HOW ATTORNEY REVIEW IS LIKE BEING ENGAGED

In the spirit of Valentine’s Day, I am going to compare the home-buying process to a relationship specifically focusing on attorney review (AR), which is like being engaged. During this phase, you are publicly committed to the other party, but not legally bound.

As Realtors, we claim to be matchmakers as we take our clients through the following steps:

·         Home Search/Meeting People

·         Making an Offer/ Dating

·         Attorney Review/ Engaged

·         Under Contract/ Marrying

I’ve found that most misconceptions about the home-buying process typically occur in attorney review.  This makes sense for a couple of reasons: the language we use, the fact that it varies from state to state, and because not everybody uses an attorney.

What is Attorney Review? 

Attorney review is the period of time between when the seller officially accepts and offer and the deal goes under contract.  During this time either side can back out for any reason without consequence. If both parties are using attorneys there is no designated time frame for how long attorney review lasts.

Bringing it back to the relationship analogy, an accepted offer is essentially the seller saying I have dated around and seen what others have to offer and I want to commit to you.  I want to start the process of merging our situations and see if we can make this work.  Being engaged is more serious than just dating.  You get a ring to show to the world you’re almost off the market, but it’s not a done deal.  That’s what the little asterisk in the MLS means, the house is spoken for but there are no legal ties yet. The home will still appear on websites like Zillow, Trulia, and Realtor.com until it is under contract/”married”.

Reasons for Confusion About Attorney Review

The wording: The terms “accepted offer” and “in attorney review” make it sound like a done deal. Just like an engagement some people take that phase really seriously and view it as a commitment they morally don’t want to break and others view it as just a label since there is no legal consequence tied to it.

The real estate process varies from state to state.  Even the way offers are submitted differs by location, so especially when working with clients who have gone through these processes elsewhere it can cause some confusion.  Additionally, many parts of the country, even other parts of NJ do not use lawyers which complicates people’s understanding of AR.

In New Jersey, the NJ Bar Association brought litigation against the NJ Association of Realtors (NJAR) claiming that agents were practicing law without a license.  As a result, NJAR puts out standard contracts, leases, and other documents we need our clients to sign and we are limited in the scope to which we can amend.  We can fill out the provisions of an offer and that’s it, we as Realtors cannot alter the contract. This litigation also resulted in a 3-day period where buyers or sellers could back out of the deal or seek legal consolation without penalty. Because of this, people assume that attorney review lasts for three days, but that is not always the case.

If neither party uses an attorney, AR lasts for 3 days.  If one party uses a lawyer AR must be at least 3 days but can be extended by the attorney.  If both parties have legal representation, there is no time frame for attorney review.  I had a deal where land was being sold to a builder and attorney review took less than an hour. I also had a deal where the sellers (who were getting a divorce) couldn’t agree on anything so they kept my buyer in AR for over a month.  

Riders and Ensuring Terms

In a relationship, it’s typically during the engagement phase when couples check-in and confirm their partner wants the same things as them, that they haven’t changed their mind. If a woman says she wants a big family and then once she is engaged and they are talking about family planning, she changes her mind and says actually she doesn’t want to have kids at all that’s something her future spouse has to think about. If that partner still wants a big family they most likely won’t go through marrying her.

The same thing happens in attorney review.  The lawyers are going to send out riders that clarify language and specify details to protect their clients. Sometimes one of the parties will try and change a core component of the offer and that is when we start to run into issues.

For example, if a buyer makes an offer as-is and either their agent didn’t fully explain the consequences of doing so, or the buyer just ignored their agent but the lawyer was able to get through to them, that buyer might want to change what they can ask for with regards to the inspection contingency.  Especially if that buyer’s offer was accepted on the as-is term, the seller may not allow them to change that term. The seller can also just kill the deal because they feel the buyer isn’t acting in good faith.  So the option to just walk away is always there. However if the seller doesn’t have other offers, they may decide to negotiate and cap inspection requests at a set dollar amount or limit the requests to structural and environmental only. Similarly, if a seller tries to change the terms, such as insisting the buyer waive the appraisal gap when that wasn’t originally offered in the contract of sale, the buyer might refuse knowing it could kill terminate the agreement.

Outside Influences

You also have outside influences. So in a relationship people have affairs, they decide they’re not ready, something big changes in their life and they don’t want to move forward.  Up until they actually say “I do” they can back out.  Socially it might be looked down on but if you call off an engagement there is no divorce, legally you just both go your separate ways as if nothing ever happened.

It’s the same thing with attorney review, if the seller gets a better offer or if the buyers find a house they like better, either side can back out without consequence. At one point during Covid, this was really common since buyers were putting in offers on multiple houses every week in a desperate attempt to get any of their offers accepted.  They would be in AR when they found out their offer on another property they liked better was accepted so they would back out.  Similarly, a buyer could have had their offer accepted on a house and then the seller gets a better offer and now the seller is killing the deal. I have also seen both buyers and sellers change and go through a major life event that impacted their willingness to move (but not something that would be legally covered if they were under contract) or just change their minds. It is unfortunate for the other party, but there is nothing that can be done about it.

Once you conclude attorney review and go under contract/get married. You can still legally back out, just like you can get a divorce.  However, at that point, there could be legal ramifications depending on why you are no longer going through with the sale which could result in the loss of a deposit or even litigation.