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Best Practice for Agents: Parties Should Choose Closing Attorney

Recent inquiries and complaints to the Commission indicate that there is some degree of confusion and misunderstanding, both in the industry and the general public, on the issues of who decides the time and place of closing and who decides the closing attorney to be used by the Buyer or Seller.

The time and place of closing should be negotiated by the parties.  An agent may make suggestions about these choices but cannot make a decision.

Likewise, choosing an attorney is the decision of the party desiring representation.  While an agent may certainly make a recommendation, an agent cannot make this choice for a party.

The standard “Offer to Purchase and Contract” form recommended by the North Carolina Association of REALTORS® and the North Carolina Bar Association contains two paragraphs addressing these closing issues.  Paragraph (8) allocates closing expenses between the Seller and Buyer.  Paragraph (14) defines closing, establishes an approximate date, and designates how the deed is to be made.  Nothing in the standard form requires the Seller or Buyer to use a particular closing attorney.

There are a number of other sales contract forms in use, typically created by volume sellers such as developers, builders, and in recent years, relocation firms that purchase and re-sell homes on behalf of employers who are moving employees.  Often these forms offer no choice or negotiation about time or place of closing but specify circumstances dictated by the seller.  The “closing” itself may be defined differently from the standard form.  Frequently, such volume sellers offer to bear some of the buyer’s closing costs if the buyer allows the seller to provide or designate the closing attorney for the buyer.

An agent should be aware of what an offer provides on the issues of time and place of closing and choice of legal representation.  Disagreements over time and place of closing, while minor, are important and should be resolved.   If the offer specifies one party can designate the closing attorney for the other party, make sure the other party is aware of the provision and freely decides to accept it.

Where payment of expenses at closing is a sales concession from a volume seller, a buyer who insists on securing his or her own legal representation usually will have to give up the offered concession. In other words, the buyer will have to pay his or her own closing costs. If the parties cannot agree on these issues, the offer may never become a contract.

Another source of controversy arises when an agent directs or attempts to direct the choice of attorney for a party without specific authority from that party to do so. It appears most agents in these situations simply “take” a transaction to an attorney in order to get the sale closed.

Where an agent selects and engages the services of a closing attorney without proper authority from the party on whose behalf the agent purports to act, the agent can be held personally responsible for the value of the services rendered by the attorney and may be subject to discipline by the Commission.

To avoid complaints involving the selection of a closing attorney, explain to the seller and buyer their respective obligations under the contract with regard to closing, and the services their attorney will perform. Whenever possible, have the Seller and Buyer contact their respective attorneys themselves in preparation for closing.

If an agent is authorized by a party to select or engage an attorney, the party should be placed in direct contact with the attorney as soon as possible to prevent any misunderstandings.  An agent should consider obtaining written documentation from any party for whom the agent employs an attorney stating the extent of the agent’s authority and that the party will be financially responsible for the services obtained by the agent..

Controversy and consumer dissatisfaction over the agent’s role in finding a closing attorney can be avoided by a careful professional approach to addressing these issues during the negotiation of a contract, with full disclosure to the parties of the agent’s reasons for suggesting a particular attorney.

This article came from the June 2002-Vol33-1 edition of the bulletin.