Sunday, September 4, 2011

Understanding a Real Estate Closing

How often do you find yourself sitting at a closing table getting ready to sign your life away with the purchase of your new home?....Perhaps once or twice in your lifetime, maybe more?  With the average span of seven plus years in between the purchase and sale of your home, this time lag coupled with the plethora of paperwork that comes along with the complexity of a real estate transaction, could make you apprehensive upon entering the doors of the Title Company. I'm here to help explain the process and ease the anxiety for those who find themselves pen in hand at the closing table.

With a seasoned Realtor by your side, and a team of experts associated with that Realtor, you should sit comfortably knowing that they've all done their job to help make it a smooth transaction, yet with much diligence things can still go wrong. With so many variables and people involved in the process, it takes a team effort all doing their part and staying on top of things to see it through to the end.
  It all begins once you've signed and executed your purchase contract for your dream home. Some Realtors, including myself, may have a relationship with a title company that will open title when they take a listing in order to ensure all obstacles are resolved prior to the house going under contract. What are some of the hurdles they look for? Beginning with the contract, it is the responsibility of your agent to ensure updated promulgated forms are being used and fully completed, signed and executed.

 First item to note on the contract of importance would be the parties to the contract…who are they and are they the only one with legal capacity to buy or sell the property? Are there any implications with ownership, i.e. deceased spouse, divorce, probate of a will, power of attorney, etc.?
Next, would be the property that is being conveyed particularly the legal description of the property and everything associated with it including the complete description and location. Complications can arise with surveys, easements, home owners associations, type of ownership, leases, taxes, insurance claims, exemptions, liens….these are all items of importance which should be addressed both by your real estate agent as well as the Title Company.

Which brings us to the ever-perplexing title commitment, the commitment to issue title insurance on the property? It is the instrument that reveals all the aforementioned issues that could throw up roadblocks on the road to a smooth closing. That is why it is so important for you to discuss the contents of this document with your real estate agent and or escrow agent at the Title Company as soon as you receive it.
 If you are the seller it is important to read over, understand, and answer any topics noted on Schedule C of the commitment which discusses such things as mortgage payoff, taxes or liens on the property and marital status.  As the buyer in the transaction you will want to read and understand topics particularly the “exceptions” noted in Schedule B; these items include exceptions to the title that are not covered by the title insurance, as well as, easements and survey issues. Schedule A of the Title Commitment states the who, what, where and how much information about the subject property, i.e. current owner, legal description of property and balance of note on property. Lastly Schedule D states the disclosures from the title company and its attorneys as to what their premium is they will be collecting. It will also disclose the cost of the title policy which is set by the state based on sales price. In addition, the mortgage co.’s amount and any endorsements they may have. Keep in mind the buyer’s lender will be acutely interested in reviewing the commitment particularly Schedule C to make sure there are no defects as this could cause delays in the closing if they need to satisfy or correct any defects.

After the title commitment has been addressed and any issues resolved, it is now up to the lender to keep things moving toward the closing with the ordering of the appraisal and satisfying any other underwriting guidelines. Once at the closing table, there are numerous and possibly duplicate copies of documents to sign and resign particularly for the buyer if they are borrowing money to purchase the home. These are all standard documents, provided by the Title Company and your lender that a good escrow officer will be able to give you a thorough explanation of each form. With the last stroke of the pen, the only thing left to do is wait for the loan to fund and to collect your keys to your new home. Note that all closings are handled differently, depending on the state in which you live. This description is based on a typical closing in the state of Texas. Check with your local Realtor or Title Company for more accurate and state specific guidelines and regulations.