Introduction
Are you a first-time home buyer? Then you’ve probably heard a variety of real estate professional titles being bandied about. Titles like real estate agent or mortgage lender; home inspector or appraiser; title or title company, real estate closing attorney or home insurance agent.
If you’re buying a house and doing things correctly, then all seven of the real estate professionals listed above will be involved (at some stage) in the home buying process.
Of these seven real estate professionals, the real estate attorney plays one of the most crucial roles in the home buying process. It is therefore somewhat surprising to me that a lot of people tend to discount the role real estate attorneys play in the home buying process.
If first-time home buyers really understood the role of a real estate attorney in the home buying process, I believe they would come to see that these real estate attorneys are the unsung heroes in the home buying process.
In this blog post, I will discuss what every first-time home buyer should know about real estate closing attorneys.
What Does a Real Estate Closing Attorney Do?
A real estate closing attorney is a legal expert who:
- specializes in real estate law
- Their involvement helps minimize risks and any legal complications.
- assists home buyers in the final stages of the home buying process.
- They facilitate communication between all parties and real estate professionals involved in the transaction.
- They verify the title.
- They review and prepare all necessary legal documents.
- They conduct a thorough title search to verify the property’s title.
- oversees the closing stage in the home buying process.
- They oversee the disbursement of funds.
When Does a Real Estate Closing Attorney Become Involved in the Home Buying Process
Home buyers typically engage a closing attorney when they reach the “Under contract” stage but before the purchase contract is signed. Essentially:
- You have made an offer.
- The seller has accepted the offer.
- The seller has provided you with a purchase contract.
- You may or may not have signed the purchase contract.
Please note that not all real estate transactions involve a real estate closing attorney. This is because a closing attorney is not always required by law. Some states require closing attorneys to be present at closing.
Please check with your state law to see if a closing attorney is required.
Key Responsibilities of a Real Estate Closing Attorney
Real estate attorneys play a variety of roles in ensuring that the closing process goes smoothly. Their responsibilities include a wide range of tasks such as:
Prepare and review legal documents:
- Buying a house is a legal transaction. Accordingly, various legal documents are utilized to facilitate the transaction. Here are some examples of the legal documents used:
- Purchase agreement
- Deed
- Bill of sale
- Escrow agreement
- Title insurance policy
- Closing statement
- Disclosure forms (such as lead-based paint, property condition, and seller disclosures)
- Loan documents (such as the promissory note and mortgage)
- A real estate closing attorney prepares and reviews these legal documents. If you have hired a real estate attorney, they won’t necessarily prepare all of these documents. However, in cases where they aren’t responsible for preparing the legal document, they will review and examine the said documents.
- Thanks to real estate attorneys’ expertise in real estate law, they can ensure that all documents (prepared by them or otherwise) are:
- accurate
- follow legal regulations.
- protects the buyer.
Conduct a title search:
- A title is a legal document. This legal document formally transfers ownership of the property from the buyer to the seller. This legal document also protects everyone in the home buying process. As a first-time home buyer, the last thing you want is to buy a house from someone who had no right to sell you the house. The title:
- serves as proof of ownership.
- provides evidence that the seller has the legal right to sell the property.
- protects home buyers from future disputes over ownership.
- When buying your first house, you want to buy a house that has a clean title.
- A house with a clean title is one that is free of liens, claims, or any other legal issues that can potentially impact the transfer of ownership from the seller to the buyer.
- Buying a house that has any of these types of legal issues can jeopardize your right of ownership.
- These liens, claims, or legal issues can include anything:
- from an outstanding mortgage to a tax lien (due to unpaid property taxes).
- from easements to restrictions related to bankruptcy proceedings.
- from HOA liens as a result of unpaid HOA dues to judgments from divorce proceedings.
- Your real estate attorney will conduct a thorough title search to ensure that the property you’re trying to buy has a clean title. They perform their search by:
- examining public records
- reviewing historical documents
- reviewing legal filings
Obtain title insurance:
- While a real estate closing attorney will try her best to uncover any legal issues with a lien before closing, there are however instances where such legal issues are discovered after a buyer has completed the house purchase.
- Title insurance is meant to protect home buyers in such scenarios. It protects home buyers against any financial loss that might occur due to undiscovered legal issues against the property.
- The real estate closing attorney can work closely with the title company to help you obtain title insurance before closing.
Oversee the exchange of funds:
- Real estate closing attorneys facilitate the exchange of funds between the buyer, the seller, and any other involved third party. When I bought my house, my real estate attorney ensured the seller acknowledged receipt of funds from the mortgage company. I didn’t leave the closing location till my closing attorney confirmed that all parties expecting payment had been settled.
- My closing attorney also provided me with a final accounting of all funds exchanged during the transaction. She explained how every single cent was disbursed from:
- how much went towards property taxes, to how much went to the closing fee, to how much went to mortgage insurance.
Provide legal counsel:
- Buying a house is a legal transaction that involves a lot of legal jargon. As a first-time home buyer, you want to ensure that you work closely with a real estate closing attorney. A closing attorney, thanks to their legal expertise, can provide you with legal counsel. This legal counsel can help:
- you through the process.
- identify any potential issues with the transaction.
- ensure that the transaction complies with any applicable laws and regulations.
- As previously noted, there are a number of legal documents utilized in the home transaction. You will be required to sign a number of these documents. Documents which are legally enforceable. Legal documents are not always easy to understand, especially for first-time home buyers with zero legal background. As such, you want to ensure that you understand what you’re signing. Your real estate closing attorney can:
- explain the contents of these legal documents.
- highlight important part of these documents you should be paying attention to.
- Answer any questions you might have about the documents.
Facilitate communication:
- A number of parties are involved in the home-buying process. These may include:
- The buyer
- The seller
- Real estate agent
- Mortgage lender
- Morgage broker
- Home inspector
- Appraiser
- Title company
- Homeowners insurance agent
- Homeowner associations (HOAs)
- Local government agencies
- Contractors performing repairs on the property.
- and of course, the real estate closing attorney.
- As you can see, that is a quite a list. I don’t know about you, but in my experience, having multiple communication channels creates room for:
- confusion
- miscommunication
- time wasted on redundant communication.
- important information getting lost or overlooked.
- A real estate closing attorney helps facilitate communication between all the involved parties. This will help mitigate any communication issues and also reduce the risk of any important information getting lost or overlooked.
Ensure legal compliance of the closing process:
- A house purchase, as a legal transaction, must comply with all legal requirements and regulations in place. These may include:
- Disclosure requirements
- Zoning regulations
- Building codes
- Environmental regulations
- Mortgage regulations
- Homeowners insurance requirement
- Tax regulations
- Fair Housing Act
- A closing attorney ensures that the transaction complies with the legal requirements and regulations. Thanks to their legal expertise, closing attorneys can navigate or prevent any potential legal pitfalls.
Act as an escrow agent
- A real estate closing attorney can also serve as an escrow agent
- An escrow agent holds the funds, the documents, and any other items in escrow until all contingencies and conditions of the closing are met.
Conclusion
Closing attorneys are vital players in the home buying process. Their legal expertise can help you avoid costly mistakes. They offer legal protection and look out for your best interest throughout the transaction. Having a knowledgeable and experienced closing attorney by your side can provide peace of mind and ensure a smooth and legally sound transaction.
Sincerely,
Your Mortgage Minister
