Attorney Fees: You Can’t Have it Both Ways and Neither Can They

From the FAQ Page:

COMMENT: I contacted one attorney on your list and had a consult with another firm which is not part of your list but has been referenced quite a few times in the blogs. I have a problem with both and find them a bit predatory (sorry guys and gals) and quite frankly, am reticent to contact any others.
One charges $350 a month and the goal is to get the mortgage nullified due to discovery of fraud. If they succeed in this, they get a 40% interest in the property (new appraised value) in the form of a mortgage. Ok, that’s win-win I guess. They then go for legal fees and get a share of any fees recovered over and above their actual legal fees if successful in a counter suit against the lender.
If they instead get a workout/modification, they then get a 40% interest in YOUR savings in the form of a new mortgage with them. So now the homeowner has a modified mortgage with lender and a second mortgage with attorney, basically putting homeowner upside down, again. (Editor’s note: not necessarily — and remember whether you accept the settlement is strictly your decision and not the attorney’s decision).
Second attorney was similar but upfront fee for audit/retainer. If no fraud found, then only small portion of retainer is reatined to cover the audit. If they go forward with trying to defend/get a work out, etc./they charge by the hour AND get 33% of any savings. I assume same as attorney #1, in the form of a mortgage.
You all really see this as ethical?

ANSWER: YES AND NO. YES IT IS PERFECTLY APPROPRIATE FOR AN ATTORNEY TO GET PAID A FAIR FEE FOR HIS PROFESSIONAL SERVICES. YOU HAVE A CHOICE OF PAYING HOURLY, WHICH NORMALLY RANGES BETWEEN $250-$400 PER HOUR.

That is what people pay when they see a lawyer. In some cases, like personal injury (auto accidents etc.), lawyers have worked out a method of allowing clients to have access to their services even if they don’t have money. The lawyer takes what is called a contingency fee. That fee, which is fairly standard throughout most of the states is 1/3 of the recovery of the value awarded or settled to the client if the matter does not go to court, 40% if the matter goes into litigation, and 45% if the matter goes to appeal.

Sometimes the attorney will even advance the filing fees, discovery costs and expert witness fees in a case on behalf of the client. For these foreclosure cases, or mortgage disputes, the hours spent can be very intensive and time is money.

Prospective clients often forget that it is their case and their life and that the lawyer has nothing to do with it unless he chooses to accept the retainer arrangement. On the other hand, it is improper under most rules to take an interest in the property that is the subject of the dispute, particularly a home residence. But the fees still apply.

So if the only way you can afford to pay the lawyer is to get a mortgage or give the lawyer a secured interest in your home AFTER the case is settled, then in most cases the fee would be considered fair and the arrangement within the bounds of legal ethics. If the lawyer is taking a sum of money that goes far beyond the costs of the case and is basically charging you hourly PLUS the full contingency fee, then you are right — that is predatory. The situations you described do not seem predatory although your description sounds that way.

You have a choice of paying an hourly fee plus the costs of the case and the lawyer will be perfectly happy to take your case. You don’t want to or can’t pay that fee so you want the attorney to take a risk as to whether he/she will get paid at all. You object to the amount of the contingency fee because you feel you have already been the victim of predatory behavior. You would like them to work for you for less than they charge other clients and they are not willing to do that. Why should they?

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11 Responses

  1. I am not quite sure how it works. If I am facing foreclosure, do I hire an attorney, pay a monthly retainer and then use barely ethical methods to stay in my house as long as possible? I DID borrow the money and now I cannot pay it back. Why should I prolong my misery just to put money in my lawyer’s pocket? I hate to admit it, but I got in over my head. It was no one’s fault but my own. If anything, I feel I owe the bank an apology, not more headaches. What should I do?

  2. Some attorneys are making an effort to give cash-strapped homeowners a chance at effective representation. A thank you is in order, not accusations of gouging.

    Old saying: A little of something is better than all of nothing. If you prefer 100% of nothing to 60% of something, then walk away from your home. Assuming you are not currently making payments to a mortgage company, you could just give up and go rent an apartment or house for several times what your lawyer was going to charge in monthly fees. Or, you could pay your lawyer $350.00 per month and stay in your home while litigation takes place. I would really like to see how a family can rent housing comparable to their home for $350.00 per month. I would also like to see how you compare $350.00 a MONTH to the typical HOURLY fees of $200.00 to $1000.00 that this kind of litigation usually requires, often to the tune of tens of thousands before the end of the case.

