The closing attorney plays a pivotal role in representing the buyer during the acquisition of real estate or when refinancing a mortgage loan. This intricate process can be segmented into three distinct phases: Pre-closing, the actual Closing, and the Post-Closing stage. Throughout these stages, the closing attorney undertakes several crucial responsibilities.
In the Pre-closing phase, the attorney reviews all pertinent documents, ensures that the title is clear of any encumbrances, and liaises with all parties involved to set a closing date. During the Closing phase, they oversee the signing of all necessary documents, ensure the transfer of funds, and confirm that both parties fulfill their respective obligations.
Finally, in the Post-Closing stage, the attorney ensures that all documents are appropriately recorded, disburses any remaining funds, and addresses any lingering concerns or issues that may arise after the transaction has been completed. Their role is essential in ensuring a smooth and legally sound property transaction.
First, Some Personal Context
Navigating the intricate maze of real estate transactions was an experience I’ll never forget. A few years ago, I decided to invest in a quaint little property on the outskirts of town.
The picturesque views and the promise of a serene life away from the city’s hustle and bustle were too tempting to resist. However, what seemed like a straightforward process on the surface turned out to be a roller-coaster ride of legalities, paperwork, and endless meetings.
I vividly remember my first encounter with the closing attorney’s office. The sheer volume of documents, terms I had never heard of, and the meticulous attention to detail required were overwhelming. The pre-closing phase was an eye-opener.
From title examinations to ensuring no liens existed against the property, every step was a lesson in patience and trust. The actual closing event was a whirlwind of signatures, discussions, and final confirmations.
And just when I thought it was all over, the post-closing phase began, with its own set of tasks and responsibilities. Throughout this journey, the closing attorney was my guiding star, ensuring that every ‘i’ was dotted and every ‘t’ was crossed.
Looking back, I realize the importance of having knowledgeable professionals by your side, guiding you through the complexities of such significant life decisions.
The Role and Selection
During a real estate transaction, both the buyer and seller have the liberty to engage a closing attorney to safeguard their interests.
This attorney ensures that all legalities are adhered to and that the transaction proceeds smoothly. While it’s possible for a single closing attorney to represent both parties, ensuring a fair deal for both, they can also act as representatives for individual parties.
Furthermore, when a property is acquired with a mortgage loan, the closing attorney might also represent the mortgage lender’s interests.
It’s essential to understand that the primary role of a closing attorney isn’t necessarily to advocate for the buyer or seller. Instead, their main objective is to streamline and simplify the intricate closing process, ensuring all legal requirements are met.
Selection of the Closing Attorney:
The responsibility of selecting the closing attorney can vary based on regional practices and state laws, provided they don’t clash with federal regulations.
For example, in Georgia, it’s customary for the buyer to select the closing attorney. However, the seller can negotiate this choice, especially concerning the buyer’s closing expenses.
On the other hand, in places like Pinellas County, Florida, it’s the seller who typically decides on the closing attorney for the deal.
Who Should Hire?
While a real estate agent often plays a critical role in preparing a purchase contract, it’s advisable to hire a closing attorney or a closing lawyer to draft or review the purchase contract terms and handle all additional paperwork.
However, it is more of a necessity with less conventional scenarios that call for more complex contracts, such as the following:
- Purchasing real estate in another town, state, or country;
- Buying or selling property with a critical issue;
- Selling property that is part of a divorce settlement;
- Trying to sell property under a mortgage due to serious financial problems; and
- Buying real estate that is part of a special sale, such as an estate sale.
Before the actual closing event, the closing attorney’s office undertakes several pivotal tasks to ensure a smooth transaction:
- Title Examination: The office conducts a thorough title search at the County Register of Deeds Office. This is to verify the property’s ownership, identify any restrictive covenants, ensure property access, and pinpoint any easements or rights affecting the property. They review the title’s history for at least 30 years (this can be shorter if a previous title insurance policy exists) to confirm a clear “chain of title” leading to the present owner. Additionally, they inspect records at the County Clerk of Court’s Office to ensure no liens or judgments exist against the property. If the property is part of an estate sale, they also review the estate records. The attorney also verifies any outstanding assessments with the local municipality and checks the County Tax office records.
- Drafting the Preliminary Title Opinion: After the title search, the attorney prepares a “preliminary title opinion,” which is then sent to a title insurance company. This also involves ordering a title insurance binder for both the lender and the buyer.
- Information Compilation: The attorney’s office collects data from various sources in preparation for the closing. This includes:
- Homeowners insurance details and associated costs
- Homeowners Association Fees (collected or prorated at closing)
- Reports like termite inspections, home evaluations, and other relevant costs
- Information on home warranties
- Details on realtor commissions
- Preliminary Data Submission to Lenders: The bulk of the gathered information is forwarded to the buyer’s lender, typically in the form of a preliminary Closing Disclosure Form (CD Form), accompanied by any other necessary documents.
- Review of the Closing Package: The lender provides a loan package to the closing attorney, who then reviews it for accuracy. This includes verifying property details, tax information, insurance data, and other relevant terms. The attorney supplements this package with additional documents like homeowners insurance, title insurance binder, plat maps, restrictive covenants, and home warranties. A duplicate of this comprehensive package is prepared for the buyers.
