The 5 W's in Every Real Estate Transaction

A good reporter must cover the ‘five w’s’ (who, what, where,
when, and why) in every story
.” – Perry White

A good real estate attorney (and brokers, lenders and buyers/sellers) must be cognizant of the answers to Mr. White’s seemingly simple, but often forgotten questions in every real estate transaction:

1. a) Who is being represented? If it is the buyer, for example, standard seller-oriented form contracts should not be utilized without alteration. (Note: Every standard form should be modified to fit each particular transaction)

b) Who is the broker representing? Prospective buyers should know this before they unwittingly divulge their maximum offering price to seller’s broker.

2. a) What type of property is involved? The commercial transaction usually involves more dollars and more complexities. Standard forms can rarely be relied upon. Extensive, originally drafted purchase/sale agreements, environmental consultants, ALTA surveys and title insurance with endorsements are usually required for commercial transactions.

b) What is the “law behind the language”? For example, a poorly drafted letter of intent may be held to be a legally binding contract, not the agreement to agree it was intended to be.

3. Where is the property located? Land near an environmental problem may be land with an environmental liability which far exceeds the property’s value. General, geographical location is also important. Deals in Northern Ohio typically utilize title companies, title insurance, and escrow closings. In other parts of Ohio, abstracts of title, opinion letters, and round table closings may be the norm. Finally, retention of out of state counsel may be necessary for transactions outside of Ohio.

4. a) When should the attorney be consulted? This is one general rule without exception. The attorney should always be retained prior to signing the real estate contract. Bargaining strength is reduced to near zero after the contract is executed.

b) When is the transaction scheduled to close? Coordination of inspection, financing, and closing time periods is crucial.

5. Why is the seller selling and/or buyer buying? An understanding of each party’s motivation is a crucial element to good negotiating/lawyering. A seller who must desperately sell in a soft market should focus more on “major issues” during contract negotiations. Conversely, a buyer who wants a real estate investment as risk free as possible should not gloss over anything.

Keeping in mind the above-questions will maximize the odds for a successful real estate transaction, as well as for a good story for The Daily Planet.

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