Today’s question comes from Frank Teo of Oxford. He asks, “As an investor in real estate, why wouldn’t I save money using legal forms off the internet instead of hiring a real estate attorney.
The internet makes it easy to go online and download a legal form. Need a lease, go online. Need a deed, go online, Want a land contract, purchase agreement or a option to purchase? Go online.
Many attorneys are discouraged by the internet. Not me. The internet is the “gift that keeps on giving” for seasoned real estate and finance attorneys just like me. That’s because, at their very best, online forms only address the basic contract needs of any transaction. What do I mean by that, well here is an example.
I have a real estate investor purchasing on land contract. The property is an 18 unit apartment building. The seller gave my client, a land contract that he pulled off the internet. A 7 figure transaction without an attorney approved form. This land contract had of all things, a promissory note. In Michigan, you don’t use a promissory note when you have a land contract. Creates more personal liability for the buyer.
The transaction did not have a purchase agreement. “Yes” you need a purchase agreement that spells out the terms of the transaction – the land contract is the financial instrument in lieu of a mortgage.
Finally the terms of the land contract did not address the seller’s current HELOC nor did it have provisions as to what happens if the Seller defaults on his underlying bank loan, or whether he can still draw off the equity line of credit.
Why am I telling you this Frank? Because having a legal form is not a substitute for having an experienced attorney review and opine on your legal documents.
If you choose to avoid using attorney approved real estate documents tailored to your specific transaction when you are investing thousands, if not hundreds of thousands of dollars, I have news for you Frank, you may not see the consequences of using poor documents right away, but the legal vomit will creep up on you at some point. I make a large part of my living cleaning up after legal form vomit. Those people who are watching this who have paid the price for self induced legal debacles are shaking their heads in agreement Frank. Take your form over to a real estate attorney.
So do yourself a favor. If you want attorney approved legal forms for Michigan real estate and loan matters, check out Provenresource.com.