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Source of Title Blog

Clearly... I'm Not Charging Enough.
by Robert Franco | 2010/07/21 |

I recently read an article on HeraldNet entitled Real Estate Attorneys Worth the Expense.  As a real estate attorney, I naturally like to read things like that.  Having been in the title business for many years before going to law school, I am left with the impression that nobody believes they need an attorney in a real estate transaction.  Though the article makes a good point... something really caught my attention and made my jaw drop.

Source of Title Blog ::

The article began with a question about how to approach a transaction without a Realtor.  "Are there individuals who will, for a fee, direct us through the needed paperwork and legal steps?"

The tone of the article started out rather well...

Answer: Yes, there are professionals who will handle the paperwork and legal steps in a real estate transaction, namely lawyers.

That may seem obvious, but you’d be surprised how many home buyers and sellers fail to seek legal advice in real estate deals involving hundreds of thousands of dollars.

When buyers are struggling to scrape together the cash to cover the down payment and closing costs for the purchase of a home, they hate to spend an extra couple of hundred dollars on legal fees. But in my opinion, that is money well spent — especially when you don’t have a real estate agent to represent your interests.

This was written by a real estate broker, and so far, so good... right?  Then, this:

As a licensed real estate broker, I have occasionally helped my mortgage clients by drawing up a purchase and sale contract for them at a nominal fee when they were buying a home directly from the owner. In those cases, I was simply acting as a facilitator and not representing either party. The advantage is that I am using all the latest multiple listing association forms which are constantly reviewed and updated by lawyers, so the buyer and seller each have some level of legal protection. You may be able to find a local real estate agent who is willing to do this for you, but don’t pay thousands of dollars for this service. For example, I typically charge $1,000 to write up a purchase and sale agreement between a home seller and buyer after they have verbally agreed on the terms, and that fee is usually split 50/50 between the buyer and seller.

This is where my jaw dropped.  He starts by saying that people "hate to spend an extra couple of hundred dollars on legal fees."  Okay... I get that.  It wasn't much of a surprise.  But then he proceeds to say that he charges $1,000 to fill out a form!  Wow! 

First, I need to comment on another matter he raised, then I'll get back to the price.  He said that he uses the "latest multiple listing association forms, so the buyer and seller each have some level of legal protection."  In my opinion that isn't worth much (let alone, $1,000).  Forms are great (as a starting point), but they are one-size-fits-all and not everyone is the same size, so to speak.  A form isn't worth much, if you don't understand it and you don't customize it to fit each particular situation.  And, if you make changes to the form, you are providing legal services. 

Okay... that said, let's get back to the price.  I was shocked that someone would charge $1,000 to fill out a form.  And even more surprised that someone would pay that much for such a service. 

I have prepared sales contracts for individuals who were entering a real estate sale without a Realtor.  I typically charge $350 and I actually draft the Purchase Agreement... I don't use a stock form.  Furthermore, I advise my clients about the required disclosures and liability aspects of the deal.  For that fee, I also include the Inspection Addendum to the Purchase Agreement, the Lead Based Paint Disclosure Statement, the HUD Lead Paint Disclosure and Brochure, and the Ohio Residential Property Disclosure.  And... for another $50, I'll even prepare the deed!

Maybe I'm selling myself short, but if I charged $1,000, even for all that I provide, I would not be able to sleep at night.  Maybe this guy is in a more affluent area of the country than I am... maybe the cost of living is higher and, like all things, it just costs more.  But I still have to say that $1,000 to fill out a form sounds out of line to me. 

But... at least he is honest about it...

However, I still think that you are better off hiring a real estate attorney because for roughly the same amount of money you would be able to get some legal advice to protect your interests rather than just hiring somebody to fill out the forms for you.

Maybe I'm just off the mark on what such services cost these days... who knows.  But, in any regard, I am pleased to see someone writing about the value of a real estate attorney in a land sale transaction.  All too often, people forego legal advice in the single largest investment most of them will ever make. 

