You Deserve a Real Estate Attorney; Not just the cheapest closing lawyer that you can find

Posted by on Oct 9, 2018 in Uncategorized | 0 comments


Richard Herrmann

Client intake



I was at a closing recently where the seller choose to use the cheapest attorney she could find. After all it was just a simple real estate closing; how hard could it be? Just think of the money she would save. It ended up costing her thousands of dollars. It cost her a lot more money than if she has simply hired an experienced real estate attorney.

This is what happened. An attorney friend of mine hired me to write title insurance for closing where he represented the purchaser. The seller had recently lost her husband and moved to Florida. She had a relative, a brother, who was an attorney represent her. He worked in a big law firm in a specialized area of the law. He did not do real estate law. It was clear that he asked someone in the firm to help him but he still cost his sister THOUSANDS OF DOLLARS, NEEDLESSLY.

In New York state if someone who lives out of state is selling real property that is located in New York State, New York requires that they fill out a special form and they pay their income tax which would be due on the sale of the property at the time of the closing. Fortunately, this attorney knew about the form and he brought it to the closing. Unfortunately, since he was not familiar with all aspects of real estate law, which I feel requires knowledge of not just real estate law but also contract law, estate law, easement law and tax law he did his sister a great disservice. He was going to have her pay thousands and thousands of dollars of tax that was avoidable. He just didn’t know any better.

During the course of the closing and the small talk that ensued I as title was able to determine that although she had been a lifetime New York State resident she just recently moved to Florida. This means she was qualified for an exemption from much of  the income tax which would otherwise be due.

I was in a quandary. I didn’t want to embarrass her relative, but I did not want her to waste her money. When I saw the form with the thousands of dollars of tax which was about to be wasted I inquired if Seller’s attorney  might want to utilize the exemption. He advised that he did not think they would qualify and he did not want to risk it. I then while quickly reviewing the numbers realized that he had failed to take advantage of the stepped-up basis; that is how obvious the numbers were. I then inquired as to whether or not he had utilized the stepped-up basis. He advised that he had no idea as to what I was talking about. We then explained how since the husband had recently deceased the seller who inherited the property from her husband was entitled to a stepped-up basis on half the value of the house.

Fortunately, Seller’s  attorney was very cordial and he then explained that he was not experienced in real estate law. I suggested that he speak to other members of his firm and redo the tax form and then contact me the next day. As it was late in the day I could not record the documents in any event and therefore I would hold them as a courtesy for him. He then requested that I help him after the closing with the calculations. I agreed to help.

By redoing the calculations with the stepped-up basis I was able to save his sister, the seller,  several thousand of dollars in tax which was avoidable. They were very grateful.

I’m glad I was able to save them some money. However, I was disappointed that they did not agree to use the full exemption which would’ve resulted in her paying no tax whatsoever. She ended up wasting several thousand dollars.

The bottom line is, that if she had simply hired an experienced real estate attorney who knew what they were doing she would’ve saved thousands of dollars even after paying the attorney for his full legal fee. Instead, she was penny wise and pound foolish. She needlessly wasted thousands of dollars and her relative who was just trying to help wasted numerous hours of time. If he had simply used that time that he wasted trying to help his sister by billing a client while working in an area of the law where he was knowledgeable he would’ve made more than enough to pay for an experienced real estate attorney to perform the closing. He would’ve saved his sister thousands of dollars. Sad but unfortunately too common. Many people think it is just a simple real estate closing and they don’t need a real estate attorney. Sometimes they never realize how much their false thrift cost them. Ignorance can be very expensive even with a “simple real estate closing.”

You deserve an experienced real estate attorney.

*Disclaimer. Richard J. Herrmann Jr, JD/MBA, 440 Route 146, Clifton Park , New York, 12065 , 518-383-1299 is  an attorney at law experienced in all aspects of real estate law in New York State. I have represented buyers and sellers, title insurance companies, and lenders at closings. This includes both residential and commercial properties. If you are interested in representation please contact me. Thank you. Rich

Upstate New York Buyers Should Purchase Owner’s Title Insurance *

Posted by on Feb 3, 2016 in Real Estate, Title Insurance | 0 comments

In upstate New York many buyers do not purchase an owner title insurance policy. This seems to be a throwback to the days of how closings used to happen. Before the government basically took over the mortgage industry and required that borrowers buy mortgage title insurance, the cost of owners’ title insurance resulted in a custom of no title insurance. This happened in part because sellers gave warranty deeds, the attorneys actually read the abstracts of title and gave title opinions (of course their legal fees were higher as well) and the incident of fraud was low.

Downstate buyers always purchased owner’s also known as fee title insurance. Downstate, warranty deeds were not given and sellers were more anonymous. Title insurance was the only practical way of protecting ones purchase; suing a seller on a warranty just was not a realistic option.

Now with the requirement that borrowers purchase mortgage or lender’s title insurance for the lender, buyers should purchase owners title insurance. This is due in part to the lowered cost; a buyer receives a 70% reduction in the mortgage policy rate when they simultaneously purchase owner title insurance. This is a one-time expense.

Fee title insurance can help realtors. In addition to covering title claims Fee insurance can be a deal saver on future closings. I was recently a lender attorney on a closing that couldn’t be scheduled due to a 20 year old open mortgage from a prior owner that should have been discharged of record. Of course the old bank was out of business and the prior parties were gone. Nobody wanted to put forth the effort to clean it up. If the sellers had had a fee insurance policy an indemnity letter could have been issued and the closing could have proceeded without delay. Since it was an old mortgage nobody had a loan number or a social security number or authority from the prior debtors. The mortgage rate lock date passed and otherwise unnecessary mortgage extension fees were incurred. The parties argued over the fees and the delays. The deal almost fell apart. If the deal did fall apart then the realtors would have had to start over. The realtors had to struggle to keep the sale alive. Fortuitously, the mortgage broker knew the husband of the senior partner of the sellers’ attorneys firm and made some calls and got them to move. That’s how protracted the situation had become.

At closing, the sellers had to place thousands of dollars in escrow; they complained throughout the closing. Escrow agreements had to be negotiated and executed. Fees increased and we still don’t know how much more the sellers will have to pay to cure title; they might have to sue which is always expensive to clear title. This work and expense could have all been dumped on the title insurance company and the additional expenses (which were far greater than the cost of title insurance) could have been saved. Don’t be penny wise and pound foolish; have you buyers purchase an owners title issuance policy. The deal you save may be your own.

*Conflict disclosure. I am an examining counsel for a national title insurance company and I earn a fee for the work that I do from the title insurance company when I research and prepare (sell) a title insurance policy. However, as the title insurance rates are set by the NYS insurance department the borrower’s cost for their title insurance does not increase because of this arrangement.

Disclaimer: You’re not a client and there is no attorney-client relationship or privilege until after you retain the firm and the firm agrees to represent you.