Protect yourself: engage an attorney to represent you for your home purchase.

It is common here in New York to have an attorney represent the Buyer in a purchase transaction. I know elsewhere in the country this is not necessarily the case. Frankly, I can’t understand how anyone could proceed with signing important legal documents without an attorney present to review and advise.

I’ve recently encountered two situations where the Buyers were not represented by an attorney at contract or closing.

In the first case, the Buyer purchased a property in Florida. Until I reviewed their documents a year later, they had no idea a prepayment penalty existed on the mortgage loan for the Florida home. Their mortgage person was one of those, “Sign here! No Problem!” quick-talking salespeople who doesn’t bother to counsel, advise, inquire of, or explain the loan product.

Sure, the Buyers received a Truth-In-Lending statement for the loan prior to closing. But the TIL does not actually explain the loan terms. It provides only the fundamentals such as term (30years), Fixed/ARM, and the prepayment penalty box is way down near the bottom of the page and only says, “…may have to pay a penalty.”

That’s not much detail is it?

Had the Buyer been represented by an attorney at this Florida closing, their lawyer could have advised them right there at the table about the existence of the penalty, and the particularly onerous nature of this penalty (five years!).

That’s what the attorney does at closing: reads the documents before you sign and explains or questions those documents if there is something there that may be detrimental to your best interests.

The second case I heard of was last night. A Buyer signed a contract to purchase an apartment without an attorney representing her. The Buyer is not the least bit qualified for the mortgage loan. There is no way possible this Buyer can obtain financing to purchase this apartment.

Normally, you might think, “Well, alright, Buyer makes application to the bank, is denied for the loan, presents the denial letter to the Seller and gets the downpayment back.” Seems simple enough—and very common, indeed—but, not in this case.

The contract of sale has no mortgage contingency. And the Buyer put 10% of the purchase price down on signing.

If the Buyer had an attorney, at the very least the attorney would have made provision for a mortgage contingency in the contract. If the Seller refused to provide such a contingency, the attorney would have advised the Buyer of this deficit and the potential loss of downpayment. If the Buyer insisted on proceeding with the purchase minus the contingency, then an attorney could have advised the Buyer to be absolutely certain that mortgage financing was possible before signing the contract.

No attorney. No mortgage contingency. No mortgage loan approval. No way to get back the 10% downpayment.

Have your attorney on your “team” before you get out there shopping for a home. Your team of professionals should be at your disposal to advise you before you open up the paper to look at the “Homes For Sale” ads or contact a Realtor to show you homes.

It makes good sense to protect yourself in this way with the single biggest purchase of your life.