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Do you lawyers expect to get paid even if a real estate closing does not go through?

Chicago, IL |
Filed under: Real estate

Generally speaking, a real estate attorney hired to do a closing, if the closing does not go through, is the attorney still expected to get paid? I know it is an odd questions, but I was curious.

Attorney Answers 7

Posted

Perhaps this explanation sounds self-serving, but I assure you it is sincere. When clients balk about paying me even if this closing does not occur, I explain to them that I am the only one in the transaction who is not going to be paid only if it closes. The real estate agent does not get paid unless it closes, nor does the loan officer or closing agent. So, as nice and professional as those folks may be, they have a vested interest in making sure the darn thing gets closed no matter what. Since I am getting paid either way, I am only interested in my client's welfare. Sometimes it does not make legal sense to close, and since I am not worried about not getting paid if it does not close, I will tell you so.

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Posted

The attorney will get paid according to the terms of the fee agreement. If it specifies that the attorney will not get paid unless the property closes, than the attorney does not get paid. I doubt many fee agreements have this provision, as the attorney puts in time and effort, regardless of the outcome.

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Posted

It is a matter of what the policy of the real estate attorney. Generally, if a transaction "falls apart" shortly after the contract is signed then likely the attorney has not done too much work. However, when a contract comes to my office, I have a duty to review it and, if I have concerns, then I talk with my client and/or send a letter to the other attorney requesting modifications to the contract. This takes time. Assuming we make it past that point, then we are waiting for the home inspection and appraisal. In the current market it is not unusual for the buyer to make demands for further changes to the contract (repairs, credits, price reductions and more). This all takes time to talk to everyone, negotiate, give advice and draft emails, letters and riders. Theoretically the realtors could do much of that work but it usually doesn't work out that way. Lastly, we arrive at the closing, sign all kinds of paperwork, wait for 2 or more hours and then find out that the lender was pulling back the loan for the buyer due to some obscure issue that they failed to note at some earlier time.

So, yes, in many instances, I believe the attorney is entitled to compensation for spending anywhere from 1 hour to 10 hours working on a real estate transaction regardless of whether it closes or not.

Those are my thoughts have been in many real estate transactions. Thanks for asking.

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Posted

There is no one answer to your question - other than "it depends",

It depends on the contract with your attorney. Some will bill by the hour, some will do it for a flat fee, some will do it for a flat fee with a "non-refundable" deposit of a portion of the fee with the remainder to be paid at closing, and other will only get paid if the transaction closes.

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Posted

Typically yes. It depends what was in your agreement with your attorney.

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Posted

Yes, you do if the Fee Agreement with the Attorney requires you to do so. Real Estate Attorneys do the majority of their work prior to closing and they, like everyone else, want to get paid for the work they have done. Many times, Attorney's Fee Agreement will indicate that the fee paid will be prorated for the work they have done based on their stated hourly rate. The Fee Agreement will determine this.

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Posted

Thank you for your question. The expectations, terms of legal services, and payment are typically governed by the engagement letter. The engagement letter is often prepared by the attorney upon a request for representation. You will have the opportunity to negotiate the terms of representation. If you approve of the agreement, you should honor the terms of the agreement.

The engagement letter should clearly state when fees are deemed to have been earned. Some attorneys charge a flat fee which must be paid in advance, some require a portion of the fee to be paid in advance, and other require the fee to be paid at closing. There are others who charge by the hour, primarily in commercial real estate transactions.

If you retained an attorney for representation ONLY for the actually closing day and the closing did not go through, it would be reasonable to assume that the attorney should not expect payment if the closing did not occur. However, if the agreement states otherwise and your attorney has taken the time to be present at the closing and for reasons outside of his/her control that the closing is not completed and funds are not disbursed...your attorney should still be compensated for his/her time.

This is a short answer to a question that I'm sure is filled with many more details than you've shared in the body of your question. Every scenario is unique and the terms of each relationship are, as well.

It pays to have counsel...and having the resource is priceless.

You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Attorney Shara Danielle Harris and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of Avvo.

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