Use A San Diego Lawyer On Your Next Real Estate Transaction
A significant amount of our practice is devoted to real estate. As San Diego attorneys and licensed real estate brokers, we have the knowledge and expertise to help you with all aspects of real estate purchase and ownership. We represent commercial developers, investors, lenders and entrepreneurs in the acquisition, development, management, financing, sale, and leasing of real estate.
At Equity Legal, we are committed to the preservation, development, improvement, and operation of real estate. Traditional real estate attorneys typically do not understand the business side of real estate transactions, and real estate brokers are often unaware of the legal pitfalls that their practices may have been exposed to – Equity Legal does not have this problem. Understanding both perspectives enables us to provide our clients with a creative yet protective approach, which allows our clients to achieve their goals of maximizing their equity in their respective transactions.
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Assisting Buyers And Sellers In Real Estate Transactions
No matter what side of a real estate transaction you are on, you need to make sure that you get through the process without any unexpected hurdles that may delay the acquisition or disposition of the property. Obtaining experienced legal representation to handle all the complex paperwork and deal with unexpected issues is essential.
At Equity Legal, we represent all parties involved in any type of commercial and residential real estate transactions: buyers, sellers, lenders, first-time home buyers, developers, business owners and more.
Our Work Goes Beyond Simple Due Dilligence
At Equity Legal our lawyers offer a practical and hands-on approach to real estate transactions that focuses on the client’s best interest. In addition to coordinating due diligence investigations related to the acquisition or disposition, the lawyers at Equity Legal:
By utilizing a practical, business-oriented approach, the attorneys at Equity Legal structure the transaction based on the client’s risk tolerance. Although our real estate attorneys are committed to closing the transaction, our litigation attorneys are prepared to advocate for the client’s interests should a dispute arise.
Contact Equity Legal To Schedule A Complimentary Consultation
Whether you are selling or buying a piece of commercial or residential real estate, retaining experienced legal representation earlier in the process will reduce the likelihood of future problems arising that would diminish your bottom line. To further discuss solutions to effectively develop and protect your real estate equity please contact us online or call 619-724-4355 to schedule a consultation.
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Whenever commercial space is rented, the success of a tenant’s business is heavily measured by the terms of the lease. Therefore, it is important to learn how a commercial lease differs from a residential lease.
In fact, commercial and residential leases are quite different. Consequently, it is important to note the distinctions. Some of these distinctions include the following:
- Unlike residential leases, commercial leases are not subject to consumer protection. For example, commercial leases do not feature security deposit caps or feature rules to protect the privacy of a tenant.
- Commercial leases must be customized to a property owner’s needs while most residential leases follow a template type of agreement. Therefore, each party must carefully scrutinize the terms of a commercial lease.
- It is difficult to break the terms of a commercial lease or to modify it. A large amount of money is involved in the transaction, which makes this type of agreement long-term and binding.
Because commercial leases are typically customized to the needs of the property owner and tenant, they are more negotiable than residential leases. Often, businesses need to include special features when renting a property. In addition, property owners are more inclined to offer special amenities.
Before a commercial lease is signed, the property owner needs to make sure that the agreement meets all his or her business needs. It is also important to check the rent price and the lease’s length. If your business is in a growth phase, you do not want to tie yourself to a long-term lease as doing so may make it difficult for you to make adjustments. By committing to a shorter term with renewal options, you are in a better position.
Strategies for Buying & Selling Property
In order to buy and sell property, you need to know some basic rules to be a success. By learning some key strategies, you can invest in some lucrative real estate.
Look at Properties in Bankruptcy Court
Seeking properties in bankruptcy court can be profitable, as the sellers often are seeking a way to convert their real estate to cash.
FSBOs (For Sale by Owner)
FSBO properties can be purchased with a little creative maneuvering. Some owners may be willing to structure a flip for an investor who is willing to close quickly.
Estate Sales and Probate Properties
Properties can also be obtained through estate sales and probate. Many of the properties are sold far below market value.
