We are regularly faced with situations where a client went through a real estate transaction asking intelligent, necessary questions to the professionals involved and receiving answers that put their fears to rest. Later, they find out that those answers did not reveal certain deficiencies in the transaction, and a lengthy process of unwinding and/or repairing the damage ensues. Many times this difficulty comes because the questions were asked to the wrong person.
The question is where can you go in a real estate transaction to get real, helpful answers to your questions? We submit to you that the way to answer that question is to know who has the best information regarding your question, and knowing who is your advocate.
Each of the professionals involved in your transaction is hired for a specific purpose. Within that purpose, they are the best sources of knowledge. Outside of that purpose, you must be aware of who is really looking out for your best interest as an advocate for you, and who is not. Knowing this information will help you ask questions to the people most likely to help you, and to understand answers from others by viewing them through the lens of that party’s position.
The professionals in a real estate transaction all have a very specific role, and that role defines what information they can and cannot provide to you. It is unfair to these professionals to put questions to them that are outside of their area, and which they may not have the knowledge to answer, or to which they may have an ethical obligation not to answer. You want every professional in your transaction doing their job as well as possible, and so it is important to know their roles and to respect them.
With that in mind, let’s examine each of the professionals in your transaction.
THE ESCROW OFFICER
Escrow officers are generally competent and helpful. But who do they represent? The answer is that, technically, escrow represents neither you nor the other party in the transaction, they represent the “money.” They are simply charged with impartially preparing the necessary paperwork to close the deal, and with transferring all the monies to the right place. They ethically cannot be an advocate for you without violating their role as escrow.
For that reason, it is important to know that the escrow officer is not equipped to answer much regarding your closing documents. They prepared their Settlement Statement based on figures provided by the parties. The deed is prepared using information from others as well. They do not prepare the loan documents.
What does this mean for you? It means that when you sit at the closing table signing documents, the person from the escrow office can tell you what a document is, but you should not and cannot rely on them to tell what a document means. So, asking the escrow officer whether a document accurately does what you want it to do is beyond their knowledge and their duty, and can be unfair to the escrow officer, who is usually trying to do their job as best they can. Most of the time, they will be helpful, but you should not rely on the statement of an escrow officer regarding the nature of any document.
Another necessary, usually helpful, and knowledgeable party in your transaction is the agent of the Title Insurance Company. But what is their role? The Title Professional works for an insurance company that is issuing you a policy.
Their job is to accurately describe the title to the real estate so that you can be certain that you (or your buyer) are getting what you pay for. A good title professional will want to help you in this way. But be aware that the benefit to the title company of doing this job well is that it allows them to disclaim up front all the situations where they might have to pay a claim. Title insurers are writing a policy that they hope will ensure that they will never face a claim.
What does this mean for you? Usually only good things, as your title professional is motivated to be thorough in his/her search of title, which protects you from unseen issues. But knowing that they are not signed on to work as your advocate means that any question you ask them will be answered from their position of ensuring that no claim against the insurance will result.
Loan Brokers are critical to your transaction (especially if you are buying). Their job is to pair you with a lender (and a loan program) that is compatible with your situation and needs.
This is the limit of their involvement and knowledge. Many brokers have years of experience in real estate deals, and so can advise you on various issues based on that experience, but relying on your loan broker for advice outside of issues surrounding their loan is not a good idea. Such questions are unfair to the loan broker, as they are outside their knowledge.
Also important is the fact that loan brokers are working to bring you and a lender together, so they are not advocates for you or for the lender, just a facilitator. So the loan broker can tell you the about the words on the loan document, but not advise you on whether you should sign anything. What does this mean for you? Depend on your loan broker to find you a loan that is compatible with your financial condition, and ask them questions about that issue and the loan papers. They will be your best source for that information. But for the questions of the legal effect of loan documents, or the ultimate question of what is best for you, you should look to a party who is your advocate, not a facilitator between two parties.
These professionals are hired by you for a specific purpose. Be sure your questions to them fall within that purpose. Within their expertise, they are your best source of information. Rely on them for those issues, but not for others.
REAL ESTATE AGENT
Your agent is on your side. Their objective is to match you with a buyer or seller. The way a good agent does this is to make certain that everything in the transaction is going to happen in the way that you want it to happen. They will usually do their very best to guide you and to help you in any way they can.
Once again, it is important to know their limits. Agents are your advocate, but just like the other professionals in your transaction, their knowledge is limited to their training and experience. You know you have a good agent when they will answer questions (when they do not know the answer) with advice to talk to another professional (either one we have listed or someone else). A good agent knows that getting you in touch with the right person to answer your questions is the most likely way to get your transaction closed.
I am a lawyer, and so I am definitely biased in writing this article. But the fact is that your lawyer is usually the only professional involved in a transaction whose payment is not in some way conditioned on the transaction closing. That allows the lawyer a certain freedom to advise you of the legal effects of the decisions you are making. We can act as your advocate, keeping your best interest in mind at all times.
I am not advocating that you need a lawyer in every single real estate transaction. In fact, many transactions will proceed to closing with no attorneys involved, based on solid and wise information provided only by the professionals discussed above. But should a question arise in your transaction about the legal effect of the transaction or the overarching question of “should” you sign a document, we are equipped to answer that question.
We are proud of the relationships we have with real estate professionals. Many of our clients are such professionals. They do their jobs with integrity and a high level of skill. They deserve our respect and that means not only trusting them to do their jobs well, but understanding those jobs so that we do not put them in the uncomfortable position of dealing with issues that should be brought to someone else.