Having received a couple of responses to my post of yesterday, I thought that I would take a stab at discussing them.
Every state regulates real estate closings in some form. Part of the beauty of the federal system in which we live is that each jurisdiction can choose solutions to local issues that seem to fit that state. I will be up front - I am an attorney and practice real estate law. I conduct closings for both residential and commercial property and have a construction litigation practice as well. Much of my income is derived from closing real estate transactions. I am a title insurance agent as well. When I close a transaction, I earn a commission on the sale of the title policies.
Now that the full disclosure is done, more about attorney closing states and title company states -
I suppose that the practice developed in Georgia over time that real estate closings came to be considered the practice of law. The practice of law in Georgia is regulated by two sources - statutes passed by the Georgia General Assembly and rulings and regulations from the Georgia Supreme Court. The Georgia Supreme Court regulates the practice of law under its powers derived from that State Constitution delegated to the judicial branch. Its authority is based on the principal of the separation of powers.
Exactly what constitutes the practice of law can get a little fuzzy because of the nature of the judicial process of handing down opinions on specific fact patterns. This process is common in all states and in the federal courts, and is part of the common law tradition we inherited from Great Britain.
Over the last several years, various scenarios surrounding real estate closings have arisen and been brought before the Georgia Supreme Court for rulings on how these issues should be handled in Georgia. What has developed is a body of law that provides a legal framework in which lawyers have the exclusive franchise to close real estate transactions in Georgia. The Real Property Law Section of the State Bar of Georgia has more members than any other.
Economics being what they are, and the business climate in which we operate have put tremendous downward pressure on attorney fees and closing costs for closings. The large number of closing attorneys chasing far fewer closings has resulted in lower closing costs for consumers. There was a time thirty years ago when it was common for the attorney fee to equal one percent of the loan amount. Those days are long gone.
I do not necessarily agree that people - buyers and sellers of residential real estate - have little or no need for legal advice when buying or selling a home. Contrary to conventional wisdom, residential real estate transactions are complicated, and the best of intentions often result in unintended adverse consequences for the parties. This is especially true where real estate agents are not involved in the transaction -
The New York system where every party to the closing is represented insures that the legal interests of all parties are reviewed by an attorney. This minimizes the possibility that one of the parties will be at a disadvantage for lack of information or experience relevant to these kinds of transactions. My belief is that there is probably a lot less post closing real estate related litigation there than in jurisdictions where attorneys are not involved on the front end of the deal in any significant degree.
Having said that, other states choose to allow non-lawyer entities to close real estate transactions. In those jurisdictions, the large title insurance companies have direct operations that compete with smaller settlement services vendors. California, Texas, Florida and Colorado all immediately come to mind. There, some state department makes sure that these companies are properly vetted and have sufficient insurance to take care of errors and ommissions that inevitably occur in real estate deals.
In those states where attorneys are involved in the closing of real estate, it means that consumers do have immediate access to information and answers to questions that they may have about this significant purchase. I am not sure that a notary whose sole function is to properly identify the borrower and or seller and to insure that all documents are properly signed can competently provide that kind of information.
Real estate agents do have training in issues surrounding the negotiation of the contract and experience in marketing and finding the right properties for their buyers and sellers. However, giving advice about various legal issues involved in this process is not their job. They are there to put the deal together and to provide their expertise about local market conditions so that buyers and sellers have the advantage of that information. A large part of my practice (provided in large part for free) is giving advice to agents that refer closings to me. It is part of the larger duty to the public that I believe real estate attorneys have as part of their license to practice law. Helping people with their real estate problems is an important part of that practice - it is not just about how many closings you can line up in the reception area.
Anyway - there is no one solution that fits all states. My intention in the original post was simply to make people aware that Georgia is one of those states in which closing a real estate transaction - with very limited exceptions - without an attorney is a crime. It is probably a lot like speeding though I will spare you that novel!
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