What is Title Insurance?
- Title Insurance provides a guarantee of ownership of real property. Title Insurance protects the insured (Buyer and Lender) against any unknown claims or title defects. If a problem is discovered after closing, the insurer will pay the cost to defend the insured’s ownership in court, to fix the problem, or cover any financial loss if the defect cannot be fixed. The premium for title insurance, commonly referred to as “Promulgated Rate”, is set forth by the Department of Financial Services.
What are the responsibilities of the Closing Agent?
- The Closing Agent is usually the attorney for the Buyer or Seller who manages the closing, disburses all funds, and coordinates the signing of all documents relating to the purchase and sale.
- It is the job of the Closing Agent to ensure that all documents and records are completed properly and to ensure the related funds are properly disbursed. Essentially, a Closing Agent acts as a custodian, a service that can only be performed by a neutral party.
- A Closing Agent doesn’t work for the Buyer, Seller, Real Estate Agent, or Lender. Instead, they handle paperwork and activities required for each party involved in a real estate transaction. The Closing Agent has a fiduciary duty to all of the principal parties involved in a real estate transaction.
What are the Pre-Closing Procedures? (Title and Closing Preparation)
- Initially the Closing Agent will search and examine the public records to determine the ownership and the marketability of title to the real property. A review of all documents that may affect the title to the property (deeds, mortgages, liens, judgments, probate, etc.) is performed as part of the examination process.
- Upon completion of the title examination, the Closing Agent prepares a Title Commitment.
- The Title Commitment reflects the current owner of the property, discloses any title defects, and lists any items which must be excepted or excluded from coverage.
- The Title Commitment serves as an agreement to issue a Title Insurance Policy after all requirements have been met and a successful closing occurs. Customarily, the policy is issued within 45-60 days following closing and is sent directly to the insured (Buyer and Lender).
- Depending on local custom and procedure, the Closing Agent will order a Boundary Survey and Elevation Certificate, if applicable. A Survey is required on all transaction where a Lender is involved. Gregory B. Taylor, P.A. recommends a Survey for all real estate transactions.
- The Survey is a sketch of the boundary lines of the property. It also reflects any structures located thereon; i.e. power lines, a/c units, sheds, fences, etc.
- The Elevation Certificate reflects the flood zone of the property and the actual elevation level of the property. An Elevation Certificate is required to obtain flood insurance.
- The Closing Agent serves as the “hub” for the closing; they are responsible for coordinating the transaction with all parties.
- Customarily, the Closing Agent will prepare all documents necessary to effectuate the closing. This includes all required Buyer and Seller documents, the HUD-1, and any documents which may be required under the lender’s closing instructions.
- A representative from the Closing Agent will conduct the closing (see below “What happens at the closing table”).
What are the Lender’s Requirements?
- Once the Buyer has submitted their application, financials, etc., the Lender will issue a loan commitment which outlines any outstanding loan conditions/requirements. The loan commitment is a contractual obligation and the time frame of the Purchase Contract should be observed accordingly.
- A final loan approval will be issued once all conditions are cleared. The Lender will provide the Closing Agent and Buyer with a time frame for closing and finalize any quality control processes. Quality Control, commonly referred to as “QC”, is the final process of a loan application wherein the Lender conducts an audit of the file.
- Once a closing date has been confirmed, the Lender will deliver to Closing Agent the closing instructions. These closing instructions are the guideline by which the Closing Agent will prepare the HUD-1 Settlement Statement. Lender approval of the HUD-1 is required.
- Upon approval of the HUD-1, the Lender will release the loan package to the Closing Agent.
- Lender funds are typically wired to the Closing Agent the day of closing. The Lender approved HUD-1 and funds are a prerequisite to any closing.
- Once the loan package is signed at the closing table, the Closing Agent will be required to fax/email funding documents from the closing table and obtain funding authorization from the Lender.
- The original loan package must be returned to the Lender within 24 hours of closing.
What happens at the closing table?
- The closing time and location are typically coordinated by the Closing Agent. Gregory B. Taylor, P.A. can accommodate most any time or location that is convenient for the Buyer and Real Estate Agent.
- On purchase transactions where financing is involved, the loan package and closing instructions are a prerequisite to preparing the HUD-1. This documentation is typically provided 24-48 hours prior to the scheduled closing date; however, receiving the loan package and closing instructions on the day of closing is not uncommon in today’s market.
- The Closing Agent will conduct the actual closing. The role of the Real Estate Agent is that of support to their client. In most cases, there is limited involvement from the Real Estate Agent.
- The Closing Agent will explain the documents to the Buyer at closing and notarize their signature. This process normally takes about 30 minutes depending on the Lender and volume of documents. The Seller’s documents are signed during this process as well.
- Upon completion of the signing, the Closing Agent will most likely be required to fax or email several documents to the Lender to obtain funding authorization. This process is a Lender review of the closing documents to ensure that they are property executed and meet the Lender’s requirements. The time frame for funding authorization varies; however, 15 minutes is a good rule of thumb.
- Upon receipt of funding authorization, the Closing Agent will coordinate the transfer of keys and disburse funds to the Seller, Real Estate Agents, and any other parties who attend the closing. (Note: it is the Real Estate Agent’s responsibility to ensure keys are available at the time of closing.)
What are the Post Closing Procedures?
- Return original, fully executed and notarized loan package to the Lender.
- Disburse any funds or checks that were not disbursed at the closing table.
- Record documents in the official records of the appropriate county (i.e. Warranty Deed, Mortgage, etc.).
- Issue Title Insurance Policies and send the same to the Buyer and Lender with the original recorded documents.