Do I need a real estate attorney to close on a home?
We're closing on a house at the end of August. How do I know if I need a real estate attorney, or are my real estate agent and title company enough?

Highlights and [bracketed comments] added

Stevie K. Bear, Presidio Group Realtors: A real estate contract is a legal document, which generally comes with financial obligations and repercussions for the principals involved, and perhaps others. Hence it deserves a fair amount of respect and the handling of professionals who specialize in the type of real estate being transacted, such as a real estate agents or attorneys.

According to the National Association of Realtors, most residential real estate transactions are closed without the formal involvement of an attorney representing any of the principals. Title companies still tend to close significantly more transactions than attorneys' offices, though the documents that the title company prepares to securely transfer title from one principal to another are always reviewed by an attorney associated with the closing title company, and both the attorney and title company [are supposed to] act as neutral parties in all the proceedings. This means they are not your attorney, and your real estate agent is never to be mistaken for an attorney, either.

A real estate contract represents a significant obligation for a buyer or a seller. Your real estate agent has a fiduciary duty to take care of you. However, if you need that extra peace of mind from using a real estate attorney, an ounce of prevention is worth a pound of cure.

[HOT: Buying a new home is significantly more risky than buying a used home. That's because TREC (Texas Real Estate Commission) requires sellers to use standardized contracts when reselling existing homes but allows you and your attorney to negotiate terms and cross out sections of the standard contracts. That contrasts with builders selling new homes. The builders are free to use their own contracts and often get them through membership in TAB (Texas Association of Builders).]

Leon J. Barish, attorney at law-mediator: As a real estate attorney, I also have my biases. Getting an attorney involved in the transaction can almost never have any downside to it (other than the payment of the attorney's fees), while failing to engage an attorney could.

Here are the stages in buying a home:

1. Submitting a contract and getting it signed by all parties; [HOT: This is often where the legal rights of both parties are defined, and builder-written contracts always protect the builder's interest, including forced binding arbitration should any dispute arise. Many buyers find that dream home while driving around and looking at neighborhods over the weekend. Too many sign the sales contract without legal representation.]
2. Arranging for financing;
3. Reviewing the title commitment for any problems with title to the property; and
4. Closing. [HOT: You'll be be asked to sign dozens of complex legal documents at closing with little time to review them, so having your attorney review them ahead of time is a good idea.]

Most real estate agents can handle the contract part flawlessly, although there are some parts of the TREC (Texas Real Estate Commission contract) that I automatically delete for a buyer that a real estate agent probably would not. Since real estate agents are not lawyers, agents are reluctant to mess with the forms by making a deletion. I have a client involved in very expensive litigation because their real estate agent did not delete the specific performance clause in the default paragraph, and the seller is suing the buyer to force them to buy a home for which they could not get financing. If the client had an attorney review the contract before it was submitted, chances are these mistakes would have been caught and they would not be in litigation now. This example is rare, but it does happen.

Likewise, most real estate agents can assist their clients with the financing by referring them to at least two reputable mortgage brokers. An attorney usually isn't necessary here unless the buyer is unable to secure financing and then attempts to terminate the contract.

The third area involving title to the property is probably the most important for an attorney to be involved. Having an attorney review the title commitment is not time-consuming or very expensive and is a good investment. Given the purchase of a home at a cost of $200,000 or more, spending $200 for an attorney to "bless" the commitment is an easy decision.

Having an attorney involved in the closing is usually not necessary, but I do have clients who ask me to review the closing papers from the lender and title company. Usually, I don't catch any errors, but on occasion I do, usually in the closing statement prepared by the title company.

[HOT: In Texas you may also want your attorney at the closing, because at least one document may not be presented to you until that time. Builders often offload their warranty responsibilities by presenting you with a "gift" - a prepaid home warranty insurance policy. But many of those warranties are illusory and full of exclusions. Others include clauses that force buyers into binding arbitration in the case of disputes - not only disputes with the warranty company but also disputes with the builder. That may be why most closings are scheduled late in the day and often on a Friday - so you are less inclined to keep everyone waiting while you take time to read the policy. This advice is expecially important when dealing with large and vertically integrated volume builders that own finance companies and offer mortgage, title and insurance services.]

In summary, most buyers would spend about $200 to $400 to have an attorney take a look at the contract as prepared by the real estate agent before it's submitted, review the title commitment and review the closing documents. Again, given the financial investment being made by the buyer, adding $200 to $400 to the cost of the transaction seems to me very little to spend for a lot of peace of mind about the transaction.

Do you have a question to ask a real estate agent? Submit it to Nicole Villalpando, nvillalpando@statesman.com.

 Ask an Agent column by Nicole Villalpando, 7/19/2009
Source: http://www.statesman.com/search/content/business/stories/statesmanhomes/2009/07/19/0719ask.html

READER COMMENTS:

Mr. M wrote:
Good Advice in general. However a real estate attorney may not be an expert in spotting improper fees and yield spread premiums being hidden into a loan and not properly disclosed and are material violations of Truth In Lending Act (TILA). Hidden fees and costs may be hard to audit without some computer software that calculates the difference between the stated APR and the actual APR. The lawyer reviewing closing docs needs to know what to look for and this area of law is more of a consumer protection attorney not real estate. In addition, by law all closing docs must be provided well in advance of closing for proper review and not at the time of closing.

OldBlowhard wrote:
Whether you're buying or selling Texas real estate, borrowing or lending, you're likely to end up somebody's dessert. That's 200% true in this area. If there's any real $$$ riding on the deal, the other side will have a lawyer. Count on it. I agree emphatically with the article's implication that HOME buyers should have their own lawyers. The market has shifted. Buyers with $$$ are totally in the driver's seat. A good lawyer can get in the faces of the sellers, real estate brokers, and mortgage lenders to demand concessions, insist that the buyer will walk the deal if the demands aren't met.

Bill wrote:
OldBlowHard: I agree that folks come out of the woodwork and from under dark places at closing with their hands out. Unless you have to absolutely have to sell your house, a 'buyer' can demand anything they want until they're blue in the face... doesn't mean they'll get jack. When selling a property some time ago, we had a prospective buyer making all sorts of unreasonable demands (not requests, demands!), We had a face-to-face meeting regarding what these 'people' (they were yankees from NYC), felt they were entitled to. Everytime they listed one of their demands in order to buy the property, I upped the price $1K bucks. Long and short, it became absurd. with them turning all sorts of the color purple in apoplexy... gawd, were they obnoxious. Hope they went back east...