One of the considerations in deciding whether or not you should hire a lawyer to help you fight your foreclosure is the cost. It is important to understand how legal fees work to make sure that you do not end up paying more than you can afford.
Read on to learn more about the different ways that foreclosure defense attorneys charge for their services, the pros and cons of the various fee arrangements, and generally how much an attorney will likely charge to represent you in a foreclosure action. (Before you plunk down money, consider whether you should hire a foreclosure attorney in the first place.)
Most foreclosure defense attorneys structure their fee agreements with homeowners in one of three ways:
Some foreclosure defense attorneys charge an hourly rate for their services. The rate can range from around $100 per hour to several hundred dollars per hour. With this type of fee arrangement, the lawyer generally collects an initial retainer (an advance payment to the attorney before he or she starts to work on your case) of several thousand dollars. The retainer amount and hourly rate varies widely, depending on the attorney’s experience and the customary rates in the area.
How an hourly rate works. Say you give your foreclosure defense attorney a $2,000 retainer. She charges $200 per hour. First, she reviews all of the documents in your case. Then she prepares and files an answer and affirmative defenses to the foreclosure action. All of this takes five hours. The attorney also spends time preparing for and attending a foreclosure mediation with you. (Learn more about State Foreclosure Mediation Programs.) You’ll also get billed for the time it takes to make phone calls and emails related to your case. This too adds up to five hours. The retainer is now gone and the attorney hasn’t even attended any foreclosure hearings yet. Since the attorney must do more work, you’ll have to make further payments.
Pros and cons. The benefit to this type of fee arrangement is you’ll only pay the attorney for the amount of time he or she actually works on your case. The downside is that while the attorney will probably be able to give you a likely range of what you’ll pay in total, you won’t get an exact price as far as what the total cost of the foreclosure defense will be -- and hourly fees can add up quickly.
Some attorneys charge a flat fee to represent homeowners in a foreclosure. Generally speaking, the fee can range from $1,500 to $4,000 depending on the complexity of the case.
Pros and cons. The benefit to paying a flat fee is that you know ahead of time exactly what the total cost of your foreclosure defense will be. Whether it takes five months or two years to dismiss the foreclosure (or for the lender to complete the foreclosure), you know that this is all you’ll pay. The downside is that not all foreclosure attorneys offer this option and you’ll have to pay the fee upfront, which is difficult for many distressed homeowners.
Some foreclosure attorneys charge an upfront retainer (ranging from several hundred to several thousand dollars), and then a monthly fee (for example, $500) for each month that the foreclosure is pending. In addition, attorneys have been known to charge an extra fee on top of this (called a contingent fee) if the case is dismissed as a result of the firm’s efforts.
Pros and Cons. The benefit to paying a monthly fee is that you know exactly what your attorney will cost each month without variation. Also, the attorney has an incentive to keep you in the property for as long as possible (if that’s your goal). The downside is that you must pay this amount each month, even if little activity takes place in your case during that time.
Foreclosure defense attorneys will also charge for costs, such as copying, mailing, travel expenses, and court costs, on top of their fee.
When the recent financial crisis occurred, it became difficult for many people, including attorneys, to find work. As a result, many attorneys became foreclosure defense “experts” overnight marketing their services to homeowners in distress. In some cases, the fees that attorneys charge for services related to foreclosure are not reasonable. This means you need to be careful and do your research when hiring an attorney to fight your foreclosure. Ultimately, when trying to decide if a foreclosure defense fee is reasonable, ask yourself whether the attorney is charging a fair amount considering the services provided or is he or she trying to get a windfall from your situation.
Be aware, as well, that many scammers prey upon homeowners in foreclosure. Take steps to avoid foreclosure rescue scams.