Learn to Distinguish between a Buyer’s and Seller’s Market
While a buyer’s market is defined by a market where prices are decreasing and the inventories are full, a seller’s market is one where the property prices are increasing and the inventory is low. Therefore, to profit from rental investments, purchases should be made in a buyer’s market while sales should be made in a seller’s market.
Buy-and-hold is a preferred strategy in real estate investing, and is one where you can become quite prosperous as an investor. This strategy entails buying an investment property for a long time, while renting it. In this scenario, you buy low and sell high. Moreover, you also make money from the rental income that is produced.
Drafting and Review of Purchase Agreements and Sales Contracts
The typical residential purchase agreement should include the following details:
- The address of the real estate and its legal description
- The offered purchase price
- The amount of the down payment
- A mortgage contingency provision, which releases the buyer if he or she cannot obtain a loan in a certain period (30 to 60 days) at a specific rate of interest
- The earnest money deposit
- The length of time the offer will be open, or the amount of time that the seller can respond to the offer
- The date the sale will be closed
- The date of possession
- Items to include in the sale, such as lighting fixtures, appliances, and carpeting
- A seller’s guarantee that he or she will provide clear title
- A provision that states the seller is responsible for paying the utilities, insurance, taxes, and other household costs until the date of closing
- An inspection clause which permits the buyer to have the home inspected, making the purchase offer contingent on a satisfactory inspection
- A clause making the contract contingent on the sale of the buyer’s house
- A liquidated damage clause, which obligates the seller to pay money for each day beyond the date of occupancy that the house is not available
- Terms that require cancellation of the transaction, and the return of the earnest money, if the sale does not go through or the contingencies are not fulfilled
When drafting a purchase agreement or sales contract, you need to find out which terms may be subject to change. In addition, ask if the price might be changed.
Title insurance covers the loss of an interest in real estate ownership as the result of a title defect. This insurance is required if a property is mortgaged. The most common title insurance is paid by the borrower and is known as a lender’s policy. This policy is designed to protect the lender. An owner’s title insurance policy can also be purchased as a separate plan. It is purchased by a seller to safeguard the equity of the buyer in a property.
An escrow account is set up by a lender to pay for real estate-related costs on the buyer’s behalf. For example, during a home purchase, the buyer remits an earnest money check that is placed in escrow. This amount is held until the buyer and seller negotiate a real estate deal and close the transaction.
By setting up an escrow account, both parties in a real estate transaction are protected. Escrow is also used so the lender can hold funds to pay for a buyer’s property taxes and homeowner’s insurance. The lender collects the money monthly along with the payment for the loan. He or she then pays the insurance or taxes when they are due.
The payment of all the funds and fees for a real estate transaction are facilitated by using an escrow account. Escrow is closed when the funds are exchanged and the proper paperwork is recorded. Normally, an attorney makes sure the funds from escrow are properly disbursed and the transaction documents are recorded before the escrow is closed.
Some people own real estate with another person. When each of the parties have different ideas about how to use the property, a stalemate can occur. When this happens, the law offers a remedy known as a partition action. A partition action is used to divide a property into separate shares, allowing each person to use his or her share as he or she wishes. This type of property division can be established voluntarily, if all the owners agree to the action.
Partition in Kind
Two main kinds of legal partitions are featured. A partition in kind, also referred to as an actual partition, enables each owner to control a separate part of a property. This type of partition is more common, and easier to facilitate when both parties are amenable. A partition in kind permits conscious uncoupling, where each party takes one piece of land for himself or herself. The division is recorded in the county clerk’s office.
Partition by Sale
The second type of partition action—a partition by sale—is also known as a partition by succession. It involves selling a whole property and dividing the proceeds among the parties. This partition is used when the parties have trouble agreeing, or when a partition in kind is not possible.
Co-owners may agree voluntarily to partition ownership rights and to divide a property. If the parties do not agree to the action, one party may file a lawsuit to enforce a partition. A court-ordered partition—also known as a compulsory partition—can be defended on a variety of legal principles, including public policy or the statute of limitations. The court decides the case, based on the title, interests, and rights of the parties in the suit.
