Legal Question in Real Estate Law in Oregon

Re: Attorney presented us with $5k bill...

When you say, "they said that they didn't get the aforesaid Instruction into the Escrow holder in time to get their fees rolled into it, and so we need to pay their fees" I think "they" refers to your lawyers who were to be paid from the proceeds of the deal, right? If so, you may be correct in the sense that if the lawyers, the mortgage holder (the bank), and the buyer agreed that your attorneys would be paid from the escrow funds, then you have a point that they are responsible for the loss of those funds- after all, they were tasked with putting the transaction together.

On the other hand, contract law does not favor a result where someone who honestly worked hard gets nothing for their work. The question is who should reimburse them? One might argue the bank that collected the short sale proceeds, but this would require the bank to have specifically signed off on a provision in the short sale contract that provided for the attorney fees to be dealt out of the home's proceeds.

If that provision was not in the contract, then you may be able to say that the attorneys' own negligence in poorly drafting a document that did not cover their fees is the direct cause of their now being shorted $5,000 (in conjunction with their failure to provide proper escrow instructions).

Either way, I am not sure, how a court would ultimately rule, in large part because I am not able to analyze all the contracts and escrow instructions that were involved in this transaction. Also, to be fair, there are two sides to every story, and I would be curious what your lawyers are claiming (in their own words) is the basis for their fees, not to mention the bank's position on handing these fees back to the lawyers.