ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, February 16, 1997 TAG: 9702180005
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
WHEN Phil North bought his home in the Roanoke Valley last year, he insisted that a lawyer handle the closing - "because it makes you sleep better at night."
North compared his decision to paying for a home inspection before buying the house. "To me," he said, "it's a no-brainer to have a specialist inspect these things," even if it costs more.
Besides, he said, lawyer Ross Hart had saved him a lot of money in 1993 when he had signed a contract on another house. Hart had written into that earlier contract a stipulation canceling the closing if North was transferred from Roanoke by his employer, Norfolk Southern Corp.
Indeed, North was moved to a job in Tennessee just before closing, which was not held. This saved North the considerable expense of buying and reselling a house.
"If you have surgery, you don't go to a physician's assistant," said North, who returned to Roanoke last year.
Barry Mills went another direction in October when he retained Lawyers Title Insurance Co. to handle his closing on a house in Roanoke. He had used what's commonly called a lay company in the past, Mills said, and he was "completely satisfied."
Mills said his mother, who is in the real estate business, recommended he use Lawyers Title. "I went on her advice. ... I was real pleased with them."
He has heard, Mills said, that you never see the attorney, even if you hire one. "It's handled by someone in the office."
Matt Robertson made a similar decision based on a friend's recommendation. "I was very satisfied," he said. "They were easy to deal with. Every 'i' was dotted and every 't' was crossed."
Robertson had used Lawyers Title with good results when he had purchased another house in Roanoke, but he had employed a lawyer for a still earlier deal.
Between the two, he said, using an attorney involved "more questions to answer, more paperwork to fill out and more calls back and forth."
That choice - between using a lawyer or a lay closing company - is at stake in disputes that, in the past year, have embroiled the Virginia General Assembly and are also before the Virginia Supreme Court.
Part of the controversy is an affidavit being circulated by real estate lawyers in Virginia. That statement was signed before a notary public by a Roanoke Valley resident. He swore that a title company had failed to warn him that the property he was buying had no access, even though the situation clearly showed on a survey. Because he had no access, he said, Roanoke County denied him a building permit. The man's attorney said he declined to be interviewed or quoted by name.
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In the Roanoke Valley, at least five non-law companies close real estate deals. Besides Lawyers Title, they are Southern Title Insurance Corp., Dominion Settlement Services, Southwest Virginia Settlement Services and Acquisition Title and Settlement Agency.
Last year, the General Assembly let die bills that would have declared that real estate closings involved the practice of law and, therefore, are a field open only to lawyers.
Now, a bill, which already has passed the state Senate, would stipulate that real estate closings could be handled by either lawyers or title companies. It would set ethical and professional standards for both that are now lacking for the lay companies. The bill was unanimously approved by a House committee Thursday and will come before the full House on Monday.
The House committee, however, adopted several amendments offered by Del. Clifton Woodrum of Roanoke. As it stands now, the bill would require lay persons to register with the Virginia State Bar and follow guidelines published by the Bar. And, like lawyers, lay companies would be banned from keeping the interest on their escrow accounts as they do now.
R. Brian Ball, a Richmond lawyer who is lobbying for the bill on behalf of a coalition of bankers, real estate agents and lay companies, said it is important for it to win passage by the General Assembly this month.
That's because the state Supreme Court is expected to act by summer on a recommendation from the Virginia State Bar Council that it require lawyers to be available at all real estate closings, Ball said. That means a lawyer must at least be on call for a closing.
Such a ruling, he said, would put the lay companies out of the business they have enjoyed since 1981. Real estate closings would thus be the province of lawyers at least until the 1998 General Assembly.
Lawyers, on the other hand, are fighting for more than a piece of legal turf that involves about 53,000 residential closings a year in Virginia. Investment and commercial closings would be in addition to that, although lawyers handle most of those situations.
Steve Haner of Midlothian, a lobbyist for the Virginia Real Estate Attorneys League (REAL), said this fight on real estate closings is the forerunner of an assault on the legal profession - just as physicians have lost much of their traditional practices to lesser-trained personnel as a cost-saving measure. A New York Health Maintenance Organization, for instance, recently ruled that all primary health care would be conducted by nurses.
If this fight is lost, Haner said, lay persons are "standing in line" to handle wills, estates and divorces. "The assault on the profession is not going to stop with real estate," Haner said.
Michael Hincker, Roanoke manager for National City Mortgage Co., estimated that about 60 percent of closings he attends are handled by lawyers. The other 40 percent are closed by title agencies. In the case of refinancings, he said, the figures are reversed.
"We are pretty comfortable with either one," Hincker said. "We have no problems with agencies, and real estate attorneys do a good job."
Customers pick between the two options anywhere along the process of buying.
Hincker said some people buying homes have used a lawyer or an agency in the past, so they tend to call that person again. Sometimes they get recommendations from friends, Hincker said, but they most often ask the real estate agent what they should do.
