What does a closing attorney do?

A closing attorney is the lawyer who carries a United States real estate transaction from signed contract to recorded deed: the attorney examines the title and clears its defects, prepares or reviews the deed and the loan documents, checks the settlement figures, holds every dollar of the deal in a trust account, conducts the signing, records the documents and pays each party. In several states that work is treated as the practice of law, so a licensed attorney must conduct the closing or supervise it; in the others, a title or escrow company usually does the same job.

This article covers real estate closings in the United States, where the rules are set state by state. It is general information, not legal advice, and the rule that applies to your closing is the rule of the state where the property sits.

Two questions matter as much as the task list: whom the attorney represents, because the lawyer at the head of the table is often not your lawyer, and whether your state requires an attorney at all. Both are answered below, with one closing followed from the morning title update to the last payment.

What does a closing attorney do, task by task?

A closing attorney performs eight tasks on a purchase: examine the title, cure its defects, prepare or review the documents, settle the figures, hold the funds in trust, conduct the signing, record, and disburse, with a title insurance policy issued afterwards where the attorney acts as agent for an insurer. The table sets out what each task consists of and what it protects.

Two of these tasks are judgment rather than process. Deciding that a title is good enough to insure, and deciding that the money may lawfully leave the trust account, are the decisions that several states reserve to a lawyer even where other people may carry out the steps around them.

How does a closing attorney examine title and cure defects?

A closing attorney examines title by reading the chain of recorded documents for the property and listing everything that must be removed, paid or accepted before the buyer can take ownership as promised. The search itself is often done by an abstractor or a title plant; the attorney's contribution is the opinion on what the search means.

A typical examination looks for the same families of problems:

• an open mortgage or deed of trust, including one that was paid years ago but never released of record;
• judgments, tax liens and unpaid assessments attached to the owner or the property;
• a break in the chain of ownership, such as a deed signed by one spouse only or an estate that was never administered;
• easements, restrictions and boundary questions that limit how the property can be used;
• errors in a legal description or in a name.

Curing is the unglamorous half of the job. For a mortgage that will be paid from the sale, the attorney orders a written payoff statement, good through a stated date with a daily interest figure. For an old lien that was paid, the attorney chases a release from the lender or its successor. For a gap in the chain, the cure may be a corrective deed, an affidavit, or a court proceeding that delays the closing by weeks.

Just before recording, the attorney brings the search up to date, so that nothing filed between the first examination and the closing slips in ahead of the new deed. The North Carolina State Bar lists exactly this decision, that the deed and deed of trust may be recorded after an update of title, among the acts it treats as the practice of law.

Which documents does a closing attorney draft or review?

A closing attorney drafts or reviews the deed, reviews the lender's package against the contract, and prepares the affidavits and statements that make the file complete. Who drafts what depends on the state and on whom the attorney represents.

The deed is the document the seller signs to transfer ownership, and in an attorney state it is prepared by a lawyer: sometimes the closing attorney, sometimes the seller's own. The note and the security instrument, which is called a mortgage or a deed of trust depending on the state, arrive from the lender. The attorney does not rewrite them; the attorney checks that the names, the legal description, the loan amount and the terms match the commitment and the contract, and that the instrument can be recorded in that county.

Around those sit the supporting papers: an owner's affidavit about liens and possession, lien waivers where recent work was done, entity resolutions when a company is a party, and a power of attorney when a party cannot attend.

On most home loans there is also the Closing Disclosure. The Consumer Financial Protection Bureau describes it as a five-page form giving the final details of the loan, and states that the lender is required to give it to the borrower at least three business days before closing. The lender carries that duty, but the figures on it come largely from the closing attorney's file, which is why the two offices trade drafts in the days before signing.

How does a closing attorney prepare the settlement figures?

A closing attorney prepares the settlement figures by listing every charge and every credit for the buyer and for the seller, then checking that the money coming in equals the money going out to the cent. The statement is a two-sided ledger, and the proof that it is right is that the file ends at zero.

