When navigating the complexities of buying or selling a home, many people encounter two key players: real estate attorneys and title companies. Understanding their roles, the differences between them, and the varying state requirements for home closings can help you make informed decisions throughout the transaction process.
In all states it is important to make certain your attorney has real estate experience and expertise. Litigators, divorce, or other legal specialists may not have the knowledge base to give you accurate, prompt, on point advice in real estate. This article will delve into these differences, explore state-specific requirements, and discuss why adding a real estate attorney to your team can be beneficial.
The Role of a Real Estate Attorney
A real estate attorney is a licensed professional specializing in the legal aspects of real estate transactions. Their primary responsibilities include:
- Reviewing Contracts: Real estate attorneys meticulously review purchase agreements, sales contracts, and other legal documents to ensure they comply with state laws and protect their client’s interests.
- Providing Legal Advice: They offer expert legal guidance on issues such as property disputes, zoning laws, and mortgage agreements.
- Negotiating Terms: Attorneys often negotiate contract terms on behalf of their clients, addressing contingencies, repairs, and other critical aspects.
- Conducting Title Searches: We do not conduct most of our title examinations but rely on full time, insured third party independent contractors to provide title examinations. As real estate attorneys, we do take the time and prerogative to review and evaluate title examinations.
- Closing Transactions: In some states, attorneys must oversee the closing process, ensuring all legal requirements are met and documents are correctly executed. Virginia law allows a buyer or seller to forego participating in a real estate deal with the protection and expertise of having an attorney. Attorneys still conduct most of the complex and commercial closings. Make sure you understand the value and the relatively minor increase in fees for having your own attorney in your corner and/or conducting your closing.
The Role of a Title Company
Title companies focus primarily on the financial and administrative aspects of real estate transactions. For the title insurance company, the protection of the company itself is the paramount concern. Strict adherence to home office rules generally, but not always also benefits the customer. The relationship of the Title Company to the customer can be very opaque and the duties of loyalty unclear and rarely set forth in an advanced engagement letter. Our attorneys always provide a written engagement letter upon request and make every effort to provide an engagement letter in all attorney-client undertakings.
Key functions of a title company may include:
- Title Searches: Title companies conduct thorough searches of public records to identify any issues with the property title, such as liens or encumbrances.
- Title Insurance: They provide title insurance policies to protect buyers and lenders against potential title defects that may arise after the purchase.
- Escrow Services: Title companies often act as neutral third parties, managing escrow accounts where funds are held until the closing process is complete.
- Closing Coordination: They prepare closing documents, ensure all financial transactions are accurately processed, and facilitate the transfer of ownership.
State-Specific Requirements for Home Closings
The requirements for who is allowed to conduct home closings vary significantly across the United States. Generally, states can be categorized into three groups: attorney states, title company states, and states where either can conduct closings.
- Attorney States: In these states, a real estate attorney is required to oversee the closing process. This includes preparing and reviewing documents, ensuring legal compliance, and facilitating the transfer of funds and property. Examples of attorney states include:
- Georgia: Requires an attorney to be present at closings to ensure all legal requirements are met.
- South Carolina: Mandates attorney involvement in the closing process.
- Massachusetts: Attorneys must handle real estate closings, including the preparation of all necessary legal documents.
- Title Company States: In these states, title companies can conduct home closings without the need for an attorney. Title companies handle the preparation and review of documents, manage escrow accounts, and issue title insurance. Examples include:
- California: Title companies can manage the entire closing process, though attorneys may still be involved.
- Arizona: Title companies handle closings and title insurance, with attorneys often playing an advisory role.
- Nevada: Title companies conduct closings, but real estate attorneys may be consulted for legal advice.
- Either/Or States: Some states allow either a real estate attorney or a title company to handle the closing process. The choice often depends on the complexity of the transaction and the preferences of the parties involved. Examples include:
- Florida: Both attorneys and title companies can conduct closings, with many buyers and sellers opting for attorney involvement for added legal protection.
- Texas: Either can handle closings, but attorneys are often involved in more complex transactions.
