Do I need a real estate attorney for seller financing?
Hi everyone,

I was asked if I would be willing to seller finance a property that I own (Restaurant and land).  I think that it would a good deal for both parties involved and I'm interested.  I spoke with my real estate agent about hiring an attorney and he said that he could take care of it using standardized forms from the state.  Is this a bad idea? Should I be looking for an attorney anyways? Are there any obvious pitfalls I should be aware of throughout this process?

I appreciate any input and advice!
[{"id": "dj7x4dr", "text": "Yes - to write the promissory note and protect you. 250-500 at most... make the buyer pay fees. ", "replies": [{"id": "dj83zjz", "text": "Is that common practice? and is the promissory note the only part that I should be concerned with?", "replies": [{"id": "dj8423o", "text": "The note is my concern. That's your recourse for the land in the foreclosure process. ", "replies": [{"id": "djgpvfg", "text": "IIRC real estate assets are treated differently in most states and you'll need a mortgage or deed of trust, as well as UCC filings in order to perfect a lien.  \n\nUnless you have an installment sales agreement and the ownership doesn't change hands until the Note is paid in full. ", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dj7xqhh", "text": "I am a real estate agent/broker and we do have standard forms that can be used in both states where I practice, but they don't cover as many bases as I'd want to see for my own contracts. They are literally a bare bones minimum that forces the users to find resolutions in court if problems arise.\n\n", "replies": [{"id": "dj83y94", "text": "Can you think of a reason why my broker would be so comfortable with not getting an attorney? I'm new to the process so I may be hyper sensitive but it seems like a necessary step.", "replies": [{"id": "dj844aj", "text": "Get a lawyer. 100%", "replies": [], "depth": 3}, {"id": "dj84ks1", "text": "If you get an attorney, things will get much more detailed as they should. This increases the chance of the deal falling apart and the broker not getting paid. Even if it doesn't fall apart, it will slow things down meaning the broker doesn't get his money as quickly. ", "replies": [{"id": "dj8wd2m", "text": "Yeah he's a broker that worked with my parents for a while and I don't really know him.  I'll have to keep an eye out for clashing incentives. Thanks!", "replies": [], "depth": 4}], "depth": 3}, {"id": "dj90gos", "text": "Because agents and brokers place a lot of trust in the fact that the forms we use are prepared or at least, reviewed by an attorney before a Realtor\u00ae board will use them. They assume that this means it's good enough to get the job done, and they may not want to suggest something that makes you spend money that you might be reluctant to spend. However, I can guarantee that if there's a problem later that forces you to go to court, the agent will wash their hands of it. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dj880tu", "text": "You 100% need a lawyer. You need a lien perfected by the dirt &amp; business and a RE agent isn't qualified to do that work. Have the buyer eat the attorney cost. ", "replies": [], "depth": 1}, {"id": "dj8c4xb", "text": "i am a realtor as well here in California. We can calculate the payments and create the terms of the seller financing. usually created on an addendum and then escrow will draft up the note with the said terms for it. You will have a chance to review the note as well and then it also will have to be notarized. The legal document should prove that if they were to default on the property and not make the payments, you would regain total ownership of the property.", "replies": [{"id": "dj8dyac", "text": "Your post makes sense and more or less what my broker told me. However, every other person in the thread is pretty much saying a lawyer is mandatory.  Can you expand a little bit more on why you don't feel a lawyer is necessary? Thank you!", "replies": [{"id": "dj8qsnc", "text": "Get an attorney. Doing it on your own is foolish. Yes \"escrow\" can draft the doc, but who is it in favor of? Any legal document can be skewed toward one party or the other, without an attorney on your side, how do you know that it's not you getting fucked? If you think that the only thing that you need to protect yourself from is non-payment, it goes to show how badly you really need an attorney. There are a dozen other issues that an attorney can make sure are addressed in your favor. And get one who is experienced in this particular area. Don't ask your cousin who is a tax attorney to look over the contract for you. Ask a real estate attorney. His/her advice about standard practice will be as important to you as the knowledge of the law. I recently had an attorney give me some advice that cost me $2,500 and saved me $50,000.\nTL;DR: Get an attorney. Don't be shortsighted. Real estate law is not a DIY project.", "replies": [{"id": "dj8wbpd", "text": "Really good points, any advice on finding the right attorney?", "replies": [], "depth": 4}], "depth": 3}, {"id": "dj8vadh", "text": "I am a commercial real estate attorney (although I don't do a lot of work on the finance side). Generic form documents are often not worth the paper they are written on. An attorney who regularly does this sort of work should have much better forms on hand that can be adapted to your needs fairly efficiently and you'll know everything has been drawn up correctly so that your interest is protected.", "replies": [{"id": "dj8wadn", "text": "Thank you, that's helpful!", "replies": [], "depth": 4}], "depth": 3}, {"id": "dj8ypxz", "text": "Am agent too. I think this falls into the \"you don't know what you don't know\" realm. If your broker has done commercial a lot, then sure. He might be able to do it on forms to your satisfaction. But an experienced attorney can protect you better and make it more in your favor. \n\nIt's not so much about calculations of payment. It's about the foreclosure process, non-payment, improvements, access to the property, time frames for inspections, etc. ", "replies": [], "depth": 3}, {"id": "dj9k9qv", "text": "Yea I did notice that too which is why I think it's odd to get an attorney for it. All of the car forms that realtors use in California are actually reviewed by attorneys who update the terminology and clauses and such. It seems like overkill for me to get a tax attorney. Perhaps escrow has an attorney consultant who overlooks all the documents /notes they use and get their approval. Just like how real estate agents are , you never know if you get a good or a bad attorney . Using the escrow note document , may not protect from every single possible clause or event you can think of , but I think it does get the point across of the seller financing terms. It is not too complicated for seller financing terms to get it wrong. Of course you can't go wrong with going with an attorney , but I am just saying deals have been done without one necessary. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dj8v9ij", "text": "I'm a lawyer, so obviously biased, but using a (good) lawyer is the better approach.  That said, it isn't about need, it's just risk tolerance.  You can obviously do the deal using the forms (which will be mediocre and not drafted in your favor), and if everything goes smoothly post-closing / never any problems then it will be fine.  A good RE attorney (ie, probably not someone that will do it for $250) will make sure the agreement is drafted to be pro-seller and provide more protection, but at a cost.  If you can get the buyer to cover fees (either through the note, cash at closing or some mix), mind as well go get a lawyer.\n\nThis all assumes that the restaurant isn't yours and that you're just selling the RE.", "replies": [{"id": "dj8w9g7", "text": "I own a restaurant and the land that it's built on (1.7 acres total).  The restaurant hasn't been in business for 8 years or so and I'm planning to sell the land and building as is.  There's also no existing mortgage on the property.  Do these details change your advice at all? Also, any advice on acquiring a good lawyer?", "replies": [{"id": "dj8x01e", "text": "No, those details don't really change anything (although I'll add that my general opinion on commercial RE is you should hire a lawyer, it just isn't as formulaic as residential).  The last comment in my prior post was just because if you were selling an operating business the advice would have been different, because in that context I think form agreements are wholly inappropriate.\n\nUnfortunately no good advice on finding a good lawyer, other than find someone that focuses on commercial RE transactions (or at a minimum transactional work).  The market for legal services is pretty inefficient.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]