ATTORNEYS, DO YOU NEED ONE? 1/6/14

[Bill Gulley]

Hopefully, our BP member attorneys will chime in!

First thing to understand in RE is that all real estate is local, that's a saying in this business and it means that what you do, how things are done, what is acceptable and what is not largely depends on local customs.

In RE you must have a written contract for your agreement to be enforceable, you can find all kinds of contracts, some favor the sell, some the buyer, some are made for different strategies and then there are leases, or just an option or a first right of refusal. All kinds of agreements can be reached in RE related areas as well.

We also kick around many legal aspects of RE in the forums, financing issues, landlord-tenant law, title issues and other things that can get you in trouble if you're ill advised.

Most in RE that I see on BP are new, I'd have to say getting legal advice in forums is a big mistake, while we may have seasoned investors who have been doing things for years, we all fail to keep in mind at times that all RE is local.

Most seek advice as they seem to think they can't afford an attorney. But this is about saying that if you are getting into RE, you can't afford not to see an attorney in your area.

I'd like to see us discuss attorney's fees, rates and charges, so hopefully you can share what your attorney may charge or some of our attorneys can share what they may expect or some general expenses.

Say I need a contract to do lease-options without any financing involved. Now, those of us with years of experience will probably sit down and write one out, but let's say we get one from some guru book.

That should be reviewed by a local RE attorney to ensure it is compliant with what is accepted in that community or jurisdiction. Not everything dreamed up by someone somewhere else will always fly.

I think too that what many starting off may not understand is that in RE, you have an inventory of tools that allow you to conduct business. Having documents that have been locally blessed with legal water is an expense much like buying a good saw. You won't just use that saw one time, but many times. You might spend $300 for a decent saw but think about how many jobs it can be used in, that saw is going to make you money, without it, you can't do the job.

Documents from an attorney are much the same, you don't run to your attorney every time you need to cut the same type of deal, those documents can be copied and used over and over. If you do 100 deals, those documents end up costing you $3.00!

Another aspect of RE is building relationships. If you paid an attorney for reviewing or drafting documents you have established at least a small relationship with them. They are much more likely to answer the phone or call you back if something happens where you need immediate help. There is nothing like having some pressing issue where you may have a deal boiling over and need a simple question answered and have to look up attorneys in a phone book! You call and they return your call late the next day, way too late to help and they will most likely want to meet with you first before they give some free advice over the phone in your emergency.

In RE we deal in transactions that have value and take on liabilities in the ten and hundreds of thousands of dollars. Establishing your business, any business formation or simply mapping out possibilities will have many legal requirements that you just won't get addressed for your specific needs off the internet. While you can always close a company or modify it to meet new requirements, that will cost you money and time and perhaps your reputation. Money paid to set up a good structure that will meet your business needs for years to come is a very good investment.

New as well as the savvy investor needs to consider having a good attorney that you can have a relationship with in your area of operations. Not trying to run a commercial for lawyers here, but bringing the need of counsel to an appropriate economic consideration in doing business.

What other aspects of legal counsel apply to RE, how do you minimize legal costs or view them over the long haul?

[Steve Chaisson]

I think it's important to find an investor-friendly attorney. I always close with an attorney, not a title agent. My attorney draws up all types of side agreements and other relevant documents. He modifies boilerplate note documents to make them specific to private money investors and sets up pretty much anything we need.

I keep him on retainer for $500 per month, and all of my closings have no costs on his side. If I wholesale a deal, I'll push the cost back through to the purchaser. Basically, he makes me a profit.

Additionally, he creates a comfort level for non-traditional real estate transactions that often occur when one is wholesaling property.

With enough digging I think most people can find attorneys like this in their local areas, particularly if they are in a larger metropolitan area. Networking with other wholesalers and investors would probably help. I think it's vital to find an attorney who isn't just looking for perfect residential sale transactions to sell title insurance and fit the transaction in a little box. I've chewed through plenty of those attorneys.