THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Friday, February 7, 1997 TAG: 9702070587
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY AKWELI PARKER, staff writer
LENGTH: 71 lines
To survive the legalese jungle of closing on a house, Virginia home buyers usually come to the settlement meeting armed with a lawyer or a title company agent.
Some lawyers say that navigating the Byzantine maze of paperwork during the closing, or settlement process, amounts to practicing law. And, lawyers say, only they should be allowed to do it.
But this week the state Senate voted 28-6 in favor of legislation that says just the opposite - it affirms the right of licensed title companies, real estate agents and banks to handle the settlement process. The bill still needs approval in the House of Delegates and the governor's signature before becoming law.
In Virginia, real estate companies, title insurance agencies and banks have been in the business of handling last-minute real estate details since a 1981 law allowed them to.
``All the mortgage documents are standardized forms,'' said Jarett Shaffer, president of Shaffer Title and Escrow in Virginia Beach. ``They're boilerplate documents.''
In October the Virginia State Bar, which regulates lawyers, concluded that handling real estate settlements was in fact practicing law. For the bar opinion to become legally binding, the state Supreme Court would have to approve it.
But if the Consumer Real Estate Settlement Act becomes law, it would supersede any court ruling.
Both the Virginia Real Estate Attorneys League and the Coalition for Choice in Real Estate Closings - the two major groups representing the issue's opposing factions - say they're looking out for the consumer.
Lawyers in support of the ban argue that without a lawyer to decipher the legal mumbo jumbo in closing documents, home buyers risk losing money or the house itself through fraud or the incompetence of their closing agent.
Lay settlement companies contend that not only are they just as competent at closing procedures but they spare home buyers the expense of an lawyer as well.
The proposed real estate act requires anyone conducting residential real estate settlements to be a licensed attorney, title insurance agent or real estate broker. State and federally regulated banks are exempt from the bill's licensing aspect.
The bill, sponsored by Sen. Warren E. Barry, contains provisions which would seem to neutralize many of the lawyers' arguments.
Namely, it requires that settlement agents have at least $100,000 in omissions or malpractice insurance; that they secure fidelity bonds or employee dishonesty insurance of at least $100,000; and submit to escrow fund audits.
State Bar Ethics Counsel James McCauley, who wrote the bar's opinion, said it was never meant to take business from lay settlement companies.
``The bar's concern is that non-lawyers (handling settlement closings) are not regulated under any agency,'' McCauley said. ``When nonlawyers have conducted closings, there have been problems.''
Those problems, he said, range from ownership disputes resulting from unthorough title searches to outright stealing of escrow fund monies.
And although lawyers are often caught with their own hands in the escrow fund cookie jar, McCauley maintains those instances are magnified by the media and represent a small fraction of settlement problems.
Besides, McCauley said, if a problem does crop up - for instance, an old lien on the house under a previous owner - the buyer would have to call a lawyer anyway.
The bottom line, say supporters of the real estate settlement bill, is giving consumers a choice.
``Attorneys should not be given a monopoly on closing,'' said Lisa Noon, a spokeswoman for the Virginia Realtors Association.
``We are optimistic that it will come out on the side of consumer choice.''
KEYWORDS: REAL ESTATE CLOSING VIRGINIA STATE BAR GENERAL
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