Why do you need a lawyer to buy or sell a house?

Goodlawyer Inc.
Aug 27 · 5 min read

On the surface, buying a house might seem simple, but buying and selling a house is much more complicated than the sale of things like furniture or cars, and involves several different contracts involving not just the buyer and seller, but their respective real estate agents, and financial institutions.

And if something goes wrong, the financial consequences could be huge.

There are also tax consequences to buying and selling property.

Without legal advice, you could find yourself with an unnecessarily high tax bill — potentially more than it would have been to seek legal advice.

This article will explain the types of issues that might arise as part of buying or selling a house, and how hiring a lawyer can make sure that buying the home of your dreams doesn’t become a nightmare.

If you are considering buying or selling a home, you may be wondering:

Do I really need a lawyer?

After putting a down payment on a house, you probably don’t feel in a financial position to shell out additional cash to cover lawyer fees.

The bottom line is, if you are getting a mortgage to buy your house or already have a mortgage, then you are obligated to have a lawyer to deal with the legal requirements of the mortgage.

But lawyers can actually provide much more value than just managing your mortgage.

First off, what steps have to happen in a home purchase? In most cases, 6 things have to happen:

1. The seller enters into a brokerage agreement with a real estate agent. Some buyers will also enter into brokerage agreements with real estate agents, but not always.

2. The real estate agents conduct the negotiations between a potential buyer and the seller in an attempt to reach an informal agreement.

3. Buyer and seller enter into a formal written contract.

4. The buyer secures a mortgage from a financial institution. You can estimate how much your mortgage payments will be in advance by using an online mortgage calculator.

5. A title search on the property is done.

6. Property is transferred from the seller to the buyer and the seller receives the purchase price.

Now that you know what needs to happen, what can go wrong?

As it turns out, a lot of things can go wrong.

Here are four common issues that a lawyer can help you to avoid:

1. The seller may end up paying more in taxes than necessary

If the seller makes a large profit on the house, they may end up with a considerable tax burden. A lawyer can help determine whether there are any provisions that can reduce or exclude capital gains taxes.

2. The purchase agreement might not say what you think it says

The purchase agreement is the written legal contract between the buyer and the seller. It sets out the terms and conditions of the sale, and what must happen before closing.

Sounds straightforward, right?

But what if the agreement specifies terms or conditions that the buyer or the seller do not intend? What if a term or condition can be interpreted two different ways?

While the standard form purchase contract is built to protect the interests of both the buyer and the seller, you should contact a lawyer if you have any questions or concerns about what it says — better to sort it out now than later in court.

3. You might not get good title to the property

You’re paying a lot of money for your house. What if you close the transaction, and then discover there is a title defect?

One of the lawyer’s jobs is to ensure there are no liens, mortgages, or debts registered on title.

4. Closing might not go smoothly

When it’s time to actually transfer the house to the buyer, it is your lawyer’s job to make sure the process goes smoothly, funds are properly received, and title to the property is transferred without issue.

The lawyer receives the funds from the buyer’s lender and ensures that the seller receives the funds before releasing the keys to the buyer. The lawyer also pays any outstanding mortgages and the real estate commissions.

This brings us to the question of closing costs…

It can be very frustrating to pay your down payment, the home inspection fee, and your lawyer’s fees, only to find out there are more closing costs and disbursements to pay.

When your lawyer gives you a bill for closing costs, this is what you can expect:

Tax certificates: Your lawyer will request a tax certificate to show the amount of yearly property tax, how much tax is owing, and the total amount of tax arrears.

Title search: Alberta Registries charges an administrative fee to do a title search on your property.

Copies of title: Like the title search, Alberta Registries charges a small fee to provide copies of title.

Land titles registration fees: Usually, land titles registration fees are charged to register your ownership, and your mortgage on the title of your property. They are calculated in Alberta as follows, (this can still help you ball park your fees if you’re somewhere else):

Land Transfer — $1.00 per $5,000 of purchase price, plus $50
Mortgage — $1.00 per $5,000 of mortgage amount, plus $50
So for example:
$400,000 purchase price with $320,000 mortgage:
Land Transfer Registration Fee = $130
Mortgage Registration Fee = $114

Courier fees: This is simply the cost of couriering documents to the seller or buyer’s lawyer.

Condo doc review fee: If you’re buying a condo, your lawyer can review the condominium documents so for you so that there are no surprises. This will usually come at an additional cost.

If you would like to get an estimate of what the closing costs will be on your home, you can use this helpful closing costs calculator.

How Goodlawyer can help?

Finding the house of your dreams takes hard work — finding a lawyer doesn’t have to. Goodlawyer allows you to compare numerous real estate lawyers all in one place, so you can easily find the right real estate lawyer for your situation. You can see reviews and fixed fee prices up front, so there are no surprises later.

Once you’ve selected the lawyer you would like to use, simply book their service, follow their instructions, and enjoy your new property!

Check out Goodlawyer today!

Goodlawyer Inc.

Written by

Goodlawyer is Canada’s first managed marketplace offering fixed-fees for everyday legal services like home purchases, incorporations, and wills.

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