    The rules say that if an attorney wins his attorney fees from the opposition, he has to deduct those fees from the contingency fee (the 40% of the home’s current value used in your example) or, it is even possible to get the entire contingency fee paid off by the losing side, LEAVING YOU (THE HOMEOWNER) FREE OF ANY OBLIGATION. Your lawyer much prefers the last outcome. Lawyers are not interested in becoming your next mortgage holder and will work hard to avoid that result. If your lawyer additionally pursues your opponents for the years of payments that you most likely made to the wrong party and all the other awards a homeowner could win, he should also receive something for those efforts.

    With a $350.00 MONTHLY fee plus contingency arrangement, one of a lawyer’s risks is not being able to even pay his overhead for taking your case. Good attorneys charge anywhere from $175.00 per hour to over $1000.00 per hour. Any attorney asking for $350.00 per month is asking for about one or two HOURS in fees on the LOWEST POSSIBLE FEE SCALE. Your lawyer’s time and the time his office staff put into your case will outstrip this many times over from in the first WEEK. Attorneys are offering these payment work-arounds so that they can help people who could not even dream of coming up with the $5,000.00 to $10,000.00 retainers plus $175.00 to $400.00 hourly fees that would be typical for such a case. These are fees typical in Washington State.

    Just as most lawyers still don’t “get it” even more judges don’t “get it”. Your attorney (who “gets it”) has an uphill climb and earns every penny. He had to, and continues to, spend countless personal hours and his own funds, learning to effectively fight these cases. He has to successfully educate judges and turn their prevailing prejudice against borrowers around and there are no guarantees on the outcome. No win means 40% of nothing and huge losses in time and expense for your attorney. If you can find a lawyer who truly “gets it” you are fortunate, because they are still rare. If you find one who will find a way to make his skills available to you via payment plans, you are especially blessed.

    In the meanwhile, while this fight is ongoing, if you are fortunate and your attorney offers this sort of payment plan, then you pay ¼ to ½ at most, of the cost to rent a home while you remain in your home. The fight can take years. The result can be well worth the effort and your lawyer shoulders most of the risk. If 100% of NOTHING still sounds like a better deal than this, you should take it.

    BTW: I am not saying you could not win pro se, but getting up to lawyer speed in a court is a full time job in any case. You chances of winning pro se (and I sincerely wish this were not so) are greatly diminished. I have fought in court with and without an attorney, and “with” (unless your attorney is absolutely unqualified) is definitely BETTER.

  3. I have to speculate that those writing about the allegedly “high” legal fees here have never been involved in any major litigation. Once a lawyer puts his/her name on any pleading representing someone they’re “in” – and can be sued; and worse brought before the bar for malpractice if the client FROM THAT POINT ON doesn’t receive COMPLETE and correct representation – DESPITE what the client pays, or doesn’t pay (or cant pay) ever again.

    Now in this instance we are tralking about taking on a BANK, who not only have teams of lawyers on retainer; but they are also well known for NOT playing “fair” and always will choose to “paper” the opposition to death, rather than compramise (obviously, or they wouldn’t be disregarding so much ethically and morally with their ruthless “for the money – damn the rest” foreclosure choices.) So, any lawyer who agrees to put his/her name on any pleading for you VERSUS A BANK is taking a huge risk that he/she is then going to then become “trapped” into answering literally REAMS of interrogatories, and countless motions, while NOT being paid anything, and “hoping” his client doesn’t “fold” under pressure (or just “quits” – which happens all the time) and all the while, if the attorney makes a mistake; or is lax in doing what will likely be at least a year of litigation without pay before any realistic chance to settle (banks NEVER give up easy – EVER)… then if the client isnt happy – or the judge thinks the attorney didnt do a sufficient job (free! Or, a “whole” $500 a month – that doesnt even pay for the service of process; copies; filing and secretarial fees required!) – THEN he/she can get “charged” with negligent representation or malpractice, brought before the bar – or “sued” by the client who he’s worked “free” for!

