Selling Your Home? Don’t Lose Money, Time, and Sleep with this Common Mistake
Byline: Brad Pelletier, Esq.
Estimated read time: 3-4 minutes
4 reasons why every seller should use their own attorney at a closing
A real estate transaction can be a complicated process involving many issues, people, and personalities. A property seller should always have individual representation to ensure the transaction goes smoothly and in accordance with the terms of the purchase & sale agreement. Prior to COVID, having a buyer’s attorney prepare property transfer documents (for both buyer and seller) was a long established practice, especially in Rhode Island.
But this shouldn’t be the norm. For nearly 20 years, I have been educating property sellers and their realtors why using the buyer’s attorney for seller document preparation is a bad idea. Here are four reasons:
- An inherent conflict of interest exists
- Sellers could lose thousands of dollars
- No money is saved on attorney’s fees
- Forfeiting a new closing convenience
An Inherent Conflict of Interest Exists
The buyer’s attorney represents the buyer and has a fiduciary duty to the lender (if financing is involved). There is no legal representation to the seller even though the seller is paying a fee for services; therefore, an inherent conflict of interest exists should the closing process get derailed.
For example, there are many issues that can arise in a closing that stall the process. What happens if the Buyer is having financing, appraisal or home inspection issues? Again, the buyer’s attorney will advocate for the buyer and not protect the interest of the seller. I’ve been involved in numerous transactions where there are walkthrough issues and I’ve had to negotiate escrow holdback agreements. If there is only one attorney involved in the transaction, that escrow agreement will benefit the buyer and not the seller.
Sellers Could Lose Thousands of Dollars
A Closing Disclosure (CD) is an accounting worksheet showing an itemization of the credits and debits between the buyer and seller. The last page of the CD will show the bottom-line seller proceeds. When there is only one attorney preparing the CD, there is not a second set of eyes to confirm that all of the figures are correct.
When I represent a seller, I ask for all the CD backups from the closing attorney to confirm accuracy. This includes the municipal lien (tax) certificate, final water and sewer bills, fire tax, real estate commissions, resale certificates, payoffs, oil or propane certificates, etc. Furthermore, depending on the city/town where the property is located, there could be a different accounting year, which would alter the prorations between the parties. I’ve been involved in numerous transactions where the CD was prepared inaccurately and could have caused the sellers to lose money or cost them thousands of dollars due to incorrect adjustments.
No money is truly saved by using the buyer’s attorney
Standard closing costs for a seller’s attorney can range from $500-$1,000 depending on the transaction type. This includes preparing a conveyance deed, residency affidavit, and power of attorney and obtaining a mortgage payoff. Additional fees may apply if the seller is a non-resident, the property is held in a trust or business entity, or a former title holder has passed away and no inheritance tax lien release has been filed.
The buyer’s attorney will still need to prepare these documents in order to transfer the title and will generally charge the seller the same fee, without actually representing the interests of the seller.
Forfeiting a new closing convenience (advance signing)
The days of buyers and sellers meeting at the closing in one large conference room are gone thanks to COVID-19! In a way, this has made the closing process more efficient. The seller’s attorney can meet with the seller well in advance of the closing to sign all documents and deliver them to the buyer’s attorney.
The documents will include a power of attorney that grants his/her attorney to sign “trailing” documents on the seller’s behalf. This process also allows the seller to sign on a date/time that works best for his/her schedule. This means no more taking time out of work to attend a closing when, instead, the seller can focus on packing and moving
However, using the buyer’s attorney essentially forfeits this benefit since a power of attorney cannot be granted. Therefore, the seller would be obligated to take time out of work to sign all necessary documents.
Consider Your Own Representation
Planning to sell? The real estate attorneys at Pelletier Marshall & Clark are ready to help. We help thousands of home sellers every year throughout Rhode Island, Massachusetts, and Connecticut. Contact us for a free, no-pressure consultation about your real estate options.