November ABODE: Real Estate

You finally find the house you want to buy. Your Realtor draws up a purchase agreement and you’re told you have to get title insurance. This sounds kind of scary, so you ask yourself, “Do I need to hire a real estate attorney?”

For "boilerplate transactions," you can probably just stick with a title company, says attorney Bill Tucker.

First, a little bit about title insurance. “Buying or selling a home is the biggest transaction you’ll ever make,” explains Bill Tucker, senior partner at Tucker Griffin Barnes. “So you want to make sure the title comes without encumberances.” An encumberance is a general term for any cloud on a piece of property, such as easement issues, delinquent taxes, various liens, mineral rights being held by prior owners, a long lost aunt who is actually a co-owner of the property that the seller didn’t disclose or forgot about—all of these things get passed on to the buyer as part of the title if they’re not settled first. The title company assists both buyer and seller in removing defects from the title prior to closing.

A title company performs many of the often complicated and confusing administrative aspects of buying and selling a home. So does a real estate attorney. But an attorney can dispense legal advice and answer legal questions.

“If it’s a boilerplate transaction, then a title company is probably fine,” explains Tucker. Meaning, it might not be necessary to utilize the services of a real estate attorney on top of the title company. “But if language needs to be added to a contract, or if there’s a dispute, an attorney is called to interpret, advise and prepare the related paperwork.”

A good example is the case of a seller who discovered a $40,000 alimony lien on his property. The seller had paid the lien years prior, but the debt release had never been recorded at the courthouse, making it seem like the debt was still outstanding. To make matters worse, the seller’s ex-wife had passed away. The title company was not in a position to help other than to recommend consulting with an attorney, which the seller did.

Disputes over earnest money are another example. Earnest money is a deposit (anywhere from $500 to the sky’s the limit), paid by the buyer and held in a trust account to show they are “earnest” about buying the property. The money usually includes an agreement to perform necessary duties and inspections within a specific time frame. If the buyer doesn’t perform and/or decides she wants her earnest money refunded, an attorney, not the title company, is called to settle the dispute.

A title company usually gets around legal concerns by hiring an attorney or keeping one on retainer. But it’s important to remember that the attorney works for the title company, not you.

Dave Shockley, managing broker with Better Homes and Gardens Real Estate, says that most of his clients end up using a real estate attorney, though his agents are careful not to recommend attorneys over and above title companies. “I advise clients to involve one of them as early in the process as possible.”

Cost is oftentimes the deciding factor —a title company in the Charlottesville area typically charges $275-350 for a routine closing transaction, while an attorney such as Tucker represents a purchaser for $525 and a seller for roughly $625.

If it’s a routine sale, a real estate attorney may not be necessary. Then again, legal glitches tend not to reveal themselves from the outset. Paying a bit more for legal representation from the start may save money and headaches down the road.—Jessie Knadler

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