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When Should I Seek Legal Advice?

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Bilgefisher

Bronze Contributor
Read Fastlane!
Aug 29, 2007
1,812
292
Aurora, Co
As I progress down the path of property flipping 101, I realize I will be dealing with a lawyer at one point or another. I am noticing foreclosures can be a touchy subject in many states, and I want to have my ducks in a row. As I work my starting budget, minimizing costs is important, but so is minimizing risk.

So my question for those that have worked a few deals, did you seek legal advice before you began the process? After your first flip? When? What was some of the info you sought when talking to a lawyer? What were the average legal fees you encountered (I realize this can vary, I'm just ballparking)?
 
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sulli

New Contributor
Jul 26, 2007
30
4
I bought a foreclosure as my primary home. I hired an attorney to investigate whether there were any liens on the property, etc... It only cost me $250 for piece of mind.
 

nomadjanet

Contributor
Aug 28, 2007
301
57
TX
In Texas the title company usualy hires the attorney. For a $200.00 minimum about $100per additional 100k you get the title insurance and the attorney. The only time I have ever hired an attorney for a deal was when I was doing a trade accross county lines and the title company did not want to handle the deal as they thought it was to complicated. I traded a small cabin on a lot in one county for 10 acres with a mobile home, with an additional carry back note by the cabin buyer of 35k in another county 150 miles away. The title company in the county with the cabin was not willing to do the deal & neither was the one in the 10 acres county so we hired a private attorney, the cost was about $600.00 to do the deal through an attorney.
 

Adam

New Contributor
Aug 12, 2007
66
14
Minneapolis
I always use an attorney to create the LLCs that we conduct business under & to hold our properties. Creating the LLC isn't the issue, its the bylaws and member control agreements that need to be very specific in their wording. These are what ultimately protect you, not if, but when something goes wrong. We also used our attorney to draft all of the initial vendor contracts, commercial leases, contract for deeds and to advise in all transactions where we are utilizing private individual investors to fund the holding LLCs.

Under a normal residential transaction, where you utilize a purchase money mortgage, a conventional purchase agreement, etc. there is usually very little need for an attorney (generally speaking).

Now, having said that, in the foreclosure market, if you don't understand your state laws about recission periods on foreclosure purchases, redemption period, equity stripping, etc. you should consult an attorney to review your transaction as a whole.

Last, if you are truely "flipping," you should also consult a GOOD RE agent and mortgage banker to discuss your exit strategy. Now days, residential lenders are having big issues with property seasoning (the amount of time the seller has been on title) and unjustified increases in sales price from one recent sale to another (ie - your buy for $120K and resell a week later for $180K). The property may appraise for you current, higher sales price, but the lender may not approve the financing.

Now is a great time to get in, but I would never do so without a good lawyer, RE agent that understands the foreclosure laws and a lender that understands investment property financing.
 
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Bilgefisher

Bronze Contributor
Read Fastlane!
Aug 29, 2007
1,812
292
Aurora, Co
I always use an attorney to create the LLCs that we conduct business under & to hold our properties. Creating the LLC isn't the issue, its the bylaws and member control agreements that need to be very specific in their wording. These are what ultimately protect you, not if, but when something goes wrong. We also used our attorney to draft all of the initial vendor contracts, commercial leases, contract for deeds and to advise in all transactions where we are utilizing private individual investors to fund the holding LLCs.

Under a normal residential transaction, where you utilize a purchase money mortgage, a conventional purchase agreement, etc. there is usually very little need for an attorney (generally speaking).

Now, having said that, in the foreclosure market, if you don't understand your state laws about recission periods on foreclosure purchases, redemption period, equity stripping, etc. you should consult an attorney to review your transaction as a whole.

Last, if you are truely "flipping," you should also consult a GOOD RE agent and mortgage banker to discuss your exit strategy. Now days, residential lenders are having big issues with property seasoning (the amount of time the seller has been on title) and unjustified increases in sales price from one recent sale to another (ie - your buy for $120K and resell a week later for $180K). The property may appraise for you current, higher sales price, but the lender may not approve the financing.

Now is a great time to get in, but I would never do so without a good lawyer, RE agent that understands the foreclosure laws and a lender that understands investment property financing.

Adam,
Thank you. You answered my questions. Since I am at the beginning of the flipping learning process, I am trying to balance between my caution and the need to just drive. These type of replies make me feel like I at least have a roadmap. Speed +
 

jimculler

New Contributor
Sep 14, 2007
60
2
Tampa Bay, FL
My real estate attorney owns his own title company. He does our land trusts, and keeps things confidential for us complimentary. This is on the basis of me doing the closing with his title company of course. But we get free legal advice pretty much because he does the closings, and issues the title insurance to make his money.

I would find a good real estate attorney who owns a title company; since you are going to pay a title company anyway, it only makes sense.
 
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