20 Tips to Save Money on Real Estate Legal Costs

Buying Real Estate

Want Cheap Lawyer’s Fees?

Stop reading if you don’t like saving money! This blog post is aimed at helping you tame your legal bills in general, and with real estate transactions in particular. I’m an Alberta real estate lawyer and my office is RMLO Law LLP in Edmonton, but the situation is pretty similar all over the place. To get the best results when buying or selling houses, homes, condos, or properties, you need a great team. You carefully select your realtor, mortgage broker/lender, building inspector, accountant, and most importantly, IMHO, your lawyer. It’s in your interest to have the team members giving you the best possible service at the best possible price.

Let’s start with some of the basics. As I’ve discussed elsewhere, your legal bill is composed of three things: fees, disbursements, and taxes. The fee portion of your lawyer’s legal account is calculated one of three basic ways: fixed fee, hourly rate, and on a contingency basis. Lawyers charge fixed fees when they have a very good idea of how a particular piece of legal work will proceed. Basic real estate transactions fit in this category.

For custom or complicated legal work where a lawyer has no firm idea of how long it will take or what the issues might be, you get charged by the hour. If you need complex real estate law problems solved, you are going to need experienced, meticulous, and effective legal counsel. And good lawyers aren’t cheap…

Legal accounts billed on a contingency basis mean that the lawyer gets paid from money collected on your behalf. They depend on the lawyer being almost 100% certain that s/he will collect for you; it’s only a question of when. Motor vehicle accidents are a classic type of contingency. Contingency-based real estate matters are very rare.

Most of your legal accounts for real estate can be done on a fixed fee basis. In fact, my Edmonton-based law firm, RMLO Law LLP, prefers flat-rate Alberta real estate legal fees that also include disbursements. Both fixed and flat-rate fees are based on a typical transaction with no wrinkles or crinkles or surprises. If your deal turns out to have wrinkles, crinkles, and surprises, your lawyer may charge you an extra fee for the extra time required to sort everything out for you. It’s in your very best interest to avoid any extra legal fees.

Things you can do to keep your legal account at the fixed or flate-rate.

  1. Know Your Deal:
    Educate yourself because you have to be able to explain your situation in order to give your lawyer accurate understandable instructions. If your lawyer can’t understand it and you can’t explain it, up goes your legal bill.
  2. Keep It Simple:
    Clean and simple is always better than complicated. Complicated means that staff can’t handle as much as they usually do and therefore more lawyer time is required. Extra lawyer time equals extra fees.
  3. Ask About Fees Up Front:
    You can—and should—ask about legal fees, after all you are the boss and we, as lawyers, are working for you. Don’t be shy! Ask what’s included. Better yet, ask what is excluded.
  4. Use An Early Check-In:
    Most lawyers like to hear from you just before or right as you remove all your subject-to conditions. I like to take that one step further, especially when I am working with a new client for the first time. You can call me, introduce yourself, tell me what your plan is, and we can have a chat to make sure everything is as it should be. That gives me a chance to learn your name and a little bit about you. Then when your deal shows up, we are a step ahead. It goes without saying but I’m saying it anyway, if you have issues, questions, or you just don’t understand, then call us ASAP, not just before condition removal.
  5. Give as Much Lead Time as Possible:
    This might be the most important money-saving tip of all. A deal that arrives in a lawyer’s office with enough time to close in the normal course of business is far more likely keeping your fixed fee fixed.
    My strong suggestion is that you set your closing date no sooner than 30 days after your last condition removal date. If you don’t give your lawyer enough time, s/he often has to request that staff put in overtime, pull staff off existing files to do your rush file, and get more involved him/herself at an hourly billing rate rather than staff’s much smaller billing rate. Do your very best to make sure that you use this timing, but it’s also good to know that things can be done faster—if you’re willing to pay more.
  6. Be Available:
    It sounds funny to say this but you actually have to be around and available. There may be questions to be asked, information to be obtained, and problems to be solved. Documents will have to be signed, usually during regular working hours. Just make sure that your lawyer and staff can easily reach you by telephone or e-mail.
  7. Get To Know Staff:
    Yes it’s true, staff, and usually the same staff in most law offices, do most of the heavy lifting on fixed fee transactions. Relationships are important in any business. You get to know our staff, they get to know you, and everything just runs better.

Watch Out for Those Extras!

Now let’s talk about how to save legal dollars on more complex work, which is usually billed on the basis of time, complexity, and value to client. When dealing with a tricky situation, a lawyer can’t tell you a fixed fee because no-one knows how much time or effort it will take to do the work. But, here are some things you can do to keep your costs in line.

