[NOTE: Drawing on several decades of experience as a real estate attorney, John Pitrelli contributes articles of interest for home buyers and home sellers. To view John’s other posts please click here.]
As a home buyer, one of the most important parts of the transaction is the closing. What are some of the pitfalls of the closing process and how can you avoid them? In my next few posts I hope to describe what should happen and what you can do to avoid problems.
By the time the parties get to the closing table much has happened to provide for a smooth event. In this first post I will focus on the pre-closing process.
It all starts with our receipt of the ratified sales contract. We open a file by entering information from the contract into our database. We send out welcome letters, to both buyer and seller, which explain the role of Key Title, detail our fees and include an information form to be returned to our office. The buyer is requested to indicate how they wish to hold title and the name of their new lender, while the seller is requested to provide names and account numbers for existing lenders, sellers social security numbers and contact information for homeowners associations, if applicable.
The next step is to order a 60 year title search from an abstract company and a survey, if required. We review the search and survey to determine whether there are any issues of marketability or encroachment. The results are then compiled into a title commitment (binder) which is sent to the new lender. The commitment will reveal ownership of the property, encumbrances such as mortgages, judgments or liens, as well as easements and/or restrictions that impact the property.
In the meantime, we are gathering information such as payoffs of existing loans, the status of homeowners association dues, including any special assessments, delinquencies or violations. We also communicate with the real estate agents to verify commissions, admin fees, reimbursements and home inspection issues. The highly qualified and experienced agents we work with, make the process go smoothly, by alerting us to issues regarding property condition, lender appraisal, termite problems and amendments to the sales contract.
After receiving all the information, including the lender’s instructions, we are ready to prepare a draft settlement statement (HUD-1) which provides the accounting for the funds to be received and disbursed at the closing. At this point it is our policy to send a copy of the draft HUD-1 to the real estate agents, buyer, seller and lender so that we can correct any errors or resolve any outstanding issue prior to closing.
Although, we try to anticipate and resolve problems prior to closing, the process is not always routine. I hope to deal with the actual closing process and some of the surprises that can occur in future posts.
[ You can contact John at j.pitrelli@keytitleva.com]