Real Estate Transactions
Attorney or Title Company?Real Estate Transactions
Residential real estate transactions, including home purchases, sales and refinances, are the largest financial transactions that many people experience in their lifetime. When purchasing or refinancing property, one is often faced with a variety of mortgage loans – 15, 20, or 30 year terms, fixed or adjustable rates, negative amortization, etc.- not to mention the interplay between the interest rate itself and any associated origination or discount fees tied to it. Few borrowers understand the difference between these mortgage options and their associated legal implications. This has been shown to be particularly true in the current financial chaos and wave of foreclosures caused by the sub-prime lending meltdown and resulting financial problems of many of our nation’s largest banks and mortgage companies.
A standard mortgage transaction involves numerous complicated legal documents which are typically read and signed within a relatively short period of time and which are drafted to protect the Lender. While your Lender may have advised you of the basics of your loan, you never know the true details until you review the actual documents or have them explained to you by a knowledgeable attorney. As noted by Elizabeth Warren, formerly Chairperson of the Congressional Oversight Panel, “Mortgage lenders furnish reams of unreadable documents shortly before closing, often leaving people with no practical option but to take whatever terms the lender has filled in”. According to former Fed Chairman Ben Bernanke, “Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances”.
While there are two sides to the attorney-title company debate over which is preferable to handle your residential real estate transaction, understand that title companies are not qualified nor permitted under Virginia law to provide legal advice or answer your questions about the documents you will be required to sign at closing, nor can they prepare legal documents for your transaction such as deeds, deeds of trust or promissory notes unless they employ an in-house attorney who is properly licensed by the State of Virginia. Unless such an attorney is with you at closing, a title company cannot answer your questions about the legal implications of your mortgage documents. Title companies typically contract preparation of legal documents to outside attorneys with whom you will have little to no contact.
Many lenders will attempt to steer you to title companies in which they have an ownership interest as it increases their profit margins. They may imply that your loan approval might be looked upon more favorably if you use “their” title company but you always have a right to select a closing attorney of your choice who is going be able to answer your legal questions and look out for your best interests, rather than someone else’s.