Encumbrances and Liens
While a lien is considered an encumbrance, not all encumbrances are defined as liens. A lien always represents a financial interest. On the other hand, an encumbrance may represent an easement or restrictions on property use. Therefore, an encumbrance can be the property interest of another party that reduces the clear title or value of real estate.
Deed of Trust
A deed of trust is used to pledge real property for the securement of a loan. It is used instead of a mortgage in California. A deed of trust involves the borrower (or trustor), the lender (beneficiary), and the trustee (an independent third party that holds the legal title to the real estate). The primary function of the trustee is to sell the real estate at a public auction if the trustor or borrower defaults on the loan.
Like a mortgage, a deed of trust is transferred from one party to another party. It is also recorded in the county recording office. The document that is used to facilitate the transfer is known as an assignment of a deed of trust. Therefore, a transfer is often called an assignment.
Property Owner Representation
Property owner representation is often provided to real estate owners who want to ensure they secure the right tenants and build on the value of their rental properties. Services assist property owners by reviewing competitive properties, improving tenant relations, and qualifying prospects. Lease auditing is featured to make sure all reimbursable costs are captured and all leasable space is fully used.
Representation also ensures that both the tenants’ and owner’s obligations are clearly defined. In addition, representation helps owners realize long-term leasing objectives and lowers turnover rates. This is done by crafting terms that best support an owner’s strategy for growth.
Title conveyance involves transferring an ownership interest in real property from one party to the other. A conveyance can also reference a written instrument, such as a lease or deed, which transfers a property title from a seller to a buyer.
Due Diligence and the Title Review
Due diligence must be performed for a title to answer the following:
- Who is the owner of the property?
- What is the property’s description?
- What kinds of liens (mortgages or delinquent taxes) are attached to the property?
- Are there any easements?
- Does anyone else hold a right in the parcel?
When due diligence is performed for a title review, you need to order the title report early. Review the preliminary title report and work with the title company and seller to revise it, as needed. Search for any encumbrances or appurtenances in the legal description. Inquire about any concerns.
In real estate, a title defect or cloud on title makes a sales transaction impossible. The piece of property in question possesses an encumbrance, such as a judgment, mortgage, or lien. Because another party can assert a claim to the real estate, the title cannot be transferred to a buyer in a real estate transaction.
For example, you cannot sell a home if your title has a defect, such as a tax lien. Before you can take any action, the lien would have to be cleared. Therefore, a defective title on real estate means the property cannot be placed for sale in the marketplace.
Reasons for Title Defects
Reasons for title defects included the following:
- The seller is not the owner of the real estate.
- The property features unreleased liens, such as judgment liens, mortgages, or tax liens.
- Some of the property information has not been recorded properly, or it is missing.
Title defects teach the buyer that it is vital to obtain a good title from a seller. That is why it is important to rely on an attorney to make sure your real estate transaction is free from any of these types of issues.
Quiet Title Actions
An action to quiet title is a lawsuit that is filed to establish real estate ownership. Plaintiffs in quiet title actions ask that the court grant an order to prevent a respondent from making any more claims to a property. A quiet title action assists in disputes because real estate may be transferred frequently. Therefore, it can be hard to distinguish who has title to a property.
The quiet title lawsuit is also known as a lawsuit to remove a cloud. A cloud on a property is a potential claim or claim to property ownership. The cloud is represented as a partial or full claim of ownership, such as a lien that does not exceed the value of a property. A real estate title is clouded if a property’s recipient or buyer may have to defend his or her ownership against a party at a future date.
In a quiet title action, the plaintiff bears the burden of showing that he or she owns the title to the real estate. Even if plaintiff enjoys less than full ownership or a fee simple interest, he or she can succeed in removing the cloud or other party’s claim from the property’s title.
Disclosures and Financing Commitments
Disclosures in mortgage lending originate from the truth in lending act (TILA) and RESPA, which is an acronym for the real estate settlement and procedures act. When you combine these two pieces of legislation, they are known as TRID (TILA/RESPA integrated disclosure).
