Those buying a home using a mortgage always have some legal protection. Real estate closings in the eastern U.S. usually require an attorney, who represents the mortgage lender, but also protects the person(s) buying a house. Throughout the western hemisphere of the U.S., escrow and title companies typically manage closings, protecting both mortgage lender and buyer. Let's not forget about the seller, however.
Reasons Sellers Don't Need an Attorney
Sellers agree to accept a buyer's offer and execute a legal contract (purchase and sale agreement). Most buyers get a mortgage loan to complete the purchase of the property. Usually, the mortgage lender has much more money at risk than does the buyer.
The combination of the mortgage lender's desire to protect their "investment" and the federal and local regulations that control their operations, they employ in-house or outside counsel to prepare all documents (loan notes, disclosures, federal settlement statements, deeds, mortgages, and all locally-required additional material).
This detailed buyer protection also offers similar "insurance" to sellers. They typically need not worry about receiving the total agreed price when selling a home. The closing attorney or escrow company, representing the mortgage lender, collects the buyer's funds (personal and mortgage loan funds) and disburses them to all appropriate parties.
Reasons Sellers Should Have a Lawyer
While a house seller has a straightforward, relatively simple role in a real estate closing compared to a buyer, mistakes can happen. The risk to a seller could spell financial disaster should the closing professional, whether attorney or escrow company, make a critical error.
A seller's attorney can read and review those documents that pertain to them, particularly deeds and evidence of buyer's funds. Although sellers do not have rights to examine a buyer's sensitive financial information, they must ensure that sufficient purchaser and mortgage lender funds are present to complete the transaction.
Documentary problems, particularly if related to deeds, mortgages, and loan notes, could delay disbursement of seller's funds. The problems that could arise are serious. Sellers need money to complete purchases of new homes, current seller mortgages must be paid off and liens released before a buyer can record their ownership, and mortgage lenders cannot effectively record their new lien if some closing documents are incorrect. A dangerous chain reaction or perfect storm of trouble can occur.
The Bottom Line
Unless a seller is dealing with a cash buyer, those few purchasers who do not need a mortgage loan, the question of the need for a lawyer is still debated. A seller dealing with a cash buyer should always have a lawyer to protect themselves.
However, in most home sales, the question is more an issue of personal preference. Should sellers be more comfortable having legal representation, they should have an attorney, at least to review all closing documents that pertain directly to the seller. Most often, sellers receive the indirect protection they need from mortgage lenders to ensure their loans and liens are correctly documented and recorded.
William Pirraglia - For over 30 years, Bill served in senior executive positions in the banking industry, including over 16 years as a CEO. In 2005, he bid ...
