Real Estate Closing Attorneys
Real estate attorneys
should be part of the closing process, as the purchase or sale of a home or other real estate is often the largest transaction a person will undertake during his or her lifetime. A prospective home buyer or seller should take all precautions possible to make sure that the deal concludes smoothly and correctly. Although the law in every State does not require that an closing attorney
be employed in all real estate transactions, the enormity, importance and cost of such transactions requires it in order for all parties to be assured of success and fairness.
When you chose a real estate closing attorney, it is important to select one with the necessary expertise. An experienced real estate attorney, one who is knowledgeable with the intricate laws and the “ins” and “outs” of real estate closings.
The process begins simply enough. A buyer spends what seems like hundreds of days and weekends searching for the right home or property. Once the ideal home is found, the selling broker helps the prospective buyer prepare and execute a contract to be given to the property owner. At this point the signed contract is an “offer.” No offer should be submitted without careful consideration of the attorney’s role in the transaction. Most all standard contracts contain a clause for subsequent attorney approval or attorney modification. Don’t sign any contract that does not include an attorney modification clause.
The preferable situation is to have an real estate attorney examine a contract before it is offered. While modification clauses usually suffice, a modification or change is sometimes considered to be a counter offer. The seller can reject the modification and then opt for a new or even higher offer from a second party -- the original proposal may be lost. It is always better to bring an attorney in upfront, to be certain you are getting everything you want in a deal.
The attorney’s role in a real estate closing includes preparing a settlement statement listing all fees and charges in the transaction. The attorney negotiates and reviews specific terms of a contract. The attorney helps assess financing options, examines all legal documents, such as the deed, title policy, mortgage, survey, and closing statements. The attorney also attends the closing and makes sure clear title is transferred. The attorney must also scrutinize charges to make sure that all are fair and correct.
Who Can Sue
When a party to an agreement breaks a legally binding contract, your closing attorney will recommend bringing a lawsuit that will result in a completed transaction or at the very least, a cash settlement to your satisfaction. However, there is much more that can go wrong during a real estate transaction for which you may have potential legal action.
When attorneys are not initially involved in real estate transactions, buyers and even sellers often find themselves needing an attorney to recover monies they were overcharged by closing agents
, through fraud, sloppy work or even honest mistakes.
Reports indicate that thousands of consumers have been overcharged on recording fees, allegedly because their agent inserted incorrect information in the final settlement statement, either intentionally or mistakenly.
More than 50% of all transactions where attorneys are not included are reported to have overcharges in recording fees. Individuals who have been overcharged on the settlement statement are not necessarily refunded monies owed to them. Nationwide, hundreds of thousands of people every year have been overcharged. There are millions of dollars in overcharges that need to be paid back to every consumer that had a transaction.
Still uncounted are consumer losses due to overcharges levied during the rush of sub-prime mortgage and refinance transactions during the recent housing mortgage debacle. If you have recently refinanced or purchased a home, you may have been a victim of overcharges.
For the most part, it is the major title insurance companies, acting in their role as escrow agent, who get to keep the money from the overcharges to customers. Frequently, companies offer what they term to be "guesstimates" on some of the listed fees, which enables them to overcharge and pocket the excess monies.
Some unscrupulous companies knowingly overcharge recording and other fees because they believe that the consumer will not delay or cancel the purchase of high priced real estate they desire for a few hundred dollars. Such illegal charges could be averted if an attorney is present to review the settlement statement before the closing.
It is important to know the definitions of many of the real estate terms used during the closing of a real estate transaction. It is also important to know which party – buyer or seller – is required to pay the various fees involved.
Title Insurance: a policy that guarantees unencumbered ownership or clear title with no liens attached for the purchaser. The cost, based upon a small percentage of the purchase price, is paid by the buyer. The policy covers only the amount of purchase and not any higher value of the property at a later date if ownership is challenged.
Points: a point is equal to 1% of a loan. Points are charged by lenders to the buyer/borrower for originating a mortgage. Points are sometimes charged as prepaid interest for lowering a borrower’s interest rate. For each point charged a rate is lowered by as much as 1/4 % over a 30-year loan.
Brokerage Commission: a real estate agent’s commission, which frequently runs 6% of the selling price and is paid by the seller. An agent most often shares the commission with the purchaser’s agent. The commission is sometimes lowered by agents in effort to lower the price for the purchaser and still leave reasonable profit for the seller.
Appraisal fees: nine times out of ten, a lender will require an appraisal to determine the value of a home and insure that it is at least equal to or greater than the fair market value of a property. The fee can be paid by either the buyer of the seller.
Inspection fees: money usually paid by the borrower, to satisfy the lender that the property is in good condition and will not suffer immediate damages from pests such as termites, faulty wiring or poor plumbing. Inspection fees are negotiable and are sometimes paid by the seller.
Taxes: property taxes are usually based on a pro-rated charge to both buyer and seller according to what portion of the tax year each has ownership of the property. Likewise with community service charges for water, utilities and Homeowner Association fees.
Federal law, under the Housing and Urban Development Act, requires that the closing agent prepare a settlement statement, known as HUD-1, that list all costs and fees involved in a real estate transaction. The statement must be presented to both sides in a transaction at least 24-hours prior to closing. It is also given to the government office recording the transfer of the deed. However, HUD does not keep such statements on file. The Federal government sometimes requires the filing of form 1099-S to be sent to the IRS. The law does not allow a charge for filing 1099-S.
While State laws governing a real estate transaction vary, several of the major title insurance companies have existing cases against them. Many other companies are being investigated for class action cases. The companies are required by law to determine and charge you the exact amount as stated in the final settlement statement. Whether it is negligence or intentional conduct, the Title companies acting as closing agents are libel for overcharges.