A few weeks back during our series on “The Five Steps to Home Buying,” we discussed in Step 5 the details of the closing process. Probably the most important player at the closing is the closing attorney, sometimes referred to as the closer or title attorney. The slight variation in description is of relative importance, although for our purposes here we will refer to this person as the closing attorney. The main points of consideration are the actual function of the closing attorney and which party to the transaction is represented by the attorney.
The most important point to remember is, in Georgia, the buyer always has the right to choose the closing attorney. The chosen closing attorney represents the lender in cases where a new loan will be written for the purchase. In cash transactions or cases where a traditional or institutional lender is not involved, the closing attorney represents the parties as stated in the terms of the contract for purchase. Some lenders may also provide a list of approved attorneys from which the buyer can choose. Regardless of the details, you can choose an attorney to represent you even in the case where an attorney is representing the lender and a different attorney is representing the seller.
In most cases of foreclosure or distressed property, the seller—typically a bank—retains their own representation throughout the transaction. That attorney will be the party responsible for reviewing the contracts and closing documents on behalf of the seller. That party will typically cooperate with the buyer’s choice of closing attorney either representing the buyer’s lender or the buyer directly in cases of non-traditional financing. Sometimes you might encounter a situation described above where the seller will insist on using their closing attorney. They may do so as long as all parties agree. As real estate professionals, this is not a practice we recommend. We recommend that our buyers seek their own representation, and of course we can and do offer referrals upon request.
Why is the choice of attorney so important for the buyer? Let’s look at a real life situation:
The buyer has identified a property, written an offer and the offer terms have been accepted. The normal course of action is for the real estate professional to forward the binding agreement to the buyer’s lender and the chosen closing attorney. The lender will order the appraisal and begin drafting the borrower’s loan documentation that will be signed at closing. The attorney will typically order title to the property. This is perhaps the most important fact check that will be conducted during the entire process. The property title is essentially the same as a car title or any other instrument granting a party the right of unencumbered use and enjoyment of property. The difference with property title is, because the land is considered indestructible, the chain of title can be traced back for decades. A property cannot and should not be conveyed by an attorney unless a clear chain of title can be traced—meaning no encumbrances, liens, etc. are attached to the property. There are several methods for searching chain of title. The vast majority of attorneys today use an electronic database of records. Of course, an attorney may choose to research the title by physically visiting the courthouse records room in the county where the property is located. The online search method is sufficient; however, the time period searched is of specific importance. Amee Davis, managing attorney at Davis & Associates in Marietta, says, “Attorneys should search title history for a period dating back a minimum of 30 to 50 years.” A 50-year title search is our preference as real estate professionals. We have experience in situations where the attorney only performed a 10-year title history search or even only go back in the chain of title to the two most recent conveyances. Many attorneys rely only on the issuance of a prior title policy to re-insure a property. While the title insurance policy will protect the new lender and the buyer’s interest in the property, the title insurance company may require a title matter to be resolved prior to a subsequent closing. If this were to occur, the current owner would not be able to convey title to the property until the matter is resolved. This could result in a delayed closing while the situation is corrected.
Exercise your right as a buyer to choose the closing attorney. Make sure you understand who actually clears the title for closing. Is it a paralegal working on behalf of the attorney or is it the attorney herself? Does your attorney come as a recommendation of your real estate professional, or is he the “preferred” attorney of the seller? These are important questions that, left unanswered, could have a negative result for the buyer after closing.
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