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I recently was involved in a closing where JP Morgan Chase and Fidelity National Title ended up "stealing" my attorney fees by not allowing them on the HUD. How many times has this happened under all sorts of pretenses: You didn't request your fees be added to the HUD in writing; The lender didn't list you as receiving any attorney fees; Your fees don't match the good faith estimate. HERE'S THE BOTTOM LINE: If buyer's attorneys cannot be paid pursuant to their written fee agreement with their client in a secured way through the HUD then something is going to have to change.
Specifically, what happened in this case is the following. Buyer's had a total fee of $450. This fee was increased due to a cancellation of a schedule closing less than 48 hours prior to the closing date. All of these terms were in the written fee agreement which the clients signed. Under our fee agreements, clients must pay 1/2 of the fee up front which the client's did. Therefore at closing, $225 of the regular rate and $225 additional for the abruptly cancelled closing resulted in $450 due at closing.
The $450 was requested to be added to the HUD and Fidelity placed it in line 1307. Unfortunately, JP Morgan Chase objected and said that the fee should be placed in line 1100 section. Fidelity's software supposedly doesn't allow this. JP Morgan Chase alleges that this is what the RESPA law requires, but Fidelity doesn't allow this.
To settle the matter, I ended up slashing my fees by 50% for a payment by check at the closing from the client. What is most sinister about this is that the client had more than $1000 that they had to forfeit in seller paid credit for closing costs because they could not get money back at closing. My total fee could have been paid out of this had JP Morgan Chase not objected or Fidelity had their software updated to comply with JP Morgan Chase's view the RESPA law.
SOLUTION: All clients should pay 100% of the estimated flat fee to the buyer's attorney up front and deposit into the client trust account. Upon the failure of the closing, the buyer's attorney could specify in their fee agreement that 1/2 of the estimated flat fee be paid from retainer and 1/2 returned. Upon successful completion of the closing, all fees wold be paid from the retainer. Any special charges such as trip charges, cancelled closing fees and other miscellaneous charges could be either invoiced to the client outside of the HUD or invoice and paid via the HUD at closing .....subject to lender and title company approval. Bottom line - most of the time all of the fee would be paid.
The other option is for real estate attorneys to either take these closings on a loss leaders or simply exit the representation of buyers.
Attached is a model representation agreement for review.
To download a copy of our proposed Illinois Buyers Residential Real Estate Client Representation Form, please click Download CRA
Specifically, what happened in this case is the following. Buyer's had a total fee of $450. This fee was increased due to a cancellation of a schedule closing less than 48 hours prior to the closing date. All of these terms were in the written fee agreement which the clients signed. Under our fee agreements, clients must pay 1/2 of the fee up front which the client's did. Therefore at closing, $225 of the regular rate and $225 additional for the abruptly cancelled closing resulted in $450 due at closing.
The $450 was requested to be added to the HUD and Fidelity placed it in line 1307. Unfortunately, JP Morgan Chase objected and said that the fee should be placed in line 1100 section. Fidelity's software supposedly doesn't allow this. JP Morgan Chase alleges that this is what the RESPA law requires, but Fidelity doesn't allow this.
To settle the matter, I ended up slashing my fees by 50% for a payment by check at the closing from the client. What is most sinister about this is that the client had more than $1000 that they had to forfeit in seller paid credit for closing costs because they could not get money back at closing. My total fee could have been paid out of this had JP Morgan Chase not objected or Fidelity had their software updated to comply with JP Morgan Chase's view the RESPA law.
SOLUTION: All clients should pay 100% of the estimated flat fee to the buyer's attorney up front and deposit into the client trust account. Upon the failure of the closing, the buyer's attorney could specify in their fee agreement that 1/2 of the estimated flat fee be paid from retainer and 1/2 returned. Upon successful completion of the closing, all fees wold be paid from the retainer. Any special charges such as trip charges, cancelled closing fees and other miscellaneous charges could be either invoiced to the client outside of the HUD or invoice and paid via the HUD at closing .....subject to lender and title company approval. Bottom line - most of the time all of the fee would be paid.
The other option is for real estate attorneys to either take these closings on a loss leaders or simply exit the representation of buyers.
Attached is a model representation agreement for review.
To download a copy of our proposed Illinois Buyers Residential Real Estate Client Representation Form, please click Download CRA
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