I'm reminded of one of my early blogs, A Simple Transaction, in which a judge pointed out the complexity of real estate transactions and expressed surprise that lawyers aren't involved in them anymore.

Apparently someone has taken the advice of Dick the Butcher in Shakespeare's Henry VI, Part II and "kill(ed) all the lawyers." Nowhere in this transaction does there appear to be the participation of any lawyers... At one time a real estate transaction consisted of a deed, a note and a mortgage; took about fifteen minutes to complete; and had the participation of an attorney for all parties to the transaction. The last time the Court checked, we were still in the City of New York where people do not even verify the score of the Yankee game without consulting counsel, and yet, lawyers have effectively been eliminated from real estate closings involving the refinance of mortgages and secondary loans, including home equity lines of credit. One could conclude therefore that these transactions have no legal implications. That, however, would be far from the truth. The borrowing of money secured by a mortgage is often a complex transaction with serious legal implications for all of the parties involved, especially the borrowers who are pledging their home as security.

I do believe that it is a good idea to have legal representation at any real estate closing.  The transactions and paperwork have gotten more complex and significant legal rights are at issue.  

Robert A. Franco
SOURCE OF TITLE




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Categories: Attorneys

1542 words | 1974 views | 8 comments | log in or register to post a comment


Clearly... I'm Not Charging Enough.

Robert:

 He collected $1,ooo.oo for the preperation of real Estate Documents.Here in New York that would constitute the Practice of Law  without a Liscenes.

 
by Sal Turano | 2010/07/22 | log in or register to post a reply

Representation

Who tells a buyer they don't NEED a lawyer so they can save a few dollars? The Real Estate agent who is collecting a commission from 3% to 6% of the purchase price. The Mortgage broker whose fees will likely exceed 3% of the purchase price. The Title agent whose fees are somewhere between 1% and 2% of the purchase price. In New Jersey lawyers generally charge less than 1/2 of 1%. A portion of the Lawyer's fee is for the adminstrative tasks involved in a settlement. If a buyer doesn't hire a lawyer he/she pays an additional fee to the title/settlement agent for those services. The net savings to the buyer when he/she does not hire a lawyer are minimal. The actual exposure is extraordinary. The buyer should be wary of any settlement provider, Mortgage lender or real esate agent that advises them against hiring counsel when they have their hand in the buyer's pocket. 

 
by Richard Scott | 2010/07/22 | log in or register to post a reply

Law w/o license.

That's practicing law w/o a license. Great piece, but someone needs to contact the State's A.G.'s office.  Encroachment of the R.E. firm in to the areas of title insurance and property/contract's law is a bad harbinger of things to come.   Any real estate broker who thinks they can "Walmart"  title work and property law work (let alone the art of the contract) needs to spend an afternoon or two, under deadline, examining and underwriting a large commercial tract.  I hate real estate brokers; it's irrational, but it's how I feel.  They'd be much better off and stand to make a lot more money if they'd stick to the art of the deal and then cede control of the rest of the transaction to other professionals (mortgage brokers, tilte companies, lawyers, surveyors, appraisers, home inspectors etc.)  Make no mistake, the large real estate firms want one stop shopping for all these services INCLUDING LEGAL WORK.     Lawyers beware.  

 

 
by Vincent Racaniello | 2010/07/23 | log in or register to post a reply

I took the liberty

Robert,

I was so impressed by this article that I took the liberty of excerpting some of this great information for a blog I wrote at ActiveRain.  I did of course give you full credit for your work-

I read an interesting article today at Source of Title written by Robert Franco.  Mr. Franco brings up a very good point, one that I think most Realtors don't consider when trying to help a friend or family member in a FSBO transaction.

I have seen, in my role as a title agent, situations where the Realtor has provided a blank contract of sale as well as the necessary addendum for lead paint, FHA financing, etc. One would assume that the Realtor probably reviewed the contract with at least one of the parties to the transaction.  

