The closing is the culmination of a real estate transaction, when the property title and payment exchange, and the professionals guiding the transaction get paid for their services. Depending on the state in which your transaction occurs, the closing is conducted by different parties: a real estate attorney versus a title company. Here are the differences.
Attorney Versus Title: Who handles the closing process?
Closing on a real estate transaction is a complex legal and financial process. The aspects include:
- Completing the sales contract, which in most states is a set template set by state law.
- Vetting the title history of the property to determine who owns it or may hold a legal claim, such as a lien for unpaid taxes or vendor work.
- Preparing the deed documents for transfer from seller to buyer.
- Dispersing escrowed funds to receiving parties. The buyer’s down payment is escrowed, and later it and the full funding are paid to the seller at closing. Fees to the attorney and other vendors involved in the sale process will also be paid out.
What are the differences in how a closing is handled?
In states where an attorney-managed closing occurs, the attorney handles all the steps. The state may not require a title insurance policy.
The advantage of an attorney-managed closing is the confidence for both seller and buyer that the legal process has been professionally overseen and is dependable. The disadvantage is that legal fees are higher than in states where a title company handles the closing. If no title policy is issued, any ownership defects found later are more costly to resolve.
In states where a title company manages closings, the process is more expedited. Attorney oversight is reduced, but not eliminated. The title company does a title search and issues title insurance policies to protect the buyer and the new mortgage lender. Most title companies have attorneys whom they pay to vet the documents, but since the forms are usually state-mandated templates, the vetting is less in-depth, and the legal fees are less costly.
Therefore, the advantages of a title company closing are savings in time and money. In contrast, the disadvantage is that reduced attorney involvement means the process does not receive as detailed a legal review.
Related – Real Estate 101: What Does a Title Company Do?