    And, to agree to this ridiculous scenario vs “A BANK” – whose entire legal strategy is to intentionally “beat up” opposing attorneys by PILING ON EXTREME AMOUNTS of legal pleading’ motions and ‘whatever else” they can – specifically because they KNOW they are financially superior to the homeowner, and can pay their attorneys to do all sorts of “work” the homeowner likely wont be able to pay to fight against… Frankly, these lawyers must be VERY good, and VERY confident to even consider a “partnership” IE: a shared reward, based on a victory that will ONLY pay them if they win in the END, against a major bank. Moreover, if all the attorney can share in is a “house” – and the client needed him because the client wasn’t paying a mortgage payment; the client certainly WONT have the credit to be able to take out the cash in a “loan” on the equity – so I dont see how the lawyer’s going to even get paid (at least right away) so the lawyer must really TRUST the client too.

    Personally I thinnk these lawyers charging “a few hundred a month” must be either great “freedom fighters for the cause” – or they’re NUTS!

    (As for the “broker” trying to compare his % fee – theres absolutely NO comparison…

    As a R.E. “broker” you are paid to provide certain specified paperwork that is always the “same” forms and has a “correct” formula (and others can offer the same for the same or less fee.) Your paperwork isn’t made to “compete” with some other “possibly better judged” paperwork that GOES BEFORE a judge to steal the property from your client – and “challenges” your clients right to even have the property – VERSUS another submission alleging that you’re “wrong” so ANOTHER agent’s client “should “win” the property!

    Nor do you have to answer countless motions brought against your client’s alleged wrong-doing; for which you would have to write literally hundreds of pages of “original” free hand arguments to oppose an argument brought against your client (not just fill-out a “form” where the “correct” answers are already pre-determined.) Nor do you have to appear before a judge to “argue for” your client “versus” another advocate there to specifically attack your words, logic, and paperwork as ‘wrong.” … THIS “representation” can go on for a YEAR or more…

    And, even then, after ALL that – you ONLY get paid IF you “win” (and if your client “can” pay you at the end!)

    Are you kidding?

  4. I Agree with the fact that we all have to make a living, and if you are at the top of your game as professionals, so be it! you do deserve to get pay what you are worth, i agree however with “John” down below that some attorneys really get out of hand with their fees, shouldn’t the 35/40% fee be adjusted according to the actual amount being charged on? i mean shouldn’t the fee be variable/adjusted if the percentage charged it’s based on 300K and 200K ? for instance i think that 40% of 200K is preposterous. I’m in no way suggesting that you give up your knowledge for nothing, however i think this is a great opportunity for attorneys to step up to the plate and show their human side, if they were to adjust their fees, for instance say to 25/30% knowing that they are at the elite attorneys and they will be closing/winning lots of cases, they will still make tons of money by skilfuly helping homeowners achieve their goal which is most commonly geared towards keeping their home.
    Frankly I think that if an attorney is so focused in the money end of this economic drama that is killing our country right now, maybe he is not so confident in his ability to win many cases hence his “money driven” approach. I myself have been taken by probably one of the most incompetent attorneys i have ever dealt with, in my desperation for keeping my home, i did put my trust and money on this guy who turned out to be the biggest goof ever! he doesn’t understand the “real” problem, his attitude is the “i don’t give a crap”, “you created this problem for you” type of guy.
    i am a professional at what i do, and i act accordingly and many times i have bent my fees/charges so that i can accommodate my client’s needs and at the end I always make a heck of a lot more money anyhow because i get lots of referrals! now this is my humble opinion on the subject matter. take it as you may, respectfully, Charlie. To victory America!!!!!

  5. I like these people too. HOWEVER, we need to get everyone on the same page. let’s hear from all those who would come from a training seminar for the auditors so they can do a complete, job, make more money and do a better job for the homeowners. Something includes title record, chain of title on note and mortgage, securitization, appraisal etc.

  6. Thank you for posting that excellent response Cheri Robinson, Esq. , and MFI-Miami

    After reading the post from John the RE Broker, I was about to opine very much the same as both of you did.

    P.S. – I highly recommend MFI-Miami for forensic loan auditing

    Russ

  7. 100% in agreement.

