By Attorney Bruce M. Read

Real Estate Transactions – Costs and Process

FOR BUYERS OF REAL ESTATE

A typical transaction handled by our office representing the buyer of real estate involves one of the attorneys either assisting in the preparation of a Purchase and Sale Agreement (“P&S”) and negotiating its terms or representing a buyer who has already come into the office with a signed P&S.  In the case of buyers who need our services in negotiating and drafting the P&S, we would select the appropriate template from our database and tailor the terms of the offer to the client’s needs.  We have experience in drafting all the necessary forms relating to real estate sales, from raw land to primary residences, to second homes, to commercial properties.   We discuss with our clients their expectations regarding a budget for legal fees, and typically work on an hourly basis.  We currently bill at the rate of $225 per hour and itemize that time to the one-tenth of an hour so that clients can easily see where our time is spent on a day to day basis.

In a situation where a buyer arrives in our office having already signed a P&S, we begin our representation by examining the contingencies regarding due diligence and engage our paralegal to begin the title search.  If financing is involved, we will wait until a loan commitment is offered to undertake the title work in order to save the client that expense in the event that financing falls through.

A buyer in ANY real estate transaction is faced with the following costs:

• -State of Maine transfer tax ($2.20 per $1,000 of purchase price – this tax is owed by both buyers and sellers in all real estate transactions in the State of Maine);
• -Title search fee – we typically charge $275 to have our paralegal perform a search of the Registry records affecting the parcel of land at issue.  She will present her work to one of the attorneys who will then review it and follow up on any issues flagged.  The title examination will disclose what outstanding mortgages exist against the property as well as easements any other liens or encumbrances.  All matters of record are then listed in a title insurance commitment or a title certification letter and clearance of all outstanding matters is handled at closing.
• -Title insurance – this is a required cost in any transaction involving a lender and the premium is based upon the loan amount/purchase price.  Property owners are always afforded the opportunity to purchase a separate policy in their own name covering the full amount of the purchase price (as opposed to the loan amount) and the simultaneous issuance of both the loan and owners’ policy comes at a significant discount.  Loan policies are typically issued at the rate of $2 per $1,000 of loan amount and owners policies at $3.50 per $1,000 (which covers both the loan amount and the purchase price, naming the owner and lender as insureds). Please see the attached link for a more in depth description of title insurance matters.
• -Closing services – our office will prepare all the necessary documentation to close the transaction and will run all funds through our Client Trust Account.  We pay off existing mortgages and encumbrances, and issue checks to realtors, taxing authorities and other professionals for their services rendered in connection with the closing.  In typical transactions, our firm charges $575 to the buyer for this service.
• -Real estate taxes, water, sewer and other municipal expense prorations.  At closing, the amounts owing for these charges must be prorated between buyer and seller based up their respective periods of ownership.  Our office will obtain figures from the municipality and apportion all those amounts, whether due in the future or previously paid such that buyer and seller will each be charged only for their period of ownership.  
• -Recording fees – The Registry of Deeds charges a fee based upon the number of pages of a document to be recorded.  Buyers are responsible for recording the deed of conveyance (typically around $15), the mortgage deed (typically around $50), and any other bank documents that need to be recorded at the Registry of Deeds.

In addition to the above costs, real estate transactions can involve more work on the part of the attorney due to any number of factors.  All time spent by the attorneys on matters outside the scope of what is outlined above are billed at our current hourly rate, which we itemize to the one-tenth of an hour.  We are careful to inform clients of such additional costs so that they can make informed decisions. 

FOR SELLERS OF REAL ESTATE

For parties needing legal representation in the sale of real estate, the costs are fairly straightforward.  Sellers are responsible for preparing the deed of transfer to the buyers and our fee for that service (including the required transfer tax form) is $150. Additional work necessary to assist sellers is billed at our hourly rate itemized to the one-tenth of an hour.

In addition to the above costs, all sellers of real estate in Maine are subject to the following:

•  -$2.20 per $1,000 of purchase price payable to the State of Maine (applicable to both buyers and sellers).
• – FOR OUT OF STATE SELLERS ONLY – 2.5% of the total purchase price payable to the State of Maine.   This amount is an anticipation of an out of state seller’s capital gains tax liability and must be collected at closing unless the sellers are able to obtain an exemption or discount from the State Treasurer’s office.  We often assist seller clients in obtaining those exemptions and reductions.

FOR REFINANCE TRANSACTIONS

Our office closes refinance transactions for many area lenders.  Our current charge to lenders (which is passed along to the borrowers) to close a refinance transaction is $475. If asked, we will also provide title insurance which, depending upon the loan amount, is typically in the range of $2.00 per $1,000 of amount borrowed.  In Maine, all borrowers have the right to select their own title attorney.  We can serve in that limited role for a refinance customer even if the bank uses another closing agent.  Our fees for that service, which typically involve updating the title and issuing new title insurance, are $200 plus the title insurance premium.