Boston Real Estate Now, Boston.com's real estate blog, had a post by exclusive buyer agent Rona Fischman about whether a buyer should use his or her own attorney or just use the lender's closing attorney. Below is the post in part.
"Here are the options:
"Why hire a separate attorney?
The attorney represents the lender at closing. Therefore, the attorney is not on the buyer’s side when he/she is reviewing the Settlement Statement. What if there is an overcharge?
The closing attorney makes a commission on title insurance. Can the buyer get a good legal opinion in this situation? Will the attorney be objective in advising the client about whether or not to buy it?
What if there is a different conflict of interest with the lender that only a lawyer would recognize?
"Why use the same attorney?
The buyer can save money by having one attorney do both jobs.
The attorney has no conflicts of interest because the interests of the buyer and the interests of the lender run parallel. They both want clear title, accurate flood zone maps, smoke/CO certificates and such.
The closing attorney is in a better position to solve problems with the lender at closing.
The buyer’s attorney is redundant at closing.
"Some of my buyers do it one way, some do it the other way. Either way has resulted in problems, in some instances.
"Lawyers, what do you think? What do you do, and why?
Buyers, what did you do? Did it work out?"
I commented on the post as follows.
"The [closing] attorney represents the lender at closing." That is all you need to know. Should buyers work directly with listing agents? Of course not. Although the lender and buyer have similar interests, those interests are not always aligned. Just like a listing agent has no obligation to keep what a buyer tells him or her confidential, a closing attorney could tell the lender something confidential he or she heard from a buyer.
"In addition, most closing attorneys have a very close relationship with the mortgage broker/loan officer that referred the business in the first place.
"In my experience, many mortgage professionals will tell borrowers that their closing attorney 'will review the purchase and sale agreement for free.' You get what you pay for. This usually results in a couple of minor changes to the Standard Purchase and Sale Agreement, if any at all. I have heard of situations when the review comes after the parties have signed. That's a real big help!
"A real estate attorney representing a buyer should add a multi-page addendum to the P&S that protects the buyer's rights, interests and deposit. The Standard Purchase and Sale Agreement dramatically favors the seller.
"'The closing attorney is in a better position to solve problems with the lender at closing.' So what? S/he can still do that when the buyer has a personal attorney.
"'Buyers, what did you do? Did it work out?' The problem with this question is that 99.9 percent of buyers who are not real estate lawyers would not know whether their deposit was at risk or whether their loan commitment/rate lock could have expired. Just because those things didn't happen doesn't mean everything with the P&S was fine. It's not what you don't know, it's what you don't know you don't know.
"I am sure that there are many closing attorneys that do an excellent job for buyers, but situations do arise that make it impossible for a closing attorney to effectively represent the buyer and the lender.
"On the other hand, using a lawyer that doesn't do real estate very often might not be a much better situation."
Needless to say, I don't think buyers should use the closing attorney to review the purchase and sale agreement.