Fast track mortgage lending is no longer used, as is evidenced by TRID. Rules now state that for each financing application, the lender must supply a loan disclosure form. The buyer has three days to accept the disclosures. A loan estimate form and closing disclosure form are also provided for borrowers to review. Borrowers also have three days to review the closing disclosure form and its contents.
New lending and disclosure information is designed to safeguard real estate buyers form bait and switch type programs, such as no money down and 100% financing promotions. Any time a new buyer goes through the TRID disclosure process and changes his or her mind about buying, all the paperwork must be disposed. Therefore, extra documentation and software upgrades have led to higher closing costs.
The Preparation of Closing Documents
The closing process in real estate cannot be done quickly. A number of steps need to be followed before a transaction can be finalized. The following steps are all part of the preparation:
Escrow is an account that is managed by a third party in a real estate transaction. The neutral party holds the paperwork and money associated with the transaction until everything is settled.
Perform a Title Search and Purchase Title Insurance
A title search and title insurance safeguard a property owner. You need to conduct this activity to ensure that no one can lay a claim to your property.
Hire an Attorney
You should work with an attorney to obtain a neutral and legal opinion on your closing documents.
Obtain Pre-Approval for a Mortgage
While pre-approval is not necessitated to close a real estate deal, it does show the seller that the buyer is serious, and has the financial backing to afford a property.
Negotiate the Closing Costs
While an escrow service cannot perform its services without payment, you can eliminate junk fees, which are nebulous fees that are charged for closing. These fees are hidden charges and are assessed as dollars or a percentage of the loan amount instead of points. Some of the fees that fall under this category include settlement fees, sign-up fees, funding fees, or underwriting fees.
Complete a Home Inspection
While a home inspection is not required, it certainly is helpful to have one performed, especially if you find an issue that can be negotiated with the seller. Either it gives you an opportunity to back out of the transaction or have the seller pay for a repair.
Perform a Pest Inspection
Because a property is a large investment, a pest inspection should also be performed. For example, this inspection is indeed a good investment, as you do not want to pay for a house that is infested with termites. Moreover, you want to make sure any issue can be resolved at a reasonable cost.
Renegotiate the Purchase Offer
If your inspections reveal problems, this is your opportunity to renegotiate the offer so that the purchase price reflects the asking price minus the cost of repair.
Lock in the Rate of Interest
If you work with a good lender, he or she will closely track the rates of interest so you can enjoy a low and affordable rate.
You need to be contingent on several activities that need to be performed by certain dates. These activities must be removed in writing by specific dates. This is referred to as active approval. Some of the activities include the following:
- Obtain financing at an interest rate that does not surpass a specific percentage of what is affordable.
- Perform a home inspection that does not reveal any major repair issues.
- Obtaining a seller disclosure that states he or she is not aware of any known problems with the real estate.
- Receive a pest inspection that does not reveal any problem infestations or related damages.
Receiving confirmation from the seller that he or she will take care of certain repairs.
In some purchase agreements, the contingencies are approved passively. This is known as constructive approval – as long as the buyer is fine with the given deadlines.
Fund the Escrow Account
When a buyer signs a purchase agreement, he or she normally deposits the earnest money or the deposit. The purpose of the earnest money deposit is to let the seller know that the buyer is serious about buying the home.
The earnest money is normally directed toward the down payment. You will need to remit the remaining down payment and closings costs unless the other party (seller) has stated that he or she will cover them.
Walk Through the Property One Final Time
Before signing the closing documents, the buyer should conduct a final walk-through of the property. This is done to make sure no damage has occurred and that no items have been removed that are contained in the purchase agreement.
Completing the Closing: Signing the Real Estate Paperwork
Signing the paperwork is no easy task, as you will have to go through about 100 pages. Take your time in scrutinizing the fine print and pay specific attention to the rate of interest. In addition, make sure you will not incur a prepayment penalty
While preparation for the closing is quite extensive, it is worth your time to follow all the steps in the process. When you can work with a firm like Equity Legal, LLP, you will find that you can get through any real estate transaction with more ease and satisfaction as we provide you with our closing attorney services.