• Written by Lissa Jean Ferrell
• Tagged as Real Estate

---

Buying or selling a home is likely the biggest transaction people make. Unfortunately, in the interest of saving often times, much needed funds, individuals often think a title company can adequately represent the full interests of the buyers or sellers. Although we work together, the roles of a real estate lawyer and the title company are different.

Both the lawyer and title company protect the interests of buyers. However, that protection addresses and covers different risks. Real estate lawyers are advocates for our clients. We, the attorneys provide legal advice throughout the real estate transaction. Real estate attorneys fight to protect you. Title companies manage financial risks. They are not advocates and don't address a Buyer or Seller’s rights and duties. Although the Title company identifies and reviews the trail of ownership and related debts, they do not address or resolve any dispute between the parties.

Much of the work of the real estate attorney is done before closing of title. This work can include drafting or reviewing the sales contract, and in states, where required, drafting and negotiating terms of the contract...

A law firm or attorney’s role in a real estate transaction is to provide legal advice to clients who are buying or selling real property. Much of the work of the real estate attorney is done before closing of title. This work can include drafting or reviewing the sales contract, and in states, where required, drafting and negotiating terms of the contract in an “Attorney Review Letter” during the “Attorney Review” period. Upon client request, an attorney may also review and explain the clients mortgage terms. The real estate lawyer addresses any problems that could affect the closing and settlement. Some possible issues include:

• Reviewing terms of the contract or sales agreement. Generally, a realtor will use a standard form of contract. These contracts contain general terms which      can be edited, omitted or enhanced to conform to the agreement between the parties.
• Resolving inspection disputes. Buyers and sellers sometimes disagree on what repairs are needed to meet the building codes or the terms of the purchase      agreement. The attorneys negotiate on behalf of their respective clients to come to a resolution that satisfies both parties regarding what work is to be done or      what credits will be offered to the Buyer in lieu of the requested repairs. The attorneys will also negotiate how much if any funds are to be placed in escrow to      cover the cost of repairs not completed by closing, should the parties decide to move forward prior to the completed repairs.
• Resolving any other related disputes. Disputes can arise in different ways. For example, if the heirs are selling their father’s or mother’s property, the heirs      may not agree on how to handle the sale.
• Review of the title report. Review of the title report. The lawyer will work with the agent to help the Seller get any payoff statements any first and second      mortgage liens on a property. The most typical creditor is the first mortgage holder. The lawyer works with the title company to investigate and clear any other      open claims on the title report against either party or the property
• Draft and review the Seller Conveyance Documents. The Seller’s attorney must draft the Seller’s documents conveying the ownership of the property to the      Buyers, who will become the new Owners. Those documents generally include, the Deed, The Seller’s Affidavit, a certification of nonforeign status, a 1099      reporting form and other documents depending on the state. If the Seller is an Estate, additional documents are required.
• Reviewing the closing legal paperwork. At closing, Buyers need to sign the mortgage agreement, the mortgage Note, the ALTA, papers, a closing disclosure,      and many other legal documents. The lawyer should explain what each document means and go over each paragraph of the document, so the client knows, in      plain English, what he/she is signing. Legal documents also include the deeds themselves.

Real Estate lawyers work with the real estate agent, home inspector, mortgage lender, closing agent, and any other necessary parties to ensure our client’s rights are protected.

A title company is a business charged with the role of closing real estate transactions and issuing title insurance policies through one of the authorized title insurers in the United States. A title company does not actually insure the title to real property. A title company DOES NOT and CANNOT provide legal advice or representation to anyone.

For real estate transactions, the Buyer’s attorney selects and engages a title company on behalf of the Buyer, to search for and inspect any existing or likely legal claims against the Buyers, Sellers and the property. Mortgage companies require Buyers obtain title insurance as a condition of a loan.

The goal of the title insurance is to avoid the possibility that, after the closing of title and settlement, a third party will appear and make a claim against the property. The title insurance policy serves to protect the Buyer in case the title company misses “title cloud” which is a possible claim against the property or the parties prior to closing. An example of a missing problem is a claim by heirs to the property that were never resolved. Fraud is another problem that can be hard to detect.

The title company’s first act is to conduct a search by examining the court records to determine the ownership trail of the property since it was built. The search should trace all the prior owners and sales transactions from the time the home was built until the current ownership. Home titles are typically public records. When a property is purchased, the deed that transfers ownership is recorded with the local county or other appropriate clerk or department responsible for maintaining property records.

The title search also seeks any legal claims against the current owners, the Sellers. Existing claims can include:

• Judgment. A legal entitlement to money.
• A lien. A right to sell the house in return for money owed.
• Bankruptcy filings. Some sellers who can’t pay their bills file bankruptcy to try to save their home from foreclosure.
• A full history of any mortgages. The first mortgage is usually filed when the buyer purchases the property. After the purchase, many homeowners obtain      second, third, and junior mortgages. These mortgages need to be checked for their current status.
• Unpaid taxes and assessments. These include federal, state, and local taxes and assessments.
• Any other demand against the property such as a line of credit

The title search also includes looking for any lease agreements. The search looks for any easements or rights to enter the property. Utility companies usually have the right, by an easement, to enter homes to make necessary repairs. Lastly, at the Buyer’s request, the title company may also hire a surveyor to survey the property, to ensure that the boundary lines are correct and match the legal description in the deed.

Once the searches are completed, the title company will prepare a report of all known legal issues that could affect the ownership title. This document, the Title Commitment, will list any current and potential problems. The report is given to the real estate attorney for review before the closing process can be scheduled for settlement. The attorney reviews the items on the report, then works with the title company, the sellers and buyers to clarify any open items in the report.

It is common practice now for the title company to send a title clerk to serve as Closer to settlement. This Closer will manage the funds and funding after all documents are signed. The closer prepares and reviews the settlement statement which itemizes all the monetary details including, the sales price, down payments, the mortgage loan(s), taxes due, outstanding bills due, closing costs, legal fees, recording fees and any other money that must be paid in order for the property to cleanly transfer from Seller to Buyer. After the settlement figures are approved, this Closer distributes the checks to everyone and the keys to the property to the Buyer. After settlement, the title company records all the appropriate paperwork with the appropriate municipal clerk.

** In certain states, attorneys can provide the same role and function as a “title company”. In those states, the attorneys must be authorized to issue title insurance policies. They should also provide all the other services associated with closing transaction (provide clear title, coordinate the closing, provide escrow services, coordinate with lenders, etc.).