Myths of North Carolina Real Estate

Many agents have been told that the builder can choose the buyer's closing attorney simply because the builder is paying part of the buyer's closing costs. This is not true.  The buyer has the right to choose his or her own attorney, no matter who is paying the closing costs, or any portion thereof. As part of the contract negotiation, the buyer can agree to allow the builder/seller to choose the attorney who will close the transaction.  HOWEVER, MANY BUYERS WILL NOT AGREE TO THIS IF THEY ARE AWARE THAT THEY HAVE A CHOICE.

Some builder's representatives will attempt to persuade the buyer's agent that the builder will not sign the contract unless the buyer agrees to use the "preferred" builder's attorney.  In this economy, I would suggest that the buyer can safely take the chance of insisting on being able to choose his/her own attorney, and that the builder will not lose the sale over the choice of closing attorney.

When presented with this situation, ask yourself two questions:
1.  Why would the builder want to insist that his/her preferred attorney close the transaction?
2.  If the attorney is actually representing both the buyer and seller, what happens if the buyer and seller have a disagreement prior to or during closing? 

Most builder/sellers insist that the buyer use his/her closing attorney because that attorney will generally charge the seller less for the attorney's services in exchange for the constant referral of closings to the attorney's office.  Additionally, that attorney will be more likely to send the title insurance business to a title insurance company owned or partially owned by the builder, thereby making additional money for the builder/seller on that one transaction.  The legality of the builder/seller also owning an interest in the title insurance company is questionable--it may very well be a violation of RESPA regulations promulgated by the federal government.

When an attorney represents both parties to a real estate transaction, and a conflict or disagreement arises prior to or at closing, the attorney must withdraw from representing either party.  If the attorney has to withdraw, then the closing will be delayed while another attorney is hired and performs the work.  Keep in mind that the initial attorney may still expect to be paid for the work that he or she performed, so the parties may end up paying two attorneys.

In most real estate transactions, the attorney represents the buyer, and simply prepares the deed, owner's affidavit, and 1099 form for the seller, in addition to ensuring that the seller's loan, if any, is paid in full.  The State Bar has issued an ethics opinion stating that simply preparing these documents does not constitute representation of the seller by the attorney.  This usual situation does not present the same problem if a disagreement arises between the parties. 

Another practical point on the attorney representation is the most fundamental point.  The attorney should represent the buyer to the best of his ability, and be a zealous advocate for the buyer.  An attorney who is receiving a significant amount of business from the builder/seller is going to be less inclined to represent that buyer as the ethics rules require because he/she is not going to want to jeopardize the stream of business flowing from the builder.

Disagreements and conflicts arise quite often between buyers and sellers, especially on new construction. A diligent buyer is going to want to make sure that all repairs are made prior to closing. If the builder does not want to make repairs, the buyer's attorney should be able to freely give that buyer the best advice on how to proceed, and what the consequences for closing or not closing will be.

For buyers' agents, be careful not to put yourself in a situation where your buyer can blame you for not having an attorney who could or would adequately represent him or her.  For buyers, be careful that you are not intimidated. Insist on standing up for yourself and ensuring that you have adequate legal representation.  It is much easier to resolve conflicts prior to closing rather than hold a builder/seller to his/her obligations after closing. 

Hello World!

I am an attorney by the Grace of God.  In that vein, I have thought about writing a blog for quite a while.  I finally made myself set it up and get to writing. My primary reason for writing this blog is to help others.  That is why I decided to become a lawyer--a decision I made when I was 12 years old. God has graced me with education, knowledge and some wisdom, and I believe that it is my duty to pass that information along.  If this blog serves as advertisement and helps recruit clients for my solo practice law firm, then the blog will be even more of a success. 

I would like to share thoughts with you on various legal topics, including real estate closings, mortgages, small business matters, and wills and estates, as well as practical tips from the Christian, mother and military wife perspective.  I hope that you find the information helpful and that it blesses you with some comfort and peace.  However, the information herein should not be considered legal advice because it is not directed at any specific person or situation.  Each client's case or situation is different, and one small differing fact can create the need for different advice. If you need specific advice, please feel free to call our office and schedule an appointment for a consultation.

Miranda R. McCoy
201 S. McPherson Church Road, Ste 231
Fayetteville, NC  28303
910-425-4264