  1. Set A Budget:
    Have some idea in your own mind how much you are willing and able to spend.
  2. Ask For An Estimate:
    If your lawyer can’t tell you precisely, s/he can usually give you a range of fees. If all or part of the lawyer’s estimated legal account is outside your budget, reconsider and discuss again.
  3. Add a Warning/Reporting System:
    Tell your lawyer that you want a report and updated estimate after s/he has spent a certain amount of money and, then, perhaps at another money milestone. This will help you decide whether or not your legal work is proceeding the way you want it to, and also control how much you end up spending.
  4. Don’t Change the Terms:
    Of course, if you have to change something, then you have to. But changing the terms of what your lawyer is already doing for you or unilaterally amending a contract almost always means a bigger legal bill. Even small changes can add a lot to what your lawyer has to do or re-do.
  5. Get Your Lawyer Onboard:
    For these more complex deals, it is always worthwhile to give your lawyer a call and have a brief discussion. Collectively, you and your lawyer might decide that a face-to-face meeting is required to have more discussion. S/he may or may not send you a bill. These discussions and meetings are aimed at positioning you properly to go ahead with your more complex transaction.
  6. Use Letters of Intent:
    Move your deal forward before spending money on a lawyer by giving the other parties brief, non-binding, factual outlines. Such summaries are often referred to as ‘letters of intent,’ ‘deal sheets,’ or ‘memorandums of understanding.’ Basically, you write out roughly what the deal is and talk to the other side to see whether or not they agree. If so, then you can proceed to go to more formal paperwork with a better chance of success. This is way better than spending a whole bunch of money on legal fees to draft a 25-page document you then give to your seller/buyer, only to hear, “this isn’t a deal I’m interested in” or “I changed my mind.”

What Else Can I Do To Save Money?

  1. Do Your Own Negotiating:
    Our most successful clients are really good at negotiating. They look at situations differently and it’s certainly less expensive than negotiating through a lawyer. Typically, a realtor can also help with this phase of the deal-making process.
  2. Use Off-The-Shelf Contracts:
    If it’s off-the-shelf, and you know what you are doing, then you’re not spending money on lawyer drafting time. For residential real estate transactions, the classic contract to use is the most current offer to purchase, aka offer of sale, aka real estate purchase contract (different provinces call the contract different things) approved by the provincial real estate association. Your realtor will be using that form and should provide you with copies of the form for your own use. It’s way easier for us as lawyers to review a contract for you when all we have to do is look at the blanks and the schedules because we know what the rest of the contract says. Self-Counsel Press (available at most bookstores and Staples) produces decent off-the-shelf legal documentation.
  3. Don’t Draft Agreements From Scratch:
    Simple or complicated, leave this kind of stuff to your lawyer. It might seem cheaper to do-it-yourself, but it can be very costly to hire a lawyer to fix your mistakes.
  4. Don’t Tweak Old Agreements:
    Or be very careful what you tweak… We often see agreements come in where it is just so obvious that someone has taken a piece of this contract and a piece of that contract and a little slice of another contract and put them all together in what we call a ‘Frankenstein’ contract. Stitched together, just like Frankenstein. There’s way too much chance that the parts do not make a whole.
  5. When to Avoid Being a Lawyer (and Some Exceptions):
    • You can probably do some of your own searches at the Alberta Land Titles Office or other registries, but be careful with interpretation.
    • Avoid probating a deceased person’s will unless you have lots of time on your hands.
    • For bankruptcy purchases, you are usually making a bid to a trustee disposing of a bankrupt property. This is generally all right, although you might need help closing the actual purchase.
    • It is generally okay to represent yourself in Small Claims Court. But stay out of the Superior Courts.
    • Avoid acting as your own registered and records office for your corporations. Our experience is that one in 50 clients is able to handle the administrative detail. Then, when you sell a business or get a loan or need to do refinancing, lenders want legal opinions on the state of your corporation. That’s when you bring your minute book and other records to us so we can give that legal opinion. Generally you end up spending twice as much to have us straighten out issues as you would’ve spent by paying our yearly fee to keep your corporations in good order.
  6. Book A Consultation:
    For larger fixed-fee deals such as multi-family purchases or corporate planning/reorganization, a consultation with your lawyer can save you a ton on legal fees. Your lawyer may or may not charge for this consultation. The idea here is that for these much more complex situations, you talk to your lawyer about potential problems, diligence, structure, timing, tax issues, etc. before you are in the middle of the deal and it’s too late .
  7. Avoid Law Suits:
    I can’t stress this strongly enough. Litigation is always stressful, expensive, and time-consuming. Even when our clients ‘win,’ the stress, money, and time spent at the scene doesn’t seem to be worth the victory. We think you are way better off spending some money to structure your deal properly to start with. If things go wrong and the battle starts you are almost always better off doing whatever it takes to make peace and move forward.

Folks, will following these tips guarantee a virtually no-cost real estate transaction? Of course not, but they will certainly help you have a more straightforward, no-stress experience.

Please consider my office, RMLO Law LLP, for all your real estate needs!

“Home Yellow” stock image by nikcname. Used under Creative Commons Attribution Generic 2.0