As excerpted from Mr. Franco's blog, he quotes a Realtor:..........

Thank you for this information. I know that I will share it will all of my contacts. I can honestly say that I really never gave this a thought as it relates to "practicing law".

 
by CHARLENE PERRY | 2010/07/23 | log in or register to post a reply

Thank you, Charlene...

I'm glad you enjoyed the blog.  With regard to filling out a standard Board of Realtor's purchase agreement, it is probably not the "practice of law."  There have been several cases that have held that it is not the practice of law to fill in blanks on a pre-printed form, such as this.  But, if they go further than merely filling in blanks, I believe that a line would be crossed.

Here, it wasn't so much that this broker filled out the form that I had an issue with.  It was with the $1,000 fee.  Personally, I believe that the standard contact in my county is terrible.  I would never advise a client to use it... I would much rather draft a purchase agreement that I believe better protects their interests.  But, I have seen some standard purchase agreements that were much better than the one used around here.  I think that is where the legal advice becomes important - recognizing the shortcomings of the forms and addressing them on behalf of a client.  That advice is worth something, unlike the form-filling service mentioned in the blog.

Best,
Robert A. Franco
SOURCE OF TITLE

 
by Robert Franco | 2010/07/23 | log in or register to post a reply

I agree fully

The fact that they assist with filling out the standard "fill in the blank" form is not problematic, but I often see these forms with cross outs of entire paragraphs, altered words and so on. That to me is more the problem. As stated once they make changes they have effectively given "legal advice". Too, charging a fee for this service presents a few questions in my mind.  Are they being paid to render legal advice, are they collecting a "commission" and if so do they owe any portion of that commission to their broker, if they are not the broker of record in their office?  Perhaps I am overthinking it. 

Hope you have a great weekend and thanks for allowing me to "steal" from you.

Regards,

Charlene

 
by CHARLENE PERRY | 2010/07/23 | log in or register to post a reply

Could Attorney's have saved us?

Great post Robert!

To me this raises another question, if attorney's had still be part of the marjority of purchase and refinance transaction in the last 10 years, would they have put the breaks on the decisions of millions of consumers who got into loans they couldn't afford, with terms that were not beneficial.  Would they have stopped people from extracting every last dollar of equity, repeatedly, to pay off credit cards?  In short, would the subprime and subsequent crashes ever had happened or happened as severely if attorney's had be part of the equations?

I've lost count of how many times I've been sitting at the closing table as a title agent and thought to myself, what are these people doing - whether the loan terms were lousy, the fees were too high, or they were refinancing for the third time three years, but since I'm not attorney and nothing I saw was actually illegal, I couldn't say anything because it would be practicing law without a license - not to mention bad for business.

On the other hand, the few times I have seen an attorney involved in a "standard" residential transaction - the type were today they usually would not be, it was generally painfully obvious that they were not very experienced in real estate - questioning things that they should not have been questioning, or causing everyone else headaches because they were trying to look like they were earning their keep when in fact everything in the deal was good and there really wasn't anything else they needed to be questioning.

 
by Cheryl Hartzman | 2010/07/26 | log in or register to post a reply

Could Attorneys Have Saved Us

I, for one, have told Borrowers they were getting "ripped-off" by a lender charging too much on fees, etc., for  a refinance WITH THE SAME LENDER holding the existing mortgage.  In one case in particular, the Borrowers were able to save over $2,000 in lender fees and related closing costs by going to a different lender.  By the time you amortize that $2,000 over the life of the loan, it's probably more like $5,000 saved.

Of course, on the other hand, I did all the work for the refinance closing (title exam, closing, etc.) but because the borrowers recinded the loan within the 3-day period, I never got paid for that first closing, although they did do the second closing (with greatly reduced lender fees) with my office.  In essence, I did TWO closings for one fee - not too smart on my part, but at least I sleep well at night.

 

 

 
by Larry Ford | 2010/07/26 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

 

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