When you’re in the process of buying or selling a home, you need a team of professionals to manage the purchase contracts and disburse the funds between parties. But, when contemplating the differences between a real estate attorney vs Title Company- which of the two is best for this purpose?
In this article, I’ll shine a light on what title agents and real estate attorneys do when it comes to real estate transactions. By the end you’ll have a clearer picture of whether a title company or a real estate attorney is the right choice for you. It’s important to mention that as a Utah agent, I’m only familiar with laws in my state. While this article does help break down the differences between title companies and attorneys, it’s always a good idea to familiarize yourself with your state laws before you make a decision.
If we haven’t met yet, my name is Janice Thomas and I’m a realtor in northern Utah. The real estate industry, including your local market, is an ever-changing landscape. Every sale and every purchase is exciting and a testament to someone’s goal being reached (see what I did there?…#homegoals. As real estate agents, it’s our job to decode the market’s trends, and explain, and execute the legalities of the transaction. As an agent, I have a fiduciary duty to keep your best interest at the forefront. A large portion of my job is to advise you on who is best to help you navigate each step of the closing process.
Understanding Real Estate Transactions
Navigating a real estate transaction is exciting, but it can also be complex. Your real estate agent should be at the center of it helping guide you through listings, showings, negotiations, and paperwork. As realtors wear many hats! We’re marketers, strategists, and liaisons, ensuring each document is in order and every decision you make (and sign for) is informed. While I can fill in and explain the contracts to you, I cannot collect or disburse money to other parties without the help of a third party, which is where real estate attorneys and escrow companies (aka Title companies) come in.
Real Estate Attorney Vs Title Company- Which is Best?
When it comes to real estate transactions, comparing a real estate attorney vs title company is a bit like comparing a hammer to a mallet. Both have a similar purpose, but one works better than the other depending on the project. One is also more expensive than the other (I bet you can guess which one). While both attorneys and escrow agents can help with legal transactions, you may be inclined to choose one over the other depending on your situation. And that is because it’s important to anticipate potential problems or unique complexities specific to your transaction. Before we dive into the differences between the two, let’s lay out the basics of “title” starting with some key terms.
What the Heck is Title, anyway?
You’ve probably heard the term ‘title’ tossed around a lot in real estate conversations, and it’s for a good reason. A title isn’t just a piece of paper; it’s the legal way to say you own the right to use and modify a piece of property. Besides permission to paint the walls, think of Title as the backstory of your home, listing all the key players (mostly owners) who’ve had a role in its history.
What is a clean Title?
A clean title means the story of your property is free of liens (a term used for any financial interest on the property), disputes, or any other legal issues that could cloud your right to sell or modify your property in the future. A clean title is crucial. It’s the green light that says you’re good to go, and no one else can lay claim to your property.
What is a Title Search?
A title search is like a detective’s investigation into the property’s past, unveiling every detail from previous ownerships to any debts or legal strings attached. A title search is typically done during the due diligence period of a home sale/purchase. You can also conduct a title search preemptively if you’re considering buying a property either on or off-market.
Conducting a title search is a non-negotiable step in the transaction process (a good thing!) because it ensures that the title you’re receiving is clear. No one wants to buy a property and later find out there are title problems or that other people (such as previous contractors or heirs) have legal rights to it.
What is the Chain of Title?
The chain of title is another term you’ll want to wrap your head around. The “chain” is the lineage of ownership, tracking who’s held the title to your property all the way back to when it was first built. Sometimes this chain has missing links. That’s where title companies and occasionally real estate attorneys, step in to straighten things out, ensuring your home’s history is clear and orderly.
What is Title Insurance?
Title insurance might not be the first thing on your mind in the middle of your home purchase, but trust me, it’s a protective layer that’ll offer peace of mind. A title insurance policy is like a sturdy umbrella on a rainy day. It shields you from any potential storms that might come from undiscovered issues in the title search, like unresolved liens or legal claims from previous owners. Whether you use a law firm or an escrow agent to close on your real estate purchase, a title insurance policy should be part of the transaction. It’s well worth the extra cost to offer peace of mind and protect such a large investment. Keep in mind that rates vary per title insurance company. This is something you can inquire about when you are deciding which title company to use.
