While it may be convenient, and even seemingly cost effective, to use a Texas fee attorney to close your Texas real estate transaction, doing so may, in the long-run, cost you much more than the amount you likely thought you were saving by not hiring your own attorney.
The key to understanding the role of a Texas fee attorney is to know who the Texas fee attorney actually represents. The key to knowing who the Texas fee attorney represents, in turn, requires knowledge of the source of the Texas fee attorney’s compensation, which is not an insignificant amount in most transactions.
In Texas, title insurance premiums are set by law. This is an extremely bad idea, but that’s a discussion for another time.
Fee attorneys are often paid a whopping 40% of the premium for a title insurance policy. But since title insurance premiums are not negotiable, it is not possible for a buyer or seller to find a better deal by shopping around.
Texas fee attorneys typically make it quite clear (at least in the fine print) that their only client is the title insurance company who is paying them 40% of the title insurance premium.
Sometimes, however, a Texas fee attorney will, for a small fee, to be paid by a buyer or seller, provide “neutral” legal services to a buyer or seller, such as the preparation of legal documents related to the transaction (e.g., contracts, deeds, etc.).
It is well-known that an attorney may not represent multiple clients who have conflicting interests. For example, in a lawsuit, an attorney may not simultaneously represent both the plaintiff and defendant.
This conflict-of-interest rule applies with equal force both inside and outside the courtroom.
Thus, an attorney may not simultaneously represent both the buyer and seller in a real estate transaction.
Just as legal “representation” is not confined to the courtroom, so too, it is not confined to the negotiation aspects of a real estate transaction.
Drafting the legal documents for a real estate transaction can often be just as consequential, if not more so, than the verbal negotiations that led to a written contract. For example, just look at a written lease agreement that is used by a property management company that leases large numbers of apartments to residential clients. This type of lease is likely to be many pages in length, in small print, and with terms that clearly favor the landlord over the tenant.
Because a Texas fee attorney works for the title company that is paying the attorney a significant portion of the title insurance premium as a legal fee, the Texas fee attorney is not capable of providing either the buyer or seller with adequate or effective legal representation.
Lapin Law Offices represents both buyers and seller of real estate, but not at the same time, in the same transaction.
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