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Warning:  It May NOT Be in Your Best Interest to Use a Texas “Fee Attorney” to Close Your Texas Real Estate Transactions

7/19/2021

1 Comment

 
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Texas title companies often authorize one or more Texas lawyers or law firms to act as their agent, for the purpose of issuing policies of title insurance and closing real estate transactions.  These “fee attorneys,” as they are known, act as escrow agents and issue title polices when closing real estate transactions in their law office.

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 Group represents both buyers and seller of real estate, but not at the same time, in the same transaction.

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Disclaimer
The information contained in this publication is provided by Lapin Law Group, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Lapin Law Group, with its principal office in the Dallas-Fort Worth Metroplex, serves all 254 Texas counties.

1 Comment
Peter link
10/25/2019 08:23:09

Very informative article. It isn't very often that blogs have content that are relevant to the actual business it supports.

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    LAPIN LAW GROUP is the Texas law firm for clients who seek to maximize and safeguard their net worth.

    We accept litigation and non-litigation legal matters throughout the State of Texas in the following practice areas: Asset Protection, Business and Corporate Law, Contract Law, Estate Planning, Probate and Trust Administration, Real Estate Investor Law, Securities Law and Private Placements, Immigration Law, Family Law, Firearms and 2nd Amendment Law, and more.

    Call us at (877) 570-2200

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