Q: Your recent article on steps to take before settlement stated that a home buyer has the right to go to any reputable attorney or title company for settlement services. Are title companies legally recognized by the state of Maryland? Is there any significant difference between the services provided by a title company and the services provided by a settlement attorney during settlement?
A: Title companies are legally recognized in Maryldn - although some Maryland lawyers who don't like competition have filed a lawsuit against the title companies. The lawyers maintain that the firms are practicing law without licenses.
Similarly, for years in Virginia, only a lawyer could certify a title search, but this has recently been successfuly challenged by the title industry in Virginia litigation. In the District of Columbia, while the majority of settlments are handled by title companies, lawyers can also perform these services.
The title companies perform valuable services. They search the title of your property, and if they are satisfied with their search, will issue a title insurance policy on which you and your mortgage lender can rely. Additionally, the title companies assist in the many clerical-type functions needed at a settlement, such as obtaining mortgage pay-out information, writing numerous disbursement checks and physically recording the appropriate documents.
Lawyers who conduct settlements also perform all of these same services. However, in my personal opinion, the role of the lawy in the settlement process can (or should) be much more.
Settlement is an adversary process. There are at least four different interests represented at the usual settlement. The buyer is concerned with clear title, and with keeping closing costs down. The buyer is also concerned that the house is in good condition on the date of settlement.
The seller, on the other hand, is principally interested in getting the settlement over with, so that the sale proceeds are available - usually to buy the next house. The lender has a different interest; he wants to be satisfied that all of the legal requirements for making the mortgage loan a first priority lien are met.
And the real estate broker, although legally the agent of the seller, in reality is only concerned with closing the deal and obtaining the sales commission.
Each of these four interests deserve to be specially represented. Usually the lender will take care of himself.
When a settlement takes place in the office of a title company, generally speaking a smooth, competent operation can be expected. But who is representing the buyer?
Who will counsel the buyers about buying owner's title insurance? Who will alert the buyer to some of the small print items in the contract, so as to assure that contract terms have been met? Who will explain exactly what a deed of trust is, for example, and what the law of foreclosure means to a potentially delinquent buyer? Who will explain to the buyer what kinds of restrictions, covenants, or easements go with the property, and what they mean to the purchaser?
To get a better understanding of some of the legal problems that should be explained at settlement, look at paragraph 13 of the standard Maryland sales contract form. It says that: "The property . . . is sold free of encumbrance except as stated herein. Title is to be good of record and merchantable, subject however, to covenants, rights of way, easements, conditions and restrictions of record, if any . . ."
There are many contract provisions that may require legal interpretation. Clearly you can go to a title company, and you can be satisfied that legal title has passed. However, if you want to be truly represented, I strongly recommend having a lawyer assist you.
This does not mean, of course, that all lawyers are competent in the field of real estate. There are too many lawyers who have turned their offices into nothing more than "deed mills," grinding out settlement after settlement.
How do you find a competent attorney? Ask your friends and neighbors, ask your local bank or mortgage lender for some references, and inquire with the bar association in your area.