The Closing Process
Closing (or Settlement) is the point in time at which the title to the property is transferred from the seller to the buyer.
The buyer should receive information from the lender about the costs associated with closing on the property prior to settlement.
The buyer should also receive a copy of the booklet, “Buying Your Home,” which outlines the closing process.
The buyer will also receive the mortgage from your lender at closing.
The lender will provide the buyer with a Good Faith Estimate of loan costs so that there are no surprises at closing.
What We Do
If the buyer has given the seller an earnest money deposit, we can deposit the money into an escrow account where the funds are held until the time of closing.
Next, we will request preliminary title work. A title professional will search and examine the public records for information related to the property’s title. This provides warnings of title flaws that must be dealt with before the property can change hands. For instance, the previous owner may have failed to pay taxes. Or there may be an outstanding mortgage or judgment on the property. We work hard to see that such obligations are dealt with and resolve any issues well before settlement. If the offer to purchase calls for a prior mortgage to be paid off, we will order payoff figures from the existing lender.
We will prepare the HUD-1 Settlement Statement.
The HUD-1, as it is referred to, outlines all of the costs for both the buyer and seller associated with the closing.
On closing day, the property will be transferred from the seller to the buyer. Both the seller and buyer will sign quite a few documents, but don’t worry, We will explain each document during the process.
We will forward payment to any prior lender, pay all the other parties who performed services in connection with the closing, pay out any net funds to the seller, record all the documents needed legally to complete the purchase and order a final search of the property title. We take care of all of the post-closing details!
Buying a Home
A title is a term that includes all of your legal rights to own, use and sell a piece of land. The title reflects all previous ownerships and transfers, including rights previously granted by other parties, such as mortgages and easements.
If there are problems with the title, the ownership of your land could be in question. Unpaid taxes, a lien filed by someone who worked on the house, or any of countless other situations could cause a major problem. And even if you don’t get the land, you might still be responsible for the mortgage! That’s why it’s important to have title insurance.
So what is title insurance? It is insurance against undisclosed problems with the title, and it protects you against financial loss due to title defects, liens or other matters of public record. Title insurance will defend you against a lawsuit attacking your title, or reimburse you for the actual money lost.
Before a policy is issued we conduct in-depth research to detect, prevent, and eliminate risks and losses caused by title problems. We do this by searching public records to develop and document the chain of title to the property and by identifying all outstanding claims.
For a one-time premium, owner’s title insurance policy will remain in effect for as long as you own the property.
Your mortgage lender will also require a title insurance policy. The lender’s policy protects the lender against any title problems that may affect repayment of the loan. The owner’s policy and the lender’s policy are two different policies, and the one-time premiums for both are usually paid by the home buyer. In a few states, the home seller pays for the owner’s policy. If you have a question about this, ask your real estate agent, mortgage lender, attorney or closing agent.
Selling a Home
Consumers are free to shop for title insurance and closing services and to select a title company of their liking. Many consumers rely on their real estate agent or lender for a recommendation for a title company since they are in a position to know which companies provide good service. However, you are not required to use the title company they recommend.
How title insurance and closing fees are calculated
The fees collected by a title agent vary from company to company and are primarily based on the size and complexity of the transaction, the difficulty of the title research and the existence of title insurance on the property prior to its sale. Some fees may include other services provided by the title company such as conducting the closing, preparing closing documents, adding endorsements to the policy which may be required (usually by the lender or buyer), and other services. When comparing one company’s fees to another, be sure to get detailed information on what is included so you are comparing equally.
Here are some terms that would be helpful to know when talking to a title company:
- Basic Rate: The rate charged to a consumer who does not qualify for a reduced rate such as, but not limited to, the reissue rate. (see below).
- Reissue Rate: The reduced rate for an Owner’s Policy issued on a property which was previously insured within some period of years.
Building a Home
We will ensure that the money being loaned is getting to the people who are doing the work in exchange for a legal waiver of lien rights.
Before construction begins, we will pay out the full amount needed to complete your home. Instead of paying all of the money to the builder at the closing, your money is paid out periodically, as needed. These periodic payments, called draws, are a series of checkpoints to monitor the construction progress.
Before the first draw, your builder provides a cost breakdown of the project. The cost of the work is listed by categories, such as excavation, plumbing, carpentry and electrical. Each subcontractor and supplier is listed; along with the amount that each will be paid.
Several times during construction, your builder will ask your permission to request money from the lender, to be paid through the escrow account for work completed to that point. We will work with your lender to conduct an inspection of your new home to determine if the work shown on the draw request has been done.
You or your architect should also inspect the home before approving each draw. Contractors and suppliers have a legal right to file a lien against the property if not paid for their work and materials. When your money is used to pay the amounts specified in the draw request, we collect lien waivers from the appropriate contractors and suppliers. By giving the lien waiver, the contractor gives up the right to file a lien against the home for the work shown on the waiver.
When the project is completed, the general contractor provides an Affidavit of Completion and final lien waivers from all subcontractors and suppliers. The final inspection is performed to determine that all work is finished to your satisfaction. In most communities, an occupancy permit is issued by the local building authorities.
For Sale by Owner
Upon accepting an offer to purchase you have some timely decisions to make regarding the closing of the transaction. For instance, you need a title company or attorney to:
- Prepare the closing statements
- Draft the deed and transfer tax form
- Pro-rate taxes
- Calculate mortgage payoffs
- Obtain special assessment and tax data
- Calculate any outstanding bills (i.e., electrical repair, painting)
- Order the title insurance policy
We include all of the above in our closing package.
We attend the closing with you whether it is in our offices or at another location.
We make sure the proper documents are recorded at the courthouse in a timely manner
Where is closing?
Typically the closing is held at a place agreed upon by buyer and seller. This can be at the lender’s office, at an attorney’s office, at a real estate office or at any R&P Settlement office. Wherever the closing takes place, a closer from R&P Settlement will accompany you to answer questions you may have regarding the closing package.