Real Estate Seller’s Guide to Legal Services
From the standpoint of legal services much less is required for the Seller than the Buyer. The principal reason for this is that in Maine, unlike some other parts of the country, the Buyer has the responsibility for making the title examination. Another factor is that the Seller does not provide the closing agent. If the Buyer is obtaining financing from a commercial lender the lender will handle the closing and charge the closing costs to the Buyer. If it is a cash deal the Buyer’s attorney or title agency will be the closing agent, again at the Buyer’s expense. Also if the Seller is using a Realtor matters concerning property disclosures and identification will be assembled by the Realtor for you, often without a need for legal consultation. Aside from these matters the legal services for a Seller can be viewed as encompassing several distinct tasks: (a) identifying the description and ownership (b) assisting with the purchase and sale agreement (c) addressing title issues (d) advising on contingencies (e) dealing with a problem Buyer (f) preparing deed and Seller’s closing documents and (f) assisting with closing.
Identifying what you own. It would appear axiomatic that if you intend to sell real estate you should be able to give a description of what you own and make certain that you own it. With recently acquired real estate this generally is not an issue. However, if the property has been owned over a long time, was inherited or is held by some entity such as a realty trust, your lawyer should be consulted to help identify just what it is you intend to sell and your authority to sell it. For example, rural Maine real estate may have a present title description that is unchanged over the last one hundred years, even though parts of it have been sold off to others. Your lawyer or a surveyor can assist in providing you with a current description for sale. If the property has been inherited your lawyer can confirm that the necessary steps were taken to make certain you can give a deed in your own name this is especially true if it was inherited from a family member who was not a Maine resident at the time of death and no probate was ever opened in Maine. If the property is held in a trust, limited liability company, corporation or partnership your lawyer should review the underlying documents to make certain that the necessary steps were taken to authorize the sale. If it is residential property Maine law requires preparation of a Seller’s disclosure of matters concerning the condition of the property. If no Realtor is assisting, your lawyer should be consulted to help you meet these requirements.
The purchase and sale agreement. Maine, like other States, requires that any agreement for the sale of land must be in writing. Here that agreement is called a Purchase and Sale Agreement (the “P and S”). If you are using a Realtor the agent producing a Buyer will present an offer on a standard Realtor’s P and S form. This is a generic document that may or may not be well suited to your deal. Frequently other conditions or terms are added. It is advisable to have this document reviewed by an attorney before you sign. Remember that when an offer is presented there is no “agreement” until it is accepted. If terms are still being negotiated such as who pays for a survey, even if there is agreement on some terms such as price, there still is no enforceable agreement to purchase and sell. If no Realtor is assisting you may want to have your lawyer prepare a form contract that you can present to an interested Buyer. In this way you can establish first the terms of sale that are significant to you. Often where no Realtor is involved the parties have negotiated an oral understanding of what is acceptable to each and the Buyer then has his or her lawyer prepare the P & S. It is advisable to have your lawyer review what the Buyer’s lawyer has prepared.
Title issues. If you have a policy of title insurance or attorney’s title opinion from when you acquired the property you should provide it to the Buyer once you have a signed contract. That will save the Buyer some cost and simplify the entire process of title examination. All too frequently matters will be disclosed as a result of the Buyer’s title examination. In rural Maine, title matters may not have been addressed in the past may now become significant. There are many examples. One might be nothing more than getting a missing party to agree to the sale, such as an heir who did not release her fractional interest when the property was transferred out of an estate where there was no will. Clearing title objections is the responsibility of the Seller and is typically handled by your lawyer.
Contingencies. Buyers often write contingencies into the P and S, which if not met, can void the contract. The most frequent concern building inspections. If some serious defect is found the answer may be the negotiation of a remedy. Often the remedy may require a repair that can’t be made before closing and the parties desire to put money aside in escrow to ensure the repair being made. The terms of such an escrow should be drafted or reviewed by your attorney. If there is no Realtor involved your attorney can be of assistance in handling the difficulties presented when a contingency has failed. If a contingency may require a voiding of the contract your attorney should advise you to make certain that the contract in fact requires that and if so that the contract is cancelled in a proper manner.
The problem Buyer. It is not a perfect world. Not every deal is smooth. Occasionally the Buyer has misgivings about his or her decision. The property simply does not look the same in November as it did in September. Realtor’s refer to the experience as “Buyer’s remorse.” Some people simply are difficult. Whatever the reason it often helps to have your lawyer address the issues presented. Having an intermediary accustomed to dealing with conflict will not only give you needed support and advice, but may help to resolve the issue and save the sale.
Deed and closing documents. In many sales the attorney’s only requested role is to prepare the deed, the Declaration of Value and other Seller’s closing documents. The Declaration of Value is a tax form required to record the deed. It is also the form against which the real estate transfer tax is assessed. The Seller’s share of the tax is $1.10 for every $500 of consideration. Other documents may include a bill of sale for the personal property and documents to clear title. If the Seller does not reside in Maine and if the sale price is more than $50,000 the Buyer is required to withhold 2½% of the purchase price to be paid to the State of Maine and applied as an estimated tax payment for the Seller. Your lawyer can review with you if there are circumstances that apply to excuse or reduce this withholding.
Assisting at closing. Often the Seller is not present at closing. Instead the attorney represents him or her, often with a Power of Attorney authorizing the signing of documents for the Seller. Whether present or not, the attorney may prepare or review the Seller’s closing statement and assist in other matters to make certain the transaction is properly completed.
The extent of legal services may well be a matter of choice of the Seller. In some cases it is dictated by circumstances created by the condition of title or the Buyer. The services are typically performed on an hourly rate basis. Some lawyers will do defined tasks, such as the preparation of a deed, for a pre-set fee. You should request an estimate of the cost of legal services and the rate that will be charged.
The sale of real estate should not be an adversarial experience. Your lawyer can assist in making it a smooth transaction.