For years we have been sending seller-clients an engagement letter that also requests important information from sellers to expedite the process, e.g., payoff account numbers, HOA/regime contacts, whether a POA is needed, etc. While other law firms have been slow to follow suit, a recent South Carolina case should spur lawyers to bei more diligent. The Court decided what we have already known from our ethics rules, i.e., that informed, written confirmation is necessary in explaining and/or limiting the scope of representation. Just as real estate licensees should not provide client services to a buyer or seller until the scope of services is defined in writing, lawyers should not provide legal services until an engagement letter is acknowledged by the seller. Smart lawyers go ahead and use the engagement letter as a means of gathering important information so the process is smooth.
Because of TRID and all the new regulations, it has become more important than ever for the seller to timely complete an engagement letter and return payoff information, etc. to the closing attorney. Lenders are working with less staff, which means it takes longer to complete payoff requests. Very rarely do we get a payoff on the same day it is requested. Recently, payoffs have taken as long as 3 weeks to obtain; and HELOC payoffs oftentimes take longer because banks want to make sure checks written before the “hold” on the account have cleared so the payoff is accurate. More lenders are requiring a signed seller authorization in order to process a payoff request, which is included in our engagement letter.
Lastly, because of the Closing Disclosure requirements, lenders are required to have HOA/regime fees and prorations before sending out a Closing Disclosure, which means we have to gather that information much earlier than before. If the seller engagement letter is delayed, we lack key information to get what lenders need to timely provide the Closing Disclosure. As you can imagine, delays on the front end mean delays in closings. Gone are the days where the seller can delay cooperation and still expect to close on time.
Although we may not like dealing with engagement letters and requests for information at the beginning of the process, failing to do so will undoubtedly delay closings to everyone’s detriment. Of course, closing attorneys do not want to have to explain to someone involved in the transaction why there is a delay!
Today’s historical fact: Taylor Street is named for Taylor Plantation, which was owned by attorneys James and Thomas Taylor. The City of Columbia sits on 650 acres of the former plantation. Additionally, Richland Street and Richland County were both named after the Taylor’s other plantation called Richland, which was named for the rich soil found in the Columbia area. Obviously, they did not know about the red clay in the suburbs!
Have a great weekend!