Real Estate Attorney vs Title Company
Title companies and real estate attorneys play distinct but sometimes overlapping roles in real estate transactions. As a home buyer or seller, understanding what each offers can help you navigate the process smoothly.
In Utah and many other states, real estate deals are relatively easy to close. Most people use a Title Company (aka escrow agency) to help with the closing of their real estate deal. However, there are a number of states that require an attorney to be involved in closing any real estate transaction. According to Title Tap those states are
- New York
- South Carolina
- West Virginia
Let’s start with Title companies. As I alluded to previously, these title workers are meticulous researchers of the real estate world. They provide invaluable services like conducting a title search to uncover any issues that could affect your ownership rights. Think of them as historians, digging through records to piece together the property’s past. If they find something amiss—like unresolved claims or liens—they’ll work to resolve these title defects before you take over. Their job is to secure a title commitment for you, leading to a title insurance policy that guards against future disputes over the property. In addition, escrow agents are all well-versed in understanding the state real estate purchase contract and have an attorney with whom they can consult when needed.
Real estate Attorneys
What about a real estate attorney? Attorneys are your legal guardians in the realm of real estate. An experienced real estate attorney is essential, particularly in transactions that go beyond the standard buying and selling of real property. The role of a real estate attorney is particularly crucial in more intricate dealings like seller financing or joint ventures in investment properties. Their expertise is also vital in estate planning and scrutinizing every line of your real estate contract, ensuring that your assets are protected and your wishes are clearly laid out.
So Which of the two is best?
Real Estate attorney vs Title Company- who do you need on your team? It might be one or both. While a title company ensures the title’s history is clean, the real estate attorney looks out for your legal interests in the present and plans for the future. They’re adept at addressing title issues that require a legal opinion and navigating the complexities that can arise during closing. Their counsel is not just about fixing problems but also about preventing them. They’re also about anticipating issues that may arise in the future.
Consider the transaction and your future goals
However, if you’re buying an investment property with a partner, or if you’re buying a primary home with multiple people who are not related or legally married, I would recommend an experienced real estate attorney. Additionally, if you’re an investor and plan to wholesale, buy investment properties with multiple partners, or plan to use a property as a short-term rental, I’ll also recommend you seek legal advice from a real estate attorney.
All of these are nuances that require careful consideration as other people will be inhabiting your property. A real estate attorney can draw up legal documents tailored to you and what you plan to do. Even more importantly, an attorney can help you anticipate what can happen should you decide to sell or walk away from a partnership. All of this should be decided ahead of time and written in a contract to avoid future legal battles that require legal representation.
Who to Consult First: A Title Company or a Real Estate Attorney?
So, who should you consult first? I always recommend beginning with a Title company. Chatting with a closing agent is cheaper and they have access to legal counsel. However, if you know firsthand that you’re interested in buying multiple properties in the long run, consult an attorney first. The legal advice provided by a real estate attorney is impactful when it intersects with estate planning. A seasoned attorney will help you navigate these documents, ensuring that your interests are safeguarded and your future plans are accounted for.
It’s clear that escrow companies and attorneys play indispensable parts in real estate transactions. Title companies focus on your property’s history, ensuring the title is clean and your ownership is unencumbered, protecting you from future disputes.
A real estate lawyer, on the other hand, is your legal advocate. They step in where the complexities of law intersect with your transaction, offering advice on everything from contract nuances to estate planning. Their role is important, especially in transactions that are out of the ordinary.
As your realtor in Utah, I’m here to help you decide. We’ll look at your unique situation, the property’s specifics, and the nature of your transaction to determine the best support to get you- from offer to ownership- with confidence and care. Send me a message and I can help. If you live outside of the state of Utah, I am happy to refer you to an agent in your state who can assist you!