The buyer's side starts from the price, adds the buyer's costs, and subtracts the loan, the deposit already paid and any credits from the seller. What remains is the cash the buyer must bring. The seller's side starts from the same price and subtracts the mortgage payoff, the brokerage commission, the seller's share of taxes and fees, and any credits given to the buyer. What remains is the seller's proceeds.

Prorations are the part that most often needs explaining at the table. Property taxes, association dues and similar charges are divided at the closing date, so that each party pays for the days it owned the property. A proration is a credit between buyer and seller: it changes what each one pays or receives, but no cheque is written for it.

Three checks are worth running on any statement before you sign it:

• every figure on the lender's Closing Disclosure appears on the attorney's statement at the same amount;
• the payoff is calculated to the day the lender will actually receive the money, not to the signing date;
• the buyer's cash to close plus the loan proceeds plus the deposit equals the total of all payments out.

How does a closing attorney hold and pay out the money?

A closing attorney holds the money of a closing in a client trust account, separate from the law firm's own funds, and pays it out only when the funds have arrived and the conditions for release are met. The attorney is a fiduciary for that money, answerable to the state's disciplinary rules as well as to the parties.

The American Bar Association's Model Rule 1.15, which most states have adopted in some form, sets the framework. Funds of clients and third persons are kept in a separate account, complete records of the account are kept, and a lawyer must promptly deliver to a client or third person any funds that person is entitled to receive. When two parties claim the same money, the rule says the disputed part is kept separate until the dispute is resolved, while the undisputed part is distributed. The retention period for the records is set by each state's version of the rule.

Disbursement itself is short to describe. Once the loan has funded and the buyer's money has cleared under the state's good funds rule, the attorney pays the payoff lender, the brokerages, the taxing and recording offices, the title insurer and the other vendors, takes the firm's own fee, and sends the seller the balance. Each payment matches a line of the settlement statement, and the file is reconciled to zero.

Who does a closing attorney represent?

A closing attorney represents whichever party engaged the attorney as a client, which may be the buyer, the lender, both of them, or less often the seller, and never the transaction as an abstraction. Custom on this point differs from state to state and from file to file, so the only reliable answer is the one the attorney gives you in writing.

The North Carolina State Bar's opinion on the subject shows how joint representation is handled. It allows one lawyer to represent the buyer and the lender when their interests are generally aligned, and even the buyer and the seller if each consents after full disclosure. It adds that the buyer's lawyer is not generally assumed to represent the seller. If a conflict then arises between the clients, the opinion requires the lawyer to withdraw from representing all of them.

This is why the question matters in practice. Suppose the examination turns up an easement the buyer did not expect. An attorney who represents the buyer advises on whether to renegotiate or walk away. An attorney who represents only the lender reports whether the easement affects the loan, and tells the buyer to seek independent advice. The work on the file is identical; the duty of loyalty is not.

In which states must an attorney conduct or supervise the closing?

A minority of states require a licensed attorney to conduct a real estate closing or to supervise its steps, and the requirement comes from a different source in each: a statute, a decision of the state's highest court, or an opinion of the state bar. The six states below are those whose rule was read on such a source for this article; the list is not a complete census, and other states have rules or customs of their own.

The details repay a closer reading. Connecticut's statute defines a real estate closing to cover a mortgage loan secured by real property in the state, with home equity lines and loans that involve no lender's title policy carved out, and any transaction where consideration is paid to change ownership of real property. Delaware's court extended the requirement to refinancings as well as sales.

Georgia's opinion rejects the "witness-only" closing, in which a lawyer is asked merely to watch signatures: a lawyer who presides over a closing is acting as a lawyer. The same opinion states that funds a lawyer receives in a closing must be deposited into and disbursed from the lawyer's trust account, and that handing the proceeds to a title company or a third-party settlement company for disbursement breaches the rules.

