For every party involved in your transaction, there is likely an attorney specialization (or several) to provide legal guidance. While in many cases you will never need to consult directly with a real estate attorney, you should be familiar with their expertise should the need arise. In some cases, your private money lender may refer to you counsel who are familiar with private lending laws.
Can I trust an attorney that my private lender recommends?
Borrowers often ask PMLG whether it’s ok to consult a real estate attorney referred by someone directly involved in your transaction. In most cases, this should not be an issue. If the attorney foresees a conflict of interest, it is their responsibility to tell you. Beyond that, some of these specializations are very niche. The parties you work with will likely already know many, if not all, of the local attorneys. (It would be more of a red flag if they couldn’t give you a recommendation.)
Always do your due diligence.
The best way to find an attorney is by word of mouth and referrals from:
- Other attorneys.
- Private money lenders.
- Other real estate investors who have used the attorney’s expertise in the past.
- Frequent panelists at respected and established seminars and conferences.
While the internet may be an easy starting point in your search, don’t hire a real estate attorney based solely on what you see or read online. Good references from trusted sources are key!
In any event, it is best to reach out to the state bar association for recommendations. You will also want to complete your own due diligence on an attorney’s background, just as you would for parties involved in the rest of your transaction.
Do specialized attorneys cost more?
The specialists in these areas will likely charge more than general counsel. However, because of their highly specialized knowledge their advice will likely arrive more quickly and require fewer billable hours.
Beyond real estate attorneys, you may find yourself in need of other specializations:
- Business or corporate counsel prepare resolutions, form entities, review loan documents and contracts, and advise on how best to keep corporate records. This counsel should be independent of your private money lenders’ attorney so you receive objective advice.
- Loan compliance attorneys prepare loan documents and ensure compliance specific to your investment. It is likely your private money lender works closely with a loan compliance attorney to draft their contracts. Unlike residential transactions, commercial loans are rarely standardized. In addition, the larger the transaction, the more complex the contracts become. You should have your own counsel review the loan documents presented to you by the private money lender.
- Title insurance attorneys select and help craft the title endorsements which coincide with your collateral type.
- Collection attorneys will generally be hired by the private money lender or loan servicer if you are unable to make payments. The private lender may also retain a collection attorney to pursue the personal guarantee or full recourse option of the loan contract.
- Purchase and sale agreement counsel are often called real estate attorneys. They provide guidance on and help draft agreements for the purchase of real property. Real estate attorneys are up-to-date on changing regulation and legal interpretation, and understand the nuanced and specialized contract language.