The process of buying a house can be daunting. Beyond the emotional roller coaster of showings and offers, you must somehow walk the line between not getting attached and envisioning your future children (or pets) playing in the backyard. It means exercising patience and resilience while also moving at lightening speed to beat out other potential buyers. Even the logistics of the process that come after your offer is accepted present a challenge – one that only the best real estate lawyer is ready to take on.
After you save for a down payment, find the house of your dreams, secure your credit and get approved for a mortgage you submit an offer. In some markets – particularly the high-demand Chicago neighborhoods – this can be substantial. Even after the offer is accepted, however, there is still the final hurdle to homeownership—the pre-closing process and closing itself. Unless you’ve been in the real estate game for a long time, the sheer magnitude of the mounting expenses can go well beyond what you believed you had to pay for your new home. It’s enough to send any sane person running. Luckily, having a good real estate lawyer in your corner during the final countdown can make all the difference, even when it comes time to pay the closing costs on your new home.
The Value of Expert Advice
It’s easy to believe that hiring a professional just means another fee you have to pay before you can actually start making your new house a home. However, spending money on good legal help can help you save money in the long-run. To provide a little context, here are some of the a personal legal representative can help you mitigate or avoid the lion’s share of the closing costs on your new home. They may help you avoid going into your personal pocket to pay closing costs altogether, and the benefits of hiring an attorney come clearly into focus once the complexity of the closing process sets in. This is particularly true in the Chicago area, where closing costs average higher than many other places in America.
Closing Costs Really Add Up
Closing costs can be substantial. Although the specifics will vary based on where, what, and how (that is, with what type of loan) you are buying, here are just a few of the closing costs that may be included in the final bill:
- Application fee: paid to the lender for the costs of processing your mortgage loan application, this can include a credit check and potentially the appraisal.
- Appraisal fee: paid to a company who conducts your appraisal to determine the fair market value of the house.
- Escrow fee: paid to the title company for completing the closing process.
- Credit report: paid to the mortgage company to pull your credit history and score, helping to determine your interest rate.
- Mortgage insurance and property tax deposit: occasionally required to be placed in escrow in an amount equaling two months of your future payments (just in case).
- Inspection: paid to a professional inspector to ensure the condition of the property is up to snuff and to identify any necessary repairs.
- Homeowners insurance: usually required by the mortgage company and paid to an insurance company to cover any possible damages that may occur during the year after closing.
- Title insurance: paid to an insurance company to protect the mortgage lender in the event the seller does not actually own the house he or she is selling. A good title insurance representative can be invaluable in this process, and your real estate attorney can connect you with a reputable provider.
- Origination fee: paid to the mortgage lender to cover administrative expenses involved in providing the loan, including research conducted on you as a buyer.
- Private mortgage insurance (PMI): a widely resented fee paid to the mortgage company if you are unable to put a full 20% down on the house purchase price.
- Property taxes: a percentage of the price of your home paid to the local government to fund public resources like nearby schools.
- Recording fee: paid to the local government entity, such as a city or county, to record the new public land record.
- Title company search fee: paid to the title company to conduct a search of the records pertaining to the property, making sure no one else has a claim.
- Underwriting fee: paid to your mortgage lender for the work of determining whether or not you are a suitable candidate for a loan.
These are just examples of common closing costs; the list goes on.
Manage Closing Costs in a Manner that Makes Sense for You
To be sure, every home purchase is different, and so is every distribution of closing costs. Sometimes, the seller and the buyer split the closing costs evenly and sometimes they are paid in full or in greater proportion by either the seller or the buyer. Having a good real estate attorney on your side will help make sure you get the best of the bargain. But whatever the distribution, closing costs and all of their component parts present a serious hurdle to successful completion of the home buying process.
In all, closing costs can be expected to cost somewhere between two and five percent of the purchase price of your new house. This seems like a small range, but remember that we are talking about percentage points on very large sums. The uncertainty regarding how much closing costs may be and who will pay them makes a lawyer come in very handy.
How an Attorney Can Help With Your Closing Costs
When you hire an attorney to assist in the closing process, the first and most important role they play is to carefully read every document involved in the closing process, combing through the fine print and ensuring you fully understand everything you are agreeing to do and pay. The peace of mind afforded by this safeguard alone can be worth its weight in chocolate chip cookies baked for a Saturday open house.
Beyond serving as your adviser, an attorney is also your representative throughout the negotiation process. They can be your liaison in communicating with the seller, identifying potential costs coming down the pike, drawing on their expertise and experience in order to advise you as to whether those costs are reasonable, and assisting you in the professional bargain of talking the other side down where necessary. Indeed, the simple presence of a legal professional on your side of the table can do wonders in contravention of the frequent pitfalls of being a novice homebuyer, including being an easy target for the many people involved in the process who, at best, are trying to earn their fair share of the cut and, at worst, may even be looking to take advantage. After negotiations are complete, closing attorneys serve the additional and essential role of handling any potential disputes that may arise with regard to title, the mortgage company, inspection issues, or otherwise.