Strong Foundations

Not every residential sale requires an attorney, and many closings are handled by a title company. A lawyer is most helpful when the deal is out of the ordinary: a for-sale-by-owner sale, seller financing, a transfer between family members or out of an estate, or a purchase agreement you want reviewed before you sign.

A solid purchase agreement spells out:

• The parties and the property’s legal description
• The price, earnest money, and how the purchase will be financed
• Inspection, financing, and other contingencies, with deadlines
• What stays with the property and what goes with the seller
• The closing date and who pays which costs
• What happens if either side backs out

A warranty deed transfers property with the seller’s promise that the title is good and that they will stand behind it if a claim comes up later. It is the standard choice in a sale to an outside buyer.

A quitclaim deed transfers only whatever interest the person signing it has, with no promises about the title. It is often used between family members, to clear up a title issue, or to move property into an LLC or trust you own.

Holding a rental in an LLC can help keep the property’s liabilities separate from your personal assets. Before transferring, consider your mortgage (many loans have a due-on-sale clause, so check with your lender), your insurance, and how the transfer affects your taxes. The deed and the LLC’s records need to be done correctly for the structure to hold up.

Beyond the rent, a commercial lease should address the length of the term and any renewal options, scheduled rent increases, who pays property taxes, insurance, and maintenance, how the space may be used, who pays for improvements, whether the lease can be assigned or sublet, and what happens if either side defaults.

In seller financing, the seller acts as the lender and the buyer pays the seller over time. It is usually set up either as a promissory note secured by a mortgage, or as a contract for deed, where the seller keeps title until the buyer has paid in full. Each structure gives the parties different rights if payments stop, so the terms should be carefully drafted and put in writing.