Do you need a real estate attorney to close in Delaware?

What the law requires

The rule comes from the Delaware Supreme Court, not from a statute. On May 31, 2000, the Court approved a decision of its Board on the Unauthorized Practice of Law, dated March 8, 2000. The Court’s digest lists four holdings:

1. A Delaware-licensed attorney is required to conduct a closing of a sale of Delaware real property.
2. A Delaware-licensed attorney is required to conduct a closing of a refinancing loan secured by Delaware real property.
3. A Delaware-licensed attorney must be involved, “in a direct or supervisory capacity,” in drafting or reviewing all documents affecting transfer of title to Delaware real property, or where such property secures a debt. The one exception is a home equity loan where the lender acts on its own behalf (pro se) and no evaluation of exceptions to title is required.
4. An attorney’s participation is “necessary” in evaluating the parties’ legal rights and obligations, representing the buyer in examining the title and removing exceptions to it, supervising the disbursement of funds, and answering questions about the legal effect of the documents.

That makes every ordinary sale and refinance in Delaware an attorney-supervised event.

What a real estate agent can and cannot do

A real estate license is a different thing from a law license. Title 24, Chapter 29 requires a license for anyone who provides real estate services (§ 2901(a)). The same section says the chapter does not include “the services rendered by an attorney-at-law” (§ 2901(e)(3)). The Real Estate Commission’s Consumer Information Statement describes the licensee’s role as a statutory agent. It says agent compensation “is not set by law and is fully negotiable” and that there is no standard commission. It does not authorize an agent to conduct the closing. See real estate commission for how agents are paid.

Who is the attorney working for?

Item 4 of the Court’s ruling mentions “representing the buyer in examining the title.” In practice, a buyer should find out in writing who the closing attorney represents, what the fee covers and whether the attorney also represents the lender. The sources I read do not say how the roles are divided. They do not say whether one attorney may act for both sides. Ask the attorney you pick, and ask your lender what it requires.

What does a closing attorney cost?

No official source I read gives a typical Delaware attorney or settlement fee, and the Court’s ruling does not set one. Do not rely on a “typical” figure from a general website. The fee is a line on your Loan Estimate and Closing Disclosure, two federal forms from the Consumer Financial Protection Bureau (CFPB). The lender must give you the Loan Estimate within three business days of your application, and you must receive the Closing Disclosure three business days before closing (CFPB). Compare several attorneys’ quotes against the Loan Estimate. For all the other lines, see closing costs in Delaware and closing costs explained.

What the attorney does at closing

Based on the four holdings above, the attorney’s role covers:

• Title. Examining the title and removing exceptions for the buyer; see title insurance explained.
• Documents. Drafting or reviewing the deed and the mortgage or deed of trust.
• Money. Supervising the disbursement of funds. See also earnest money and transfer tax.
• Questions. Explaining the legal effect of the documents, such as the deed and any restrictions that run with the property.

When to involve an attorney earlier

Because the closing attorney is required anyway, you can ask for a review of the sales contract before you sign. The seller’s condition report is signed by both sides and becomes part of the purchase agreement under 6 Del. C. § 2573, so it is worth having a lawyer read it (see seller disclosure). Likewise, if you buy at a sheriff’s sale, legal advice is worth getting at once (see foreclosure). For a local example, see Wilmington.