North Carolina sits between the two models. Its State Bar says a non-lawyer may present and identify the documents, direct the parties where to sign, and receive and disburse the closing funds. The same opinion reserves to lawyers abstracting or giving an opinion on title, answering the parties' legal questions, preparing deeds and deeds of trust, and determining that the funds may legally be disbursed under the state's Good Funds Settlement Act.

Elsewhere, the Consumer Financial Protection Bureau's guidance for borrowers summarises the national picture in one line: in some states there must be an attorney responsible for the legal transfer of title and the exchange of funds, while other states may require an attorney only to transfer title. It advises checking with the company handling the closing beforehand.

How does an attorney closing differ from a title or escrow company closing?

An attorney closing and a title or escrow company closing reach the same result, a recorded deed and a balanced file, through the same sequence; the differences are who exercises the legal judgment, what rules govern the money, and whether anyone at the table can give legal advice. Neither model is a lesser version of the other.

An escrow officer's neutrality is a feature of that model: the officer takes instructions from buyer, seller and lender alike and carries them out exactly, which suits transactions where each side has already taken its own advice. An attorney's role is closer to counsel: someone who can be asked whether a clause means what you think it means, at least if you are the client.

In states where both models are lawful, the choice often follows local custom and the purchase contract. In states that require an attorney, a title company still commonly takes part, as the insurer behind the policy, while the attorney conducts the closing.

What does a closing attorney charge?

A closing attorney is usually paid a flat fee for a residential closing, quoted in advance and shown as its own line on the settlement statement, with separate lines for the title search, the title insurance premium and the government recording charges. Fees vary by state, by county and by the complexity of the file, and no national schedule exists; the figures below are illustrative only.

In the worked example that follows, the attorney charges the buyer an illustrative flat fee of $950 for conducting the closing and charges the seller an illustrative $200 for preparing the deed, $1,150 in all. Those are the only amounts the law firm keeps as fees. The $225 title search goes to the abstractor, the $160 recording charge goes to the county, and the $1,480 title premium is owed to the insurer.

That premium deserves a clear word. Where the attorney issues the policy as agent for a title insurer, the agent keeps a share of the premium under its agreement with the insurer, as any title agent does. This is an established part of how title insurance is distributed, and the attorney should disclose it. When you compare quotes, compare the same four lines for each provider: the closing fee, the search, the premium for the owner's and the lender's policies, and recording.

What does a closing day look like, in figures?

A closing day runs in a fixed order, from the title update to the final reconciliation, and the settlement figures only work if every step lands. The worked example below is illustrative: a $420,000 purchase in an attorney-closing state, financed by a $336,000 loan (80% of the price), with an $8,000 deposit already held in the attorney's trust account, a $1,150 property tax credit from seller to buyer, a $198,400 payoff of the seller's mortgage and a 5% commission of $21,000 shared equally by two brokerages.

Two things in that sequence are easy to miss. The lender's $2,100 never enters the trust account, because the lender funds net of its own charges, yet it still appears on the buyer's statement as a cost. And the $1,150 tax credit appears on both statements and in no payment at all.

Whether the payments in step seven go out on the day of signing or later depends on the state's funding rules and on when the lender releases its wire. In some states a closing is not complete until the loan has funded and the documents are recorded, so the seller is paid a day or more after the table.

What should you ask a closing attorney before the closing?

Before a closing, you should ask the closing attorney whom they represent, what the title examination found, how and when the funds will move, and what the firm will charge, and you should ask early enough that the answers can still change something. A week before signing is useful; the morning of signing is not.

• Whom do you represent in this transaction, and will you confirm that in writing?
• What did the title examination show, and which items will be cleared before closing?
• Will I receive an owner's title policy, and what exceptions will it list?
• When will I see the settlement statement, and does it match the lender's Closing Disclosure?
• How should I send my funds, and by what number can I confirm your wire instructions by telephone?
• When will the seller, the brokerages and the payoff lender be paid: at the table, or after funding and recording?
• What is your fee, what does it include, and which other lines on the statement are paid to someone else?
• Who follows up on the release of the old mortgage and sends me the recorded deed?