Behind the Scenes - Closing Process
A closing (also known as settlement) is the final step in executing a real estate transaction. What does the title company do to prepare for the closing? Let’s find out. There are four parts to the closing process; information gathering, title research, document preparation and, disbursement.
Initially the closing process is information gathering and has become increasingly computerized and automated. Detailed information about the buyer and seller is necessary to get the proper documentation in order for the closing process to be completed properly. Emerald Coast Title is only a click or phone call away and the staff is courteous and friendly. If there are any questions you are unsure on how to answer just ask us and we will be happy to assist. It is vitally important the information received is correct as that information is carried forward throughout the rest of the process. Marital status and proper addresses are very important in making sure that your property rights are established through the correct documentation. We will also be gathering information from the Homeowners’ or Condominium Owner’s Association, the Seller’s Mortgage holder, the county, city, and utility companies, and on occasion, from the IRS. We will also make sure we have a current survey, if not, one may need to be ordered.
A search of the property records is done in the county and state where the subject real property of the transaction is located. This title search routinely goes back 30 years, many times later, and researches every single party that has ever held title to the property. It checks for liens and any restriction on the use of the property that has been placed in the public records. A written report called a Commitment is issued to the buyer and that binds the closing agent to its terms and requirements on how to “clear title” for the title and what documentation is needed for this purpose. The title commitment is provided to the buyer and a subsequent policy of title insurance is issued after the closing takes place.
Documents such as Deeds and Mortgages, lien affidavits and closing statements are prepared by the closing agent, and lenders and attorneys involved in the transaction. At closing, transfer taxes must be paid as well as liens against the property cleared and other claims must also be settled (including closing costs, legal fees, association fees, and adjustments). The Closing or Settlement is a brief process where all the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately. Many transactions are conducted by mail and or email. Emerald Coast Title strives to put the customer’s satisfaction and convenience first.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the property. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed, and filed with local property record offices. One of the best parts of settlement is that buyers and sellers need to do very little. Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed.
The final step of the process is that the buyer’s funds are deposited and the necessary liens and items necessary to clear title are paid and or removed by documentation. The seller’s funds as well as the other adjustments such as lender fees, recording fees, documentary taxes, commissions are paid by the closing agent. The Deed and any other documents necessary for recording are delivered to the County Clerk’s office and are entered into the public records of the county in which the property is located. This establishes the new owner is the record title holder of the real property.
Wire Fraud: More Common Than You Think
WE ALL have heard the words “cyber fraud”, “wire fraud”, “email phishing”. We all think, “This would never happen to me.” Wire fraud happens more often than you think. Over the past few years there has been much discussion and training about preventing outbound wires from being intercepted. As an ALTA Certified Title Agency, we have many levels of protection in place and follow strict guidelines before sending out any wires. We have all outbound wire instructions signed by recipients and we do not allow changes in those instructions unless said changes are given to us in person. We call to verbally verify wire instructions once again before submitting our wire requests.
Criminals are now targeting the inbound wire of cash to close sent by the buyer. These criminals often begin the wire fraud process well before the attempted theft occurs. They are hacking into email accounts of those involved in a real estate transaction and waiting for the wire instructions to show up in the inbox. The hacker then downloads them, deletes the message with the accurate document, and resend updated wire instructions either from a spoofed account of the title company or from a fake “personal” account from the Closer.
IT IS DETRIMENTAL that you CALL US before sending us any funds to verbally verify our wiring instructions. Do not use the phone number in an email. Call us at a phone number you know is accurate. Heed the warning that is in the signature line of your Closer’s email “Please verbally verify wiring instructions with us prior to sending funds”.
This exact situation recently happened to one of our buyers. The buyer’s email account was compromised. The hacker was intercepting emails from our closer, deleting the emails, and sending emails with fraudulent wire instructions. This buyer wired over $400,000 to the hacker’s bank account. We are sharing this story because we DO NOT want this to happen to you.
Here are some things to look for:
- Legitimate versus fraudulent email addresses
- Spelling and grammatical errors in the body of the email
- Fake logo, company names, or phone numbers
- If it doesn’t feel right, it probably isn’t right; trust your gut
WE WILL NEVER CHANGE OUR WIRE INSTRUCTIONS IN THE COURSE OF A TRANSACTION. Contact our office immediately if you feel that you are being victim of a phishing scam. We will contact the FBI to help file a complaint.
A survey is typically performed to locate the boundary corners of a piece of property to show the owner the extent of their property. Besides boundary lines, a survey will define any overlaps, gaps, or gores, any rights-of-way, easements, or abandoned roads, encroachments, overhangs, or projections, cemeteries, access, ingress, and egress.
A survey will always be required when obtaining financing unless the property is a Condominium (then the survey is included in the Declaration of Condominium and is recorded in the Public Records). Townhomes are not considered condominiums, even though they are attached. Surveys are required for townhomes. Surveys can cost anywhere from $400-$1500, so it is great when a survey is existing and it can be used for the home buying process. There are many factors that affect the eligibility for the acceptance of an existing survey.