- Finalizing the CD Form: The Closing Disclosure Form (CD Form) details all the funds involved and summarizes the loan terms. The final version of this form may have slight variations from the preliminary one.
- Informing Buyers about Funds: Buyers are notified about the exact amount they need to bring to the closing. This amount should be in the form of certified funds, like a cashier’s check, or through a wire transfer.
The culmination of all the preparatory work is the Closing event, typically held at the closing attorney’s office. Key participants in this event include:
- The closing attorney oversees the process.
- The buyers are the central figures in the transaction.
- Often, the buyers’ realtor is present to support and guide them.
- Occasionally, a representative from the lending institution might attend to ensure all financial aspects are in order.
- Document Review: The closing attorney meticulously goes over all the documents related to the transaction with the buyers. This includes:
- The Closing Disclosure Form (CD Form), outlines the financial details and terms of the loan.
- All loan-related documents that detail the terms, conditions, and obligations of the mortgage.
- Any additional documents linked to the property purchase, such as:
- Termite inspection reports, ensure the property is free from pest-related damages.
- Home warranties offer protection against potential future defects or repairs.
- The plat map provides a detailed diagram of the property’s boundaries.
- If requested, a property survey that gives a comprehensive overview of the land and any structures on it.
- The deed, is the most crucial document, as it signifies the official transfer of property ownership.
This stage is vital as it ensures all parties are on the same page, and any last-minute queries or concerns can be addressed before finalizing the transaction.
Following the closing, the closing attorney’s office undertakes several critical tasks to finalize the real estate transaction:
- Title Update: After receiving the loan funds and the “clear to close” confirmation, the closing attorney conducts a final title update. This involves a comprehensive title search, encompassing all records at both the Registry and the Clerk of Court’s office. This search spans from the date of the initial title search up to the point of recording the deed and deed of trust. The aim is to ensure that the property’s title remains unencumbered and that no recent developments would affect the new buyer’s ownership rights.
- Document Recording: With the title update completed, the closing attorney proceeds to record the deed (transferring ownership from the seller to the buyer) and the deed of trust (establishing the lender’s mortgage lien). This recording can be done either in person at the Register of Deeds office or through electronic recording (“e-recording”).
- Fund Disbursement: After the recording, the closing attorney notifies the involved parties, including the realtors, buyer, and seller. The funds listed on the CD Form are then distributed. This includes transferring the sale proceeds to the seller, commissions to the realtors, lender fees to the lending institution, and other collected funds for services like termite inspections, homeowners insurance, property taxes, and home evaluations. It’s also the attorney’s responsibility to promptly send the seller’s loan payoff to prevent any additional interest accumulation.
- Final Title Opinion: Shortly after the recording, the closing attorney prepares a “final title opinion.” This document details the recording information for the deed and deed of trust and confirms the status of the seller’s mortgage loans that have been settled. This opinion, along with the title insurance premium, is sent to the buyer’s title insurance company.
- Distribution of Final Documents: Once the Register of Deeds office returns the original deed and deed of trust, the closing attorney dispatches the deed to the buyers and the deed of trust to the buyer’s lender.
How Much Does a Closing Attorney Cost?
Engaging a closing attorney to guide you through the intricate process of real estate transactions is undoubtedly beneficial. However, it’s essential to be aware of the associated costs to budget appropriately.
The fees for a closing attorney can vary significantly based on several factors, and it’s crucial to have a ballpark figure in mind to avoid any financial surprises.
In the US, many closing attorneys opt for an hourly billing system. The rates typically range between $150 to $350 per hour. Naturally, an attorney with more experience and a proven track record in real estate transactions might be on the higher end of this spectrum.
On the other hand, some attorneys prefer a fixed-rate system, where the fee is determined by the specific services required. For such arrangements, you can expect to pay anywhere from $500 to $2000.
Several factors influence this fee, such as the complexity of the contract, any unique challenges or requirements, and the overall scope of the transaction.
Additionally, the property’s sale price can also play a role in determining the attorney’s fee in some cases.
1. What questions should I ask a real estate lawyer before hiring them?
Before hiring a real estate lawyer, it’s essential to inquire about their experience in handling real estate transactions, their fees, any potential conflicts of interest, and their approach to resolving disputes. It’s also beneficial to ask for references or reviews from previous clients.
2. Are there any checklists or guides provided by closing attorneys?
Yes, many closing attorneys provide home sellers and buyers with checklists or guides to ensure a smooth transaction. These resources can be invaluable in helping clients understand the process and what’s expected of them.
3. What is the TILA-RESPA Integrated Disclosure (TRID) rule?
The TILA-RESPA Integrated Disclosure (TRID) rule, also known as “Know Before You Owe,” is a set of guidelines designed to ensure that borrowers are fully informed about the terms and costs of their mortgage loans. It aims to simplify and consolidate the loan estimate and closing disclosure forms.
Navigating the complexities of a real estate transaction requires expertise and meticulous attention to detail. A closing attorney plays an indispensable role in ensuring that both buyers and sellers experience a seamless and legally compliant process.
From the initial stages of document review to the final recording of house deeds, their involvement provides assurance and clarity in what can often be a daunting journey.
Whether you’re a buyer, seller, or a real estate professional, understanding the role and costs associated with a closing attorney is crucial for a successful transaction.