And sometimes, in 10 percent of the cases or fewer, they ask Hincker for guidance. Hincker said he gives them two or three names that include both attorneys and title companies. "I do not say to go to a particular person," he said.
* * *
As a general proposition, Hincker said, it is about $100 cheaper to use a title company than it is to hire an attorney.
Ross Hart of the Roanoke law firm of Hart and Hart doesn't dispute that.
Hart said the services of a lawyer are worth the small additional cost. "Where are you going to find the expertise, time and skill for $100?" Hart asked."You are buying a lawyer for $100 more. It's a good deal any day of the week."
Hart said some lay competitors give a price for closing, but then add in other items. He generally charges $350 to $400, which he said includes the entire package.
That's the same he charged for the same job 20 years ago, even though more complicated federal documents now are involved. Not only are title companies vying for this work, but lawyers are competing among themselves for the business.
In cases where a lay company has called him to resolve a problem title search and closing, Hart said, he charges $600 or more. One such case involved discovery of encroachments "which only a lawyer can resolve."
Also, the bill can be high when a client comes to him with a problem after a lay closing, Hart said. He cited new homeowners who found that the seller had never paid his share of bills for well water or who had found the septic field unusable.
An average closing involves 30 legal documents and a total file of papers a half-inch inch thick, Hart said, and "interpreting a legal document is the practice of law." But that doesn't involve speaking legalese: "I do closings in plain English," he said.
Hart figures he spends at least five hours on each closing, and the time frequently jumps to 10 hours because of unexpected complications. The actual closing, when buyers and sellers sign the papers, takes about 90 minutes of that time.
D. Stan Barnhill of Roanoke is not a real estate lawyer, but he is a member of the Virginia State Bar Council whose recommendation for requiring lawyers to be available at closings is before the state's highest court.
He said he cast his vote in favor of the recommendation because he believes real estate closings constitute the practice of law. If the legislature determines otherwise, he said, "so be it."
Barnhill said real estate closings are substantial transactions involving large sums of money. The documents, he said, involve risk and the parties' legal rights.
Jerry Dunnavant, manager of the Roanoke office of Lawyers Title Insurance Co., said it can offer a complete package, "from start to finish," of title insurance, title searches and closing services.
It has been doing this work in Roanoke for more than four years without a problem, he said. The service has been offered in Northern Virginia since the early 1980s.
At the same time, he said, the company provides title insurance when attorneys handle the closing. "We welcome having an attorney," he said.
But one thing Lawyers Title does not do is give legal advice, Dunnavant said.
Ball, the lawyer representing title settlement companies and other proponents of the bill, said each side of the dispute can present horror stories of mishandled closings.
But problems on each side are actually few, he said, and the bill would regulate both lawyers and lay persons handling a title settlement. The law, for instance, would set standards of care, provide for annual audits of settlement accounts and require escrow accounts in financial institutions.
"It's a good bill" that preserves choice and competition, Ball said. Failure of the law, he said, would threaten people who have been in the business for 15 years.
Charles Lollar of Norfolk, president of the Virginia Real Estate Attorneys League, said banks, title companies and realty agents "have thrown a lot of money around" the General Assembly to try to get the bill passed.
So has the league. Financial records at the legislature show the league contributed $17,000 to General Assembly members.
Lollar said the settlement agent, or the person conducting the closing, implies that he or she possesses legal knowledge and skill. That person asks buyers and sellers to sign legal documents that can be more than an inch thick.
In 90 percent or more closings conducted by lay persons, he contended, the settlement agent gives legal advice.
Some banks prepare wills for their customers, Lollar said. "That will be next," he said of lay attempts to take over the roles of lawyers.
Real estate agents, whose profession is impacted by closings, are backing the lay settlement companies. The Virginia Association of Realtors belongs to the coalition represented by Ball.
"Our position is for choice" for the consumer, said Doug Sawyer of Sawyer Properties, president of the Roanoke Valley Association of Realtors.
Most buyers in the Roanoke Valley use lawyers, Sawyer said, and "attorney pricing is competitive."
Most of the time, Sawyer recommends his clients hire a lawyer to conduct the closing as a matter of "self-protection." To him, there is no question that a lawyer should be at a difficult closing. Still, he said, people should have a choice.
Despite the gigantic battle between the opposing professions before the Virginia State Bar Council and now in the state legislature, Sawyer has found the situation "strange."
There is, he said, "no clamor from the public, no controversy."
LENGTH: Long : 205 lines ILLUSTRATION: PHOTO: DON PETERSEN STAFF. Southern Title Insurance Corp. realby CNBestate closer Janet Peery (left) goes over closing information with
Constance Willis of Roanoke. Willis was refinancing her home.
Graphic: Chart by STAFF: Realty paperwork. KEYWORDS: GENERAL ASSEMBLY 1997 MGR