Anyone buying or selling a residence in Florida should employ a real estate settlement lawyer. It’s tempting, but wrong, to think that the title company can adequately represent the interests of the buyers or sellers. The roles of the Florida estate lawyer and the title company are different – even though they often work together. Both the lawyer and title company protect the interests of buyers in different ways. Real estate lawyers are advocates for their clients. Title companies are not advocates. Real estate attorneys fight to protect you. Title companies don’t explain your rights and duties. The title company does not resolve disputes.
Lawyers and the title company handle different types of Florida home sales including single-homes, townhouses, duplexes, condos, and other residences. According to BizJournals, the median price of a South Florida home sale in December 2017 was $340,000. Statewide, the median sale price was $244,185. This means buying or selling a home is likely the biggest transaction you’ll make.
The Role of the Title Company
Generally, the buyer hires a title company to inspect any existing or likely legal claims against the property. Usually, a mortgage company will require that the buyer obtain title insurance to get the loan.
The goal of the title company is to avoid the possibility that, after the settlement, someone will claim against the property. Along with hiring the title company, the buyer usually buys title insurance. The insurance aims to protect the buyer in case the title company misses a possible claim – while doing its investigation. An example of a missing problem is a claim by heirs to the property that were never resolved. Fraud is another problem that can be hard to detect. There are many other examples of why title insurance is a must.
The title search
The title company begins its investigation by examining the court records to determine how the property first come into existence. The search then, generally, traces all the owners and sales from the time the home was built until the current time. In the past, examining these records required a hand by hand check of all the recorded deeds, mortgages, and other written claims. More recently, courts use computers to record transactions.
Another part of the search is to check whether there are any legal claims against the current owners, the sellers. Existing claims can include:
- Judgment. A legal entitlement to money
- A lien. A right to sell the house in return for money owed
- Bankruptcy filings. Some sellers who can’t pay their bills file bankruptcy to try to save their home from foreclosure
- A full history of any mortgages. The first mortgage is usually filed when the buyer purchases the property. After the purchase, many homeowners obtain second, third, and junior mortgages. These mortgages need to be checked for their current status.
- Unpaid taxes and assessments. These include federal, state, and local taxes and assessments.
- Any other demand against the property such as a line of credit
The title search also includes looking for any lease agreements. The search looks for any easements or rights to enter the property. Utility companies usually have the right, by an easement, to enter homes to make necessary repairs.
The title company will hire someone to survey the property so the boundary lines are clear and match what’s in the deed.
The title company at settlement
After the title search, the title company will prepare a report of all known legal issues that could affect the title. It lists current and potential problems. The report is given to your real estate closing lawyer before settlement.
At settlement, the title company reviews the items on the report. It works with the sellers and buyers to clarify open problems in the report.
The title company then usually sends a title clerk to settlement who handles the funds and prepares a settlement sheet. The settlement sheet summarizes the sales price, the loans, taxes due, bills dues, closing costs, down payments, legal fees, and all money that must be paid. After the settlement figures are approved, the title clerk distributes the checks to everyone and the keys to the new home to the buyer. After settlement, the title company records all the appropriate paperwork with the court.
The role of the real estate closing attorney
Much of the work an experienced real estate lawyer does take place before settlement including reviewing the sales agreement and mortgage terms. The lawyer addresses any problems that could affect the settlement. Some of the issues he handles include:
- Reviewing every item on the title report. For example, the lawyer may get payoff statements for a seller’s creditors so it’s clear what the creditor should be paid. The most typical creditor is the first mortgage holder. The lawyer works to investigate any other open claims on the title report
- Resolving repair disputes. Buyers and sellers sometimes disagree on what repairs are needed to meet the building codes or the terms of the purchase agreement. The lawyers work to settle what work still needs to be done and how it will be paid for. In disputes, sometimes funds are placed in escrow to cover the cost of repairs.
- Reviewing the legal paperwork. Buyers need to sign the mortgage papers, RESPA (Real Estate Settlement Procedures Act) papers, and many other legal documents. The lawyer should explain what each document means and go over each paragraph of the document so the client knows, in plain English, what he/she is signing. Sometimes, the lawyer negotiates adjustments to the documents. Legal documents also include the deeds themselves.
- Resolving any other disputes. Disputes can arise in different ways. For example, if the heirs are selling their father’s or mother’s property, the heirs may not agree on how to handle the sale.
The Florida attorney then follows through to make sure the title company filed the right papers with the right court office.