The importance of having a closing attorney when you purchase a home

A closing attorney plays a critical role in the purchase of a home. The home buyer is responsible for hiring a closing attorney. The purchaser’s real agent can help in recommending a few closing attorneys. The purchaser is typically responsible for the attorney’s fees and those fees are part of the purchaser’s closing costs. In some instances when closing costs can be negotiated, the seller contributes funds towards the purchaser’s closing costs. In that case, if sufficient funds are contributed, the seller ultimately pays for the closing attorney’s fees. It is common practice for the closing attorney to represent the purchaser and the lender while performing limited legal services for the seller, such as preparing the seller side closing statement and the deed.

Following are the various responsibilities the closing attorney will assume during a normal real estate transaction.

Holding earnest money

When a purchaser presents an offer to purchase on a home, there is usually an earnest money deposit involved, in other words, a financial consideration in the offer so the seller is more inclined to pull the property off the market and hold it for the purchaser until the purchaser closes on the property. The earnest money is usually held in escrow by an escrow agent. The escrow agent is usually the purchaser’s closing attorney. The earnest money is deposited in a trust account with the closing attorney and disbursed appropriately once the real estate transaction closes. It is always wise to have the closing attorney hold the earnest money in case of disputes or unresolved issues between the purchaser and the seller.

Performing a title examination

After receipt of the executed sales contract for the purchase of a home, the closing attorney does a title search and examination. The goal of the title search and examination is to discover if there any encumbrances on the property title that would prevent the current owner from transferring ownership to the purchaser. In examining the title records, the closing attorneys searches for prior deed conveyances, unpaid mortgages, liens, judgments, easements and other encumbrances on the title. The closing attorney also verifies that the seller has the legal authority to convey  good title to the property and that no errors exists in the deeds in the chain of title. If you are purchasing a home where renovation or improvement work was recently performed, it is highly recommended that you obtain proof and receipts from the seller that the work was paid for in full before finalizing the home purchase. You may not know this but a license contractor has the right to file a mechanic’s lien against a home owner’s property in case of non-payment for services rendered and it can take some time for a lien of this type to show up on title. If title is transferred to the new homeowner and the mechanics lien shows off afterwards, the purchaser could be legally held responsible for paying the contractor even though the previous owner is the one who should have paid the contractor.

If the closing attorney finds issues with the title during the title examination, the closing attorney will inform the purchaser and attempt to resolve the issues so there is clear title.

Negotiating Title Insurance

The closing attorney negotiates and obtains title insurance coverage for the purchaser and the lender with the title insurance company in the event that adverse claims of ownership, liens and or easements arise post closing.

Reviewing and explaining settlement costs, loan documents deed and closing the real estate transaction

The closing attorney coordinates with the lender to get the loan documents ready in time for the closing and to prepare the closing statement. At that time, the closing attorney will have all the following information: all payoff and discharge of mortgages, payment and allocation of real estate taxes, disclosure of the brokerage fees involved, disclosure and payment of lender fees and closing costs, funding of mortgage escrow account, payment of transfer taxes and recording fees, payment of prepaid interest and distribution of sale proceeds. At that time, the closing attorney will compute all the numbers and determine how much the buyer will need to bring to closing in order to finalize the real estate transaction.

On the appointed day for the closing, the closing attorney, the purchaser, the seller and the real estate agents involved in the transaction will convene to sign all the required official and legal documents. At first, the closing attorney will go over the closing statement (also called the HUD1) which is a statement of the actual settlement costs. The attorney will explain the statement line by line to make sure the purchaser and seller understand each items and to make sure that all of the costs and credits are correct and paid by the appropriate party. It is not uncommon for a closing statement to be wrong and corrected several time until a final version is approved by all parties. Once the closing statement is approved by both the purchaser and the seller, the attorney will dismiss the seller and go over all the loan documents with the purchaser in details and have the purchaser sign the appropriate documents. Then the closing attorney will over the deed documents to make sure everything is recorded correctly without any typos.

Once the transaction is closed, the attorney will record the new deed with the county and will disburse the funds to seller and seller’s lender once the lender has wired the funds to the attorney’s account.

Closing attorneys’ fees vary but usually end up being between $500 and $800 depending on the attorney.