** Title insurance companies cannot accept a survey is the surveying company is no longer in existence **
- If there have been any improvements on the property, a new survey must be produced.
- If no improvements have been made on the property, both the seller and buyer must sign an affidavit stating that no changes have been made to the property since the time of the survey.
- The preferred time limit on an existing survey is 3-4 years, but exceptions can always be made
- If platted land (lot and block legal description), and purchase price is <$500,000.00 and the existing survey is certified to someone in the chain of title, an existing survey will be acceptable.
- If metes & bounds legal, a new survey will typically need to be produced if existing is over 4 years old.
See Example of a Survey
Informed and Proactive Listing Agents
Have you ever been in a situation with a piece of property under contract, a few weeks before closing, and title work comes in and you are told that an estate needs to be probated? Or have you received a cash offer with a one week closing timeline, but seller is out of town and the title company needs Trust documents? These are situations that we experience far too often, and each of these situations could have been avoided with a well informed and proactive listing agent.
If you ask the right questions and get the right information at the listing, you and your client will be prepared and will avoid a closing disaster. We call this process “OHIO” – Only Handle It Once. These are a few of the pieces of information we suggest you gather:
- Seller’s Name. This may seem obvious but pull the prior Deed and see how the property is legally deeded.
- Is the Seller an entity? Yes? Ask them for their Operating Agreement or Corporate Governing Documents. Title will need them.
- Is the Seller a Trust? Yes? Ask them for a copy of the Trust. Title will need it.
- Is the Seller a foreign person? Yes? Put them in touch with an accountant to go over the FRPTA rules and get the process started.
- Is the property in someone’s name other than the person you are talking to? Was there a divorce? Did someone pass away? Make sure a divorce decree or probate has been completed.
- Is there a current survey?
- Is there a Prior Owner’s Policy available?
- Who is their contact at the Homeowner’s Association?
If you, the listing agent, gather and hold onto these documents, title will not have to ask the Seller for them later. It will give your client time to find everything without a big last minute rush, and if they are in Europe when you go under contract, all will be good because you were proactive and prepared for anything.
What is a Title Policy Endorsement?
What is an endorsement? A title endorsement is an addition or limitation of coverage that is attached to the title insurance policy; it adds or changes the terms of the policy.
The following are the ONLY legal Loan Policy endorsements in the State of Florida:
Protect Your Most Important Asset
Emerald Coast Title Services offers the superior protection of the Homeowner’s Policy of Title Insurance, delivering more complete risk coverage, which translates to greater peace of mind for homebuyers. Buying a new home is one of life’s most gratifying experiences and might be the biggest investment you will ever make. As you approach closing day, however, all those details can be overwhelming. It’s easy to overlook the single most important step in the entire process—the purchase of title insurance on your wonderful new home.
What is Title?
Title is the legal right that a person has to the ownership and possession of land. Since it is possible that someone other than the seller has a prior legal right to the property that your buying, the premium coverage offered by the Homeowner’s Policy provides you with added peace of mind. There can be any number of prior problems that remain undisclosed even after the most careful search of public records. These prior hidden “defects” are very dangerous and sometimes are not discovered for months or even years after you purchase your home. You could be forced to spend substantial money on a legal defense to protect your rights. The Homeowner’s Policy helps protect you against covered losses and prior defects, and provides legal defense for covered risks.
Protect Your Investment
The Homeowner’s Policy provides the most complete title coverage available, including protection against undisclosed heirs, mistakes in recording or errors in tax records. Our basic coverage protects against prior covered matters, such as:
- Someone claiming an ownership interest in your title
- Leases, contracts, or options affecting your title
- Someone claiming to have rights affecting your title due to forgery or impersonation
- Someone having a right to limit your use of the land
- Unmarketability of your title
- A defective title
How Much Does Title Insurance Cost?
The single premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a onetime-only expense, paid when you purchase your home, yet it continues to provide coverage for as long as you own the property.
The Importance of Real Estate Attorneys in Your Title Company
The process of buying and selling a home is quite complex. Many states require that real estate transactions are closed and insured by attorneys because many components of real estate conveyance are considered the practice of law. Each state, however, has different regulations pertaining to the title insurance industry. In Florida, both attorneys and licensed title agents may handle closings. At Emerald Coast Title Services, we believe there are many benefits in having licensed Florida real estate attorneys involved in the real estate closing process. Our attorneys play an instrumental role in each transaction that comes through our office.
Specifically, our attorneys can assist by drafting affidavits, deeds, and mortgages that are needed to convey clear and clean title; drafting special terms on listing agreements, contracts, and addendums; drafting separate agreements for furnishings or other property and giving legal advice when necessary.
In addition to our on-staff attorneys, Emerald Coast Title Services is backed by a full service, law firm, Hand Arendall Harrison Sale, with offices in Northwest Florida and throughout Alabama. This gives our clients immediate access to attorneys that can handle just about any issue that arises, including, probate, will and trusts, or tax law.