Addressing the Relative lack of Attorney Involvement in Residential Real Estate Transactions
Imagine having purchased a brand new car.
That first few weeks of driving are glorious. Quick take off. Smooth acceleration. You can get lost in a sound system that rivals the acoustics of Heinz Hall.
The new car feel
Then it happens. Already late for a settlement conference involving your client’s suit for fraud and negligence in a residential real estate transaction, the engine starts to sputter. You pull to the side of the road and immediately call the dealership. Already sensing your level of frustration, the manager reminds you that Pennsylvania has a ‘lemon law’.
Your emotions having been eased by that reminder, a feeling of ironic reflection hits you as you realize that there is no such thing as a ‘lemon law’ for the purchase of residential real estate.
Save for extremely rare circumstances, there is no real means of “returning” ownership to the seller if there is a problem after closing…….even with a receipt.
Since a buyer of a home is not armed with a post purchase “lemon law” for protection, common sense would dictate that any buyer hire the best professional possible for advocacy and representation of his/her interests….namely a lawyer. In theory, that lawyer would be able to represent him/her throughout the entire process, from initial contract to closing.
However, in the fast paced world of metro Pittsburgh residential real estate, it can be highly impractical for a lawyer to be involved at the outset of negotiations. Emotions run very high. Homes can often go under agreement as late as 1 AM. Multiple bids can be the norm. If a buyer really loves a house, and takes the time for any offer to be reviewed by a lawyer, he/she runs the risk of losing the home to another buyer.
Instead of lawyers, for all practical purposes, the “representation” of buyers has been essentially left to real estate licensees through the use of forms. The general forms used in the overwhelming majority of the residential real estate transactions in metro Pittsburgh are published by the Pennsylvania Association of Realtors® (PAR). In and of itself, this status would not be so potentially problematic…….except for the existence of “dual agency”. Pennsylvania allows for dual agency.
Dual agency permits the same brokerage (even the same agent) to “represent” both the seller AND buyer, in the same transaction. An offshoot of dual agency, known as “designated agency”, allows for the regular creation of “barriers” within the SAME brokerage, such that one “agent”, can “represent” the seller and another “agent”, can “represent” the buyer. All the while, the broker of record remains, still, a dual agent.
As one can imagine, conflicts of interest, both existing and potential, abound…..much to the potential detriment of the buyer.
What is a buyer to do? While it is possible for a buyer to find and hire an exclusive buyer agency at the outset of his/her home search (thereby virtually eliminating the pitfalls presented by “dual agency”), companies such as this are rare.
Yet, there is a point in time where a lawyer can have an impactful role which goes way beyond the mere cursory review of the buyer’s loan documents, deed, title policy and CD at closing.
That point in time is immediately once an agreement of sale is signed. Often, dual agency, in some form, has attached and the buyer is now, effectively, left with no advocate. A lawyer, as that advocate, can make sure the buyer stays on top of the due diligence time periods, so no inspection is inadvertently waived for lack of action. Most importantly, a lawyer can help the buyer re-negotiate terms of the agreement, thereby relieving the buyer of having to “rely” on the advice of a real estate agent who may be in a compromised position.
Other states go to great lengths to ensure attorney involvement in the residential transaction. The “standard” agreement of sale form in New Jersey includes a contingency for “attorney review”. South Carolina and Georgia go so far as to actually require attorney involvement, to some degree, in every residential real estate transaction.
At this point, Pennsylvania is not there. So, buyers are not going to be required to knock on a lawyer’s door for help. Yet, with adequate marketing, home buyers can be made aware of the vital role an attorney can have in the home buying process, even if it is limited to the time immediately after a home is put under agreement. That guidance from a lawyer may help insure that the buyer does not get stuck with a “lemon”.