What Is A Real Estate Attorney and When Should You Retain One?
There are often questions surrounding Real Estate Attorneys. What do they do? Is it worth it to hire one? How do they get paid? In this blog, we will discuss:
What a Real Estate Attorney is
When you should retain a Real Estate Attorney
What the advantages of a Real Estate Attorney is for both the buyer and seller
What the fees are and when those fees are paid
What is a Real Estate Attorney?
A real estate attorney is a licensed professional in their respective state. Some may only be licensed as attorneys, but some are also licensed as title insurance agents. These attorneys often have important knowledge and expertise to advise their clients in a residential real estate transaction, which is the focus of this blog. Oftentimes, a real estate attorney is buried in paperwork related to the real estate transaction. It’s their job to review the paperwork to ensure a smooth transaction. For the purchase/sale of real estate, a real estate attorney’s work is often related to items such as deed preparation, title searches, mortgage/lien searches and payoffs, escrow services, and anything the buyer/seller or their realtor may need.
When should I retain a Real Estate Attorney?
As for when you should retain a real estate attorney, that is a tougher question to answer. In some states, you are under no requirement to utilize an attorney. Currently, Illinois is one of those states that does not require an attorney on each real estate transaction (aside from deed preparation). In other states, such as Kentucky, an attorney must be utilized on every real estate transaction (these are called “attorney closing states”). If you are going to utilize an attorney on a real estate transaction, it is better to do so as soon as possible. Here are a couple scenarios for when you should consider an attorney:
If you are selling a home “For Sale By Owner”, you should hire an attorney whenever you start receiving offers from potential buyers. An attorney can prepare the purchase and sale agreement for real estate in addition to handling escrow services.
If you are utilizing a realtor on your transaction, a realtor will likely help guide you through (and prepare) your purchase/sale agreement. Around the time that the agreement has been signed, you will need to decide where closing should take place. At this time, it is recommended to reach out to an attorney in the form of a closing/title insurance agent. At Hampleman Law, LLC, we are able to provide an attorney on every transaction at no extra charge to you. The attorney will be able to review title to the property, prepare the title commitment and settlement statement, and correct any issues that may arise related to the transaction.
Outside of a traditional purchase/sale transaction, attorneys are often involved in boundary disputes and foreclosures. If you are involved in one of these scenarios, it is highly recommended to retain an attorney as soon as possible. Failure to do so could result in the forfeiture of important legal rights. Unfortunately, not everyone can afford an attorney. If this is the case, it is recommended to reach out to a public legal aid office such as Land of Lincoln Legal Aid in Illinois.
What Are the Advantages For a Buyer and a Seller?
Your real estate attorney will make sure that the deal is fair to you and potentially save you money.
In Illinois, realtor contracts are typically forms provided by the local board of realtors. These forms usually contain a clause allowing 5 days for modifications to the contract. Your attorney will advocate for you to ensure that the transaction is fair and no modifications are necessary.
Real estate attorneys will likely decrease the likelihood of a deal falling through.
Sometimes in a real estate transaction, one side will turn a problem from a molehill into a mountain. This is where the attorney steps in to come to an amicable resolution between the parties. Another common pitfall in residential transactions relates to deadlines. By ensuring an attorney is on top of everything, you can have the peace of mind in knowing that your transaction is going to close.
Real estate attorneys will likely decrease the likelihood of post-closing litigation.
Surprisingly, no one (sometimes including attorneys) wants to go to court. By engaging an attorney to draft/review your documents, the likelihood for future litigation is much lower. This is because these items are likely to be discovered before closing, meaning they can be resolved quicker to ensure a smooth transaction.
What Are the Fees and When Are They Paid?
With regards to foreclosures and boundary disputes, most of the time an attorney is going to operate on a retainer fee basis. This means that you will pay a retainer (likely $1,000 or more) to an attorney. The attorney HAS NOT earned the fee yet, they must hold it in their trust account and withdraw the funds as they’re earned. In these cases, it is truly impossible to estimate how much fees someone can expect. Some cases are simple and can cost as low as $1,000, but some can cost as much as, if not more than, $10,000.
With regards to a traditional, residential real estate transaction, the seller will likely never have to pay any costs out of pocket. Most of the time, these fees are laid out on the settlement statement and seller’s closing disclosure form well in advance of closing. This way, the Seller knows exactly how much they should expect to walk away with at the end of the transaction. The same can be said for the buyer, however, they oftentimes WILL have to pay some costs out of pocket. These costs are known as “Cash to Close” and are laid out to the Buyer (at least) three days before closing in accordance with TRID (TILA-RESPA Integrated Disclosures) laws.
Typically, the fees that you’ll see on a settlement statement include fees for: owner’s title insurance policy, lender’s title insurance policy, title search fees, loan fees (if a lender is involved), and miscellaneous closing fees (copy fees, download fees, recording fees, etc.). As a rule of thumb, these fees are usually roughly anywhere from $850.00 to $2,000.00 or 1% of the total purchase price.
To conclude, real estate attorneys should be utilized whenever available. While some title companies will assure you that an attorney, failure to do so could leave you with major headaches post-closing. Therefore, we highly recommend finding an attorney that can also handle title services, such as Hampleman Law, LLC.
While some real estate attorneys hold their fees close to their heart, we are the opposite at Hampleman Law, LLC. If you’re considering us for a real estate closing, reach out to our office for our fee schedule. We pride ourselves on providing quality results with honest billing. Any other questions about a real estate transaction? Feel free to contact us!