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

What does the law require?

Iowa has no statute in the chapters read that makes an attorney mandatory for a home closing. What the law does is limit who may do which work.

Iowa Court Rule 37.5 (limited real estate practice) says that selecting, preparing and completing legal documents for real estate transactions is the unauthorized practice of law when a nonlawyer does it, unless the nonlawyer acts for themselves as buyer or seller. The rule then carves out a short list for residential deals of four units or fewer. On a buyer’s or seller’s written request, a nonlawyer such as a real estate agent may fill in these form documents:

• purchase offers or purchase agreements, as long as the parties get written notice that these are binding legal documents and that they should seek competent legal advice before signing;
• the groundwater hazard statement (Iowa Code § 558.69), which must accompany the declaration of value filed with the county recorder;
• the declaration of value form (Iowa Code § 428A.1), the transfer-tax filing.

A nonlawyer may not prepare:

1. deeds;
2. real estate installment sales contracts;
3. affidavits of identity or nonidentity;
4. affidavits of payment of spousal or child support;
5. any other document needed to correct title problems.

A nonlawyer also may not charge for preparing the permitted forms. In practice, the deed that moves ownership has to be prepared by the seller, the buyer or an attorney.

Why the title system points to an attorney

Iowa does not use the title insurance policy common in other states. Instead the Iowa Title Guaranty division of the Iowa Finance Authority offers a state-run guaranty. Before it issues one, Iowa Code § 16.91(6) requires “evidence that an abstract of title to the property in question has been brought up-to-date and certified by a participating abstractor,” and “a title opinion issued by a participating attorney.” The attorney who writes the opinion may issue the guaranty certificate under the authority’s rules (§ 16.91(7)).

The program’s own description of the steps:

1. An abstractor searches the public records and updates the abstract.
2. A participating Iowa attorney examines it and writes a title opinion that lists any defects.
3. A commitment is issued from that opinion.
4. Every defect listed must be cleared to the attorney’s satisfaction before closing.
5. After closing, the abstract and opinion are updated, and certificates are issued to the owner and the lender.

Whether your lender requires the guaranty is a question for the lender. See our title insurance page for Iowa and the national guide to title insurance.

Who runs the closing?

The closer prepares closing documents, collects the documents that clear title, gets signatures, disburses funds and records the deed and mortgage. Iowa’s guaranty program, in its June 2021 manual, lists three kinds of “participating closers”: an Iowa-licensed attorney disbursing funds through a lawyer trust account, a closing agent licensed by the Iowa Division of Banking, and a real estate broker disbursing through a real estate trust account. The manual is a few years old, so ask the lender or closer which of these will handle your file.

State law separately regulates closing agents. Chapter 535B defines a “closing agent” as “a person who is not a party to the real estate transaction, who provides real estate closing services,” and requires a license from the Division of Banking. It exempts an Iowa attorney acting where the Iowa Supreme Court regulates the attorney’s conduct (§ 535B.2(8)), and a licensed real estate broker only “while engaged in practice as a real estate broker” (§ 535B.2(6)).

What does an attorney cost?

The sources read give no typical Iowa fee, so none is stated here. The cost depends on whether the attorney only examines title or also prepares the deed and runs the closing, and on the complexity of the title. Ask for a written fee before you hire anyone. The Loan Estimate and Closing Disclosure your lender provides will show title and closing charges (see our closing costs guide).

When is an attorney worth it anyway?

Because a nonlawyer cannot prepare a deed or a title-correcting document, and because title defects must be cleared to the participating attorney’s satisfaction, you will deal with a lawyer’s work in many Iowa sales. Consider hiring your own attorney if you buy without a lender, there is a title problem, you are using a real estate installment contract (which has its own disclosure rules under Iowa Code § 558.70), or the seller is an estate.