO BROOKLYN PRESENTATION
So it’s extremely important that you have an experienced, trustworthy and competent real estate attorney guiding you through one of the most important transactions of your life! Below are some questions we recommend you ask during your search and why we think the answers are important. But remember, it’s not just the substance of the answers that’s important (though it is!) but making sure that your potential attorney is both comfortable with you asking them and can explain things to you in terms you understand. A nice person whose advice or legalese goes over your head can hurt you in the long run.
What Other Areas of Law Do You Practice Outside of Real Estate?
This isn’t exactly a trick question but the answer you should be looking for might be unexpected. Instead of someone who is also a whiz with criminal law or divorce cases, you want to look for someone who specializes in this field. It’s simply too complex a subject for someone who only dips their toes into it periodically.
What Other Areas of Law Do You Practice Outside of Real Estate?
This is a trick question as the last thing you want is for your lawyer to claim to be well versed in multiple other areas unrelated to real estate. If they’re claiming to be a practicing, top expert in criminal defense and divorce litigation in addition to residential real estate, then you may be in trouble.
That’s because the field of law is so complex that the experts in each niche generally focus solely on their sector. There is simply too much depth of knowledge and competition in law for a lawyer to be simultaneously an expert in multiple fields! Therefore, be wary if the real estate lawyer you’re interviewing begins telling you that he or she is an expert in multiple unrelated fields because in all likelihood he or she is probably not the best in any of those fields! Also, beware of litigators—not because there’s anything wrong with being a litigator but they will be in court frequently, and simply won’t have the time to attend to your needs as much as you may need. They likely also won’t be as available for casual questions.
Will You Personally Be Working with Me or Will You Hand Me off to Your Paralegal?
This is important, especially if you’re paying a premium for a brand-name real estate attorney. You may be working with the best real estate lawyer in New York City, but it means little if you get handed off to his or her assistant. This is why it’s very important to confirm in writing with your attorney whether he or she will personally be handling your file and attending your closing. If a paralegal shows up to represent you at closing, you will be at a disadvantage in all likelihood versus your counter-party who has their lawyer there. Your counter party’s lawyer will be significantly more experienced and senior versus the paralegal and you will most likely lose on every item of contention.
How Attentive and Responsive Will You Be?
This may seem like one of the more obvious questions to ask, but many people simply assume their lawyer will be responsive to inquiries within a professionally reasonable amount of time. That typically means being able to respond to emails within a few hours during a normal working day. You can easily test your lawyer on this by simply seeing how responsive they are to your initial outreach.
Is Your Legal Fee All Inclusive?
Be careful of lawyers who promise a low fee to entice you but charge a la carte for everything from printing, phone calls, travel, or attending the closing.
Traditionally, real estate legal fees are typically taken at closing and consist of a one-time, all-inclusive flat fee. The only time lawyers may charge on top of the flat fee is for the cost of messengers or shipping.
You should get the amount of their fee and ideally what it includes in writing. A retainer agreement is not necessary for anything under $3,000 and most lawyers won’t ask for one.
Note: the really good lawyers know that their business is based on referrals and they’ll never take a client to court for anything under $3,000 anyway. As a result, they never need an engagement letter or other contract for anything under $3,000!
What Does Your Due Diligence Entail?
A good real estate lawyer conducts thorough contract, legal, and financial due diligence on behalf of their client regardless oftheir fee. If you’re buying a condo or co-op in NYC, that means they will review the building’s financial statements, board minutes and original offering plan. They will review and negotiate the purchase contract on your behalf and order and review a title report or coop lien search. They will guide you through closing day and beyond.
However, sometimes, a lawyer may try to cut corners because of the heavy workload. This is where trust and a solid interview become very important.
Are You Affiliated with a Title Company?
A lawyer who gets paid to refer clients to a title company or a lawyer that outright owns a title company may have a severe conflict of interest with their buyer client. In that case, the lawyer will often make much more money from the title company versus from their client.
This is not good for you. The title company will want to insure as little as possible while the buyer will want to insure as much as possible.Since a lawyer in this situation won’t get paid from either party if the deal doesn’t go through, he or she may be incentivized to favor the title company in order to push a deal through. Usually the buyer won’t even realize this is happening! The New York State Bar Association has deemed this practice unethical; however, many law firms continue to do this.
What Kind of Insurance Coverage Do You Have?
Among the most forgotten questions to ask your real estate attorney in NYC are whether they have and how much they have of professional liability insurance and fidelity bond coverage. Often, simply due to prohibitive cost, law firms do have coverage but a very low amount. A low amount of coverage won’t do most home buyers very good when the average sale price in New York City is $2 million.
This question is especially important for buyers of luxury apartments in NYC, defined as properties with sale prices of $10 million or more. When an insurance claim is warranted for a luxury transaction that goes wrong, many law firms simply will not have sufficient funds to cover the damages even if they do have insurance!
Ask about: Fidelity Bond Coverage | This covers against theft of client funds by employees.
What Kind of Computer or Email Security Does Your Law Firm Employ?
Remember that your lawyer will have sensitive information and data about you, including bank account information and social security numbers. You and your buyer’s agent may also have shared your Deal Sheet, REBNY Financial Statement and your co-op board application with your lawyer. This is not the kind of information you want to be hacked or sold.
Your lawyer has legal and ethical obligations to protect client data. While this does not mean they need to be tech gurus themselves, they should hire a tech consultant if they cannot themselves secure their clients’ data.
Red Flag: be careful when you encounter a lawyer with an AOL or other non-professional email account. This is most likely a sign that this person either does not take security seriously or is simply less familiar with technology.