    Most people have acquired either voluntarily or by fraud a home in conditions that for the most part are unrealistic and predatory in nature. Most people have actually gotten involved in a legal issue that is manifesting itself in financial terms. When we buy a home we sign hundreds of DOCUMENTS, these documents create certain commitments on our part that in order to be removed, vacated or modified will require the expertise of someone who can decipher them, some one to do the proper compliance testing of those documents and disclosures and some one who is highly skilled and trained in those areas that involve the LAW.

    I do not believe that a good lawyer is expensive, it is not how much it costs, rather how the fees will be paid. Some attorneys and compliance auditors have difficulty in providing the client with a clear understanding of the actual value of their services, And I have to say that it is very difficult to do so.

    The people who are under stress due to this foreclosure issue should be flooding their legislatures with phone calls, forcing their government officials to change the laws, to educate them as to what you learn on this BLOG.

    Write to your state treasurer, flood them with letters, with phone calls. The hear from the lender lobbyists everyday, but they do not hear from you.

  8. An attorney charging 30-40% contingency is not predatory. Like Neil said, it’s either this or pay the attorney $300-400 per hour with a $2500-$4500 upfront retainer. TILA/RESPA law and issues of securitization are a very complicated section of RE law so you will be paying a high dollar amount for attorneys who specialize in this field. Thanks to Neil, more and more attorneys are coming into the fold. But, if we learned anything from the OJ Simpson murder trial, it is you may have have the right to justice but you have to pay for it and with attorneys you get what you pay for.

    I get calls all the time from people who read blogs on this site and then call me for an audit which is great but they expect me to do it for free because they’re upside down on their investment properties. Then get upset when I tell them my pricing. I don’t know if these people are clueless or if it’s just the narcissism of today’s society.

  9. Being one of the Lawyers that get it, I feel compelled to chime in on the fees. There is definately a difference between showing someone real estate and collecting 25k because the client can afford a 500k home and analyzing, formulating, articulating and convincing a judge or jury of a legal position. Being lisenced to sell real estate by virtue of my lisence to practice law, I would hardly compare the two industries. No one ever, EVER asks the doctor how much the surgery will cost or how much the chemo will be or the kidney transplant. They simply have the procedure. Likewise no one tells the personal injury lawyer that the case is simple and that they are taking too much money. If they did, the lawyer would simply say “find another one “. Here the lawyers have all been trained extensively in this process and understand what we are doing. We are professionals in this and should be paid and treated as such. We understand that we are dealing with a population who is in distress and simply cash strapped. They desperately need our help and we are willing to put the work in. A contingency fee is our gift to you. A monthly fee is your committment to us.

    In personal injury each claim follows a similar pattern and the standards of proof are the same, the plaintiff is in it for the money and have medical expenses and are therefore unlikely to walk away from the case. In foreclosure each case is different and the circumstances have to be detailed. This is new and emerging caselaw which a real foreclosure lawyer must stay abrest of. We also have worry about homeowners who decide it is too stressfull and that giving up and handing in the keys to their home is eaiser. Should that happen we lawyers are left with a client with no assetts and we have spent many man hours with nothing to show for it.

    The bottom line is you need help. REAL HELP. Not the kind that comes from Credit Counseling that is paid for by the Lenders or State agencies. You can’t afford the help and we have accomodated you with a payment plan. If you don’t like the arrangments, find another lawyer. Remember you get what you pay for.

  10. I have to agree, 40% is sort of like jumping from one scam to another. I have been a RE broker for 17 years and the times I hear clients complain about 5-6-7% would fill a journal…so talking 1/3, 40% is like somewhere out of this galaxy. I would think that if an attorney fely like this was a “sure thing”, $20,000 would be agood week’s work…or even a good month’s work! If we talk about a $200,000 house and 40% that’s $80,000. Sure, the owner get’s $120,00 in that deal but I know of NO profession that get’s these sort of fee’s…holleywood agents??? no… This kind of percentage gives your profession the impression that is deserved. You are out for ytourselves, not the client you represent. Since it’s the “law” you deal with, I guess it’s more important than health care. I think you deserve to make a living, and the ones that are GOOD should earn at the top of the scale, but c’mon, NO performance based emplyment agreements get those sorts of numbers….NONE!

    Abe Lincoln would be rolling over in his grave.

  11. What state are you in??????

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