I was talking to a real estate broker last week and there was a question about the relationship between attorneys and title fees. It was a thought provoking conversation and I wanted to share how the relationship works.
In order for an attorney to collect title fees from a title company, two things have to happen. First, the attorney must be an agent of the title company which is done through an application process. Secondly, the attorney agent must actually participate in process of obtaining a Title Commitment. There used to be a time when attorney’s were not required to do anything; basically, they received a referral fee. However, those days are long gone.
When a Title Commitment is needed the attorney enters the required data into the title company’s website in order to receive a Search Package. A Search Package is a package that is provided by the Title Company that searches the property, owner and buyers for any type of recorded lien, document or judgment. When the Search Package is available, the attorney must review it and complete an Exam Summary which advises the Title Company what should be included in the Title Commitment.
Depending on how many pages and the results of the Search Package, the attorney could easily take an hour or more to complete the Exam Summary. Once the Summary is complete, the attorney sends it back to the Title Company and a Title Commitment is issued within a few days.
Once the Title Commitment is issued the attorney will begin the process of ‘clearing title’. Clearing title could take as little as an hour to obtain transfer tax stamps or it could take up to several weeks.
Besides the time it takes to request and complete the Search Package/Exam Summary and clear any conditions on the Title Commitment, the attorney is also taking a financial risk against possible future title policy claims, as they are agents of the Title Company.
The amount of title fees collected is based on the price of the property, not unlike Realtor commissions, and is determined by the title company. It’s worth noting that whether there is an attorney involved in the title process or not, the title fees to the client do not change. Instead of sharing the fees with the attorney, the title company receives it all.