THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, September 14, 1996 TAG: 9609120262
SECTION: REAL ESTATE WEEKLY PAGE: 10 EDITION: FINAL
SOURCE: BY LARRY O'DELL, ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: 103 lines
If Virginia's real estate lawyers get their way, they alone will be able to conduct real-estate closings, and that's gotten the state's bankers, realty firms and title insurers steamed.
Real estate attorneys contend only they are qualified and legally bound to protect home buyers. They say bankers, real estate agents and title companies look out only for themselves.
A committee of the Virginia State Bar recently declared house closings that don't involve lawyers an ``unauthorized practice of law.'' If the committee's governing council and the state Supreme Court agree, Virginia will become the second state, after South Carolina, where only lawyers can conduct closings.
Real estate and banking industries argue that lawyers are not needed at house closings, which can be conducted at less cost by settlement agents, title agents or title companies.
Thus the battle lines are drawn in a dispute between powerful financial interests that could ultimately be decided by the General Assembly.
The legislature is also studying the matter, however, and could overturn or modify the Supreme Court decision. J.R. Hipple hopes it doesn't come to that.
``If the Supreme Court lets the opinion stand, it's big trouble for consumers,'' said Hipple, spokesman for the Coalition for Choice in Real Estate Closings. ``It would put nonlawyers out of business until the legislature could make its own decision.''
With less competition, he said, the costs of conducting real estate closings would rise.
The coalition is a group of banking, real estate and title insurance organizations formed to fight the Virginia Real Estate Attorneys League. That organization, which goes by the acronym VaREAL, is the chief proponent of lawyers-only closings.
``It's very clear their self-interest is what's motivating them,'' Hipple said. ``They want a monopoly on residential real estate closings.''
He said nonlawyer closings typically cost $300 to $600; lawyers generally charge $400 to $600 more, he said.
Jeffrey C. Flax of Virginia Beach, president of VaREAL, said Hipple is wrong about the lawyers' motives and how much they charge. He said home buyers need an advocate to spot potential legal snags in the avalanche of complicated paperwork.
``All these other competing interests are at the table,'' he said. ``When is the last time you saw a bank or an insurance company be interested in what's best for the consumer? They want to eliminate the lawyer to get the gum out of the works, if you will.''
Jordan Clark, director of the nonprofit United Homeowners Association in Washington, D.C., disagreed.
``To say the buyer has no friends at the table is an exaggeration,'' said Clark, who opposes the lawyers-only mandate. ``It does no good for the real estate agent, the mortgage company, the title insurance company to go around screwing people.''
Flax said most real estate lawyers charge about $350 for a house closing. He said settlement companies often advertise their services for as little as $150, but tack on extra charges for such things as document preparation to drive the fees as high or higher than what lawyers charge.
But regardless of the costs, Flax said, home buyers come out ahead by having legal representation at house closings.
``There have been times where I've sat there on the seller's side and seen things happen to the buyer, but I can't say anything because I don't represent the buyer,'' he said.
Flax cited a couple of recent house-closing horror stories:
Last year, a Fairfax County jury awarded $225,000 to a Cambodian couple who could not read or speak English and who were defrauded by a title company that handled the closing of their house sale.
A title insurance company in Abingdon bounced about 60 checks drawn on an escrow account and then went out of business, owing several people tens of thousands of dollars and prompting an FBI investigation.
``Cases like that happen, and it's caveat emptor'' - Latin for ``buyer beware,'' Clark said. ``If you are hesitant about the process, get a lawyer.''
Hipple also argued that legal problems are rare, and buyers who want a lawyer can hire one. ``It's a matter of consumer choice,'' he said.
And real estate transactions involving lawyers are not always without problems. The Virginia State Bar says 11 percent of the 1,092 complaints about lawyers received in the last fiscal year involved real estate.
Teresa Thomson, a lobbyist for the Virginia Association of Realtors, said she hired a lawyer when she closed on her home. ``It took about 45 minutes, and he basically told me to sign here and sign there,'' she said.
She later attended a closing conducted by a settlement company, just to observe. The buyer got two hours of detailed explanation about what the documents meant - but no legal advice, she said.
``Having gone through a couple of these and knowing what I know now, I would feel less likely to need a lawyer'' in future closings, she said.
Del. William Barlow, D-Isle of Wight and sponsor of the legislation setting up the legislative study, said he believes buyers should have a lawyer. But he is not sure whether it should be required.
``Even a person accused of a serious crime doesn't have to have an attorney,'' said Barlow, a lawyer who says real estate closings are a significant part of his business.
``It's a question of what's going to be best for the consumer. Frankly, at this point I don't know what that is.'' MEMO: The Virginia State Bar is receiving written comments until Sept.
23 on the committee opinion declaring nonlawyer closings an unauthorized
practice of law. The address is 707 E. Main St., Suite 1500, Richmond,
VA. 23219-2803.
KEYWORDS: REAL ESTATE CLOSING LAWYER by CNB