Why Consider Adding a Real Estate Attorney to Your Team?
Even in states where a title company can handle the closing process, there are compelling reasons to consider adding a real estate attorney to your team.
- Legal Expertise: Real estate transactions involve numerous legal complexities that can have significant implications if not handled correctly. An attorney provides expert legal advice and ensures all contracts and documents comply with state and federal laws, protecting your interests. Legal expertise and education in many areas of the law, not just real estate law. Real estate closings may be affected by matters of Constitutional Law, Tort Law, administrative or regulatory law, family law, insurance law, environmental law, construction law, and many other areas of law.
- Contract Review and Negotiation: Attorneys review and negotiate the terms of purchase agreements, sales contracts, and other legal documents. They can identify potential issues, suggest modifications, and ensure that the contract terms are favorable and legally sound.
- Title Search and Insurance: While title companies conduct title searches, an attorney can provide an additional layer of scrutiny. They can review the title search results for legal issues that may not be immediately apparent and advise on the appropriate type of title insurance coverage. Title Searches and Insurance are increasingly complex and the industry giants that provide title insurance constantly tighten the language of title insurance policies to reduce the risk and exposure to liability for the home office. The agent or employee that conducts the closing are forbidden to give legal advice at closing if they are an employee of the title company, even if they are also an attorney or formerly engaged in a law practice. To provide legal advice in such situations by title company employees is the “unauthorized practice of law” leading many companies to forbid their “closers” from giving any approximating legal advice. Rarely do they give explanations of the actual policy or the coverages or risks or the somewhat slow and tedious process of responding to title claims. Most law persons are unaware that title insurance policies are actually title indemnity policies, not truly insurance policies! That technically means that their “insured” must suffer a loss before the home office is obligated to pay damages to the insured. On the other hand, the insured has a duty to report a potential claim promptly so that any “title reparative” work can be investigated and tried before losses are suffered. But failure to promptly report potential claims and result in a total loss of coverage! Finally, title companies that provide closing services often make quite a few decisions on the seriousness and risk level of potential title problems they uncover in the title examination stage and rarely involve the future insured in resolving the problems or deciding whether they want to undertake a risk.
- Dispute Resolution: Real estate transactions can sometimes lead to disputes over contract terms, property condition, or title issues. An attorney can represent you in negotiations or litigation, helping to resolve disputes and protect your rights. A title Company that attempts to conduct a transaction and encounters a legal dispute in the process is directed by Virginia law to stop the closing and to provide the customer the names and contact information for 3 actual attorneys who might be able to help give them legal advice in the closing process. This practice almost always results in a delay in the closing process and can jeopardize loan commitments, moving contracts, move out dates, and other time sensitive matters.
- Closing Process Oversight: In states where attorneys are required to oversee the closing process, their involvement ensures that all legal requirements are met. Even in states where they are not required, having an attorney oversee the closing can provide peace of mind and prevent potential issues.
- Personalized Legal Advice: Every real estate transaction is unique, and an attorney can provide personalized legal advice tailored to your specific situation. Whether you are a first-time homebuyer or a seasoned investor, an attorney can guide you through the process and address any legal concerns.
No one can force you to use their attorney or title company in a transaction but they may offer to pay the service provider for an opposing party if that party agrees to use the designated attorney or title company. This can be a $500 to $700 value, but it can also result in the failure to disclose or resolve pre-existing title issues.
Conclusion
Understanding the differences between a real estate attorney and a title company, as well as the varying state requirements for home closings, is crucial for anyone involved in a real estate transaction. While title companies play a vital role in the administrative and financial aspects of the process, real estate attorneys offer essential legal expertise and protection.
Whether your state requires an attorney for closings or not, considering the addition of a real estate attorney to your team can provide valuable benefits. From contract review and negotiation to dispute resolution and legal advice, an attorney can help ensure that your transaction is smooth, legally sound, and in your best interest.
As you navigate the home buying or selling process, weigh the benefits of having a real estate attorney by your side. Their expertise can make a significant difference in protecting your investment and ensuring a successful transaction.