Working with a Real Estate Lawyer and Tax Professional
Depending on the state where you live, you may or may not be required to retain an attorney to handle the closing and other steps in the process of selling your home. Some states that require the use of an attorney include New York, Massachusetts, and Hawaii. Even if an attorney is not required, you may find legal guidance useful in reviewing the sales contract, making sure that you comply with legal requirements, and handling any disputes with the buyer. Some situations that may especially benefit from an attorney’s assistance include homes that are jointly owned, homes that are being sold by the executor of an estate in probate, and transactions in which one side or the other is trying to get out of an existing contract to sell.
Homeowners less commonly retain tax professionals. You may not necessarily owe capital gains tax on your home if it has been your principal residence, and you will not be receiving $250,000 or more from the sale ($500,000 or more if you file taxes jointly with your spouse). Some situations in which a tax professional may help include when the homeowner does not meet the principal residence exclusion, when they operated a business out of their home, or when the home was acquired through an inheritance or transferred in a divorce.
Finding a Real Estate Lawyer
You should ask for recommendations from friends, family members, and possibly your real estate agent. Using the buyer’s attorney will not protect you, since they will favor the buyer if any conflict of interest arises. You should ask an attorney about their experience in transactions similar to yours, as well as the fees that they will charge. You will want to make sure that you understand the fee structure, whether it is a flat rate or an hourly fee.
Your attorney should have spent a substantial percentage of their time on residential sales and should have represented at least seven individual home sellers in the last year. You should check to make sure that they are licensed and in good standing with your state’s bar association. Many attorneys will provide references of former clients.
Finding a Tax Professional
Your tax professional can advise you on your tax obligations related to the sale of your home and prepare your next tax return to ensure that you report this information accurately. Ordinary tax preparers may not be sufficiently trained to handle this task, so you should retain an enrolled agent, a certified public accountant, or a tax attorney. Certified public accountants (CPAs) are more knowledgeable but also more expensive than enrolled agents. Most people will not find that they need to hire a tax attorney unless they are working with the attorney on a different matter. Similar to the process of finding a real estate lawyer, you should get recommendations from friends and family members, as well as your real estate agent.
During the process of evaluating a tax professional’s qualifications, you should find out about their experience in the field generally and their experience specifically helping people in your situation. You will want to make sure that they have not been subject to discipline and that they have all of the appropriate credentials. They should clearly explain their fee structure, which may be a flat fee, an hourly fee, or a hybrid structure. Similar to real estate attorneys, tax professionals may provide references of former clients, and you can also check for online reviews. You may want to find out whether they will continue to help you if you run into problems with the IRS related to the sale, and you can ask about the costs of any further assistance.