What Lawyers Look For in the Top 5 Real Estate Documents

You’re preparing for court tomorrow when a client calls. She wants you to review some real estate documents.

You juggle a lot of different areas, but you don't get real estate questions every day. She’s one of your best clients. Referring her may mean losing her business on other matters. Do you know what to look for in the closing documents she sends over?

Here is what experienced real estate attorneys look for when reviewing key transaction documents. Are you missing any of these things?

Purchase and Sale Agreements

The complexity of real estate purchase agreements varies greatly between residential and commercial contracts. Commercial contracts often contain information on assigning existing leases and vendor contracts. Residential agreements often involve homeowners associations, restrictive covenants and more.

No matter the type of real estate purchase agreement, attorneys look for these elements, among others:

• Unambiguous conveyances, such as mineral interests
• Disclosure of known material defects
• Clauses that allow for termination if appraisals, surveys, etc. are not satisfactory
• Accurate legal descriptions
• Acceptable covenant restrictions

Financing and Loan Documents

Lawyers don’t often get asked questions about financing. These decisions are typically made by the time they get involved in the transaction. Regardless of whether the loan is residential or commercial, loan documentation typically consists of:

• Promissory notes and mortgage deeds
• Loan applications
• Closing disclosure and settlement statements

Residential loans are typically non-negotiable. If clients have questions before the lending process, attorneys can advise on lending options.

There is more leeway for negotiation in commercial loans. Things such as guarantor requirements can sometimes be negotiated.

Land Surveys, Legal Descriptions and Deeds

A land survey is a visual representation of the physical boundaries of real property completed by a surveyor. A legal description is a written description of real property subject to a survey.

When looking at land surveys, attorneys locate the following:

• Boundary lines
• Locations of all buildings
• Identification of easements
• Any encroachments

Attorneys also verify the correctness of the legal description in deeds and title insurance policies.

Title Commitments

Title insurance commitments show buyers the condition of a property’s title prior to the transaction. If any incumbrances are present that cloud the title, such as judgment liens, they are outlined in the commitment.

Title insurance commitments also commit title insurance companies to issuing a title insurance policy as long as any conditions outlined are met prior to issuance.

American Land Title Association (ALTA) title insurance commitments generally consist of two main parts –  Schedule A and Schedule B. Schedule A reflects information found in the purchase contract as well as public records. Attorneys typically confirm:

• The accuracy of all dates and names
• The correctness of the legal description
• The type of policy and the amount
• The type of estate conveyed

Schedule B1 defines any encumbrances, or title defects that may be present. Schedule B2 covers anything the title insurance policy will not cover. When reviewing Schedule B1 lawyers usually:

• Ensure any title defects can be cured
• Gather evidence defects have been cured

For Schedule B2 attorneys review:

• The standard exceptions
• Any special exceptions (These can sometimes be modified.)

Real Estate Closing Documents

Closing documents include transfer documents such as deeds, loan documents, title insurance commitments and other documents such as bills of sale. In analyzing this raft of documents before a closing, attorneys look for:

• Failures to disclose or locate title encumbrances
• Improper legal descriptions
• Instances of settlement agent negligence
• Evidence of mortgage fraud and wire fraud
• Clerical errors, such as incorrect names or notary issues

Don’t Forget CLE Coursework

This article is by no means an exhaustive list of everything you need to look for. CLE coursework is necessary to ensure you don’t leave any stone unturned when reviewing real estate documents. Access to a comprehensive library of real estate courses, both for yourself or for your team, is even more beneficial.

You need knowledge to remain your clients’ go-to practitioner for their legal questions. Continuing Legal Education is the best place to start.

This blog post is for general informative purposes only and should not be construed as legal advice or a solicitation to provide legal services. You should consult with an attorney before you rely on this information. While we attempted to ensure accuracy, completeness and timeliness, we assume no responsibility for this post’s accuracy, completeness or timeliness.