THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, August 20, 1994 TAG: 9408180411
SECTION: REAL ESTATE WEEKLY PAGE: 04 EDITION: FINAL
SOURCE: By Kathleen Butler, Special to Real Estate Weekly
LENGTH: Long : 153 lines
Cindy and John Martin were thrilled when they bought their first home in June - the one-story Virginia Beach house her grandparents had lived in for more than 35 years.
They were especially pleased, Cindy Martin says, with the way they closed the sale. Instead of hiring a lawyer to conduct the closing, the Martins chose to have a title company handle the transaction.
``It was very quick,'' Cindy Martin says. ``I was quite impressed because we closed a lot sooner than what I had anticipated.''
Until recently, most real estate closings in Hampton Roads were conducted by lawyers. But today local title companies are beginning to offer the settlement - or closing - services that have been common in other parts of the country for years.
``A lot of consumers are becoming aware that they have a choice,'' says Mary Long, senior vice president of Stewart Title and Associates Inc. in Chesapeake, which has been handling real estate closings in Hampton Roads for about 18 months.
``We have more and more people who come to us directly.''
The closing agent is a third party hired to handle the paperwork, receiving documents and making sure funds are disbursed according to the lenders' instruction. Although title or settlement companies can oversee the closing, they cannot prepare legal documents such as deeds and deeds of trust. They also cannot offer legal advice to their client during the closing.
Stewart Title and Associates Inc., a subsidiary of Stewart Title Guaranty Co., had been handling closings at hundreds of offices throughout the country for more than 15 years.
It now has a separate internal department devoted solely to settlement services, and today 50 staff members at offices throughout Hampton Roads handle 120 to 150 closings a month, according to David Ross, marketing representative.
Southern Title, a 75-year-old firm, began offering closing services locally in March. Branch manager Beth Driscoll says she does about 20 closings a month and hopes to increase that to as many as 70.
Darleen Lamb, president of the Tidewater Association of Realtors, says title companies are becoming more prevalent in the market. Many, she says, are affiliate members of the association and have been aggressively promoting their business to real estate agencies in the area.
``I think you're going to find title companies doing closings is the wave of the future,'' Driscoll says.
But why choose a title company over a lawyer? Title company representatives say they offer a bit more service more efficiently and often at a lower cost.
``It eliminates the middle man,'' Driscoll says.
Long agrees.
``It's one less office to deal with,'' she says. ``Everybody is on one staff and they are all employed by us.''
To prepare for a closing, the closing party - be it a lawyer or title company representative - must first search the property title to ensure there are no liens against it. Often, if the buyer is purchasing title insurance to guarantee he owns the property outright, the job of searching the title falls to the title insurance company.
By leaving the closing to a title company, one person can handle the transaction from beginning to end, instead of having to consult with both a lawyer and a title insurance company, local title company representatives say.
In addition to being what Stewart's president Brian Clements calls ``one-stop shopping,'' title company representatives say their services are often less expensive than a lawyer's.
Debra Ferguson, assistant vice president for First American Title Insurance Company's Peninsula area, says her company typically charges $150 for a closing, less than half what many attorney's charge.
Stewart's Clements says his firm's rate is competitive, but in line with what lawyers charge. Stewart, he says, is marketing its service and staff, not just its price.
``We are not in the business to be the cheapest,'' Clements says. ``There are people who are cheaper, but we are not the most expensive. . . . To have a quality staff, you have to make up the money.''
But even though title companies market their services as less expensive, Lamb says it is always important for consumers compare rates and find out what is included for that price.
Consumers should look at the total cost for title insurance and the closing to make sure they are competitive, she says.
To promote the service aspect of their business, title companies say they often offer extras such as scheduling evening or weekend closings and hand-delivering the real estate agent's commission check.
For real estate attorneys, title companies sell a valuable product - title insurance. So, in developing their business and opening the market to title company settlement services, title companies have also had to maintain their attorney base - an accomplishment many say has been easier than they expected.
Clements and Long say they talked to their attorney clients to advise them of their new venture before opening the settlement department.
``We let them know we were not after their business,'' Clements says. ``There's plenty of work, certainly, to be distributed for everyone out there.''
Driscoll says she also advised her attorney clients of the change in her business.
By being upfront with their attorney clients, title company representatives say they have not only maintained their clients, but some of the attorneys are now referring work to them. They also admit title company settlement services will never completely replace lawyer closings, because situations will always arise in which a buyer or seller needs legal representation, not just a third party.
Stephen St. John, a partner with Faggert and Frieden law firm in Chesapeake, says his company used to do residential real estate closings but now refers most of those to title companies so the firm can concentrate on commercial real estate.
Residential closings, he says, have become a real specialty and require a lot of time and energy. Unless a law firm does a large volume of closings, they are often not profitable, he says.
At Faggert and Frieden, for example, he says attorneys handled enough closings to make them time consuming, but not enough to turn a profit.
Still, when the firm refers a client to a title company, the attorney remains on the sidelines, ready to jump in should a problem arise, St. John says. ``We feel like our clients are getting the best of both worlds,'' he says.
Not all attorneys share St. John's opinion, he says.
``Attorneys clearly don't like us doing this,'' First American's Ferguson says.
Settlement companies, by law, cannot offer legal advice or representation. That means at the closing table, the settlement company can review the documents with you, but cannot interpret and advise you on them. But most settlement companies do have attorneys on staff or on call, should a problem arise during a closing. But the lawyer would not have followed the transaction from the beginning as a closing attorney would.
The Martins say that for them, a title company closing was a positive experience. And, though attorneys, title companies and real estate professionals all agree title company settlement services are not for everyone or every situation, Driscoll says it's nice for buyers and sellers to have an alternative.
``They have the right to shop around,'' Driscoll says. ``They have the right to look and go to the person they feel most comfortable with.'' MEMO: WHAT AN AGENT DOES
The closing agent is a third party hired to handle the paperwork,
receiving documents and making sure funds are disbursed according to the
lenders' instruction.
Though title companies can oversee the closing, they cannot prepare
legal documents. They cannot offer legal advice to the client during the
closing. ILLUSTRATION: Color photo on cover by Steve Earley
Brian Clements and Mary Long of Stewart Title and Associates Inc.
Photo by Jim Walker
Cindy and John Martin chose to have a title company handle the
transaction when they bought their first home in June. ``It was very
quick,'' Cindy Martin says. ``I was quite impressed because we
closed a lot sooner than what I had anticipated.''
by CNB