Closing Flow
For most people, buying or selling a home is the largest financial endeavor they will ever undertake. As such, the importance of securing the professional services of a title company to efficiently and accurately handle this complex transaction should not be overlooked.
Typically, the first task the title company undertakes is the completion of an “Examination of Title”. This involves searching the real estate records in the county where that particular piece of property is located. The purpose of the abstract is to (1) determine the legal owner of the property; (2) reveal any mortgages, liens, judgments, or unpaid taxes that will have to be satisfied before the property is conveyed; and (3) detail any existing easements, restrictions, or leases that affect the property.
After the abstract is completed, the title company will then issue a “Title Opinion Letter”, or if a title insurance policy is to be issued on the property, it will prepare and submit a “Commitment of Title Insurance” to the lender and/or the prospective buyer. The title opinion letter and the title insurance commitment will each set forth the requirements and corrections to be completed before the purchaser can receive “good and marketable title” to the property. The title company will be responsible for completing the documentation required to correct any title-related problems affecting the property.
Prior to closing, the parties to the transaction will be provided a “Closing Disclosure” which includes the mortgage lender’s charges, charges for preparing documents, the title company’s fees, recording costs, and the amount of the payoffs to release any existing mortgages, pro-ration of city and county taxes, real estate commission fees, survey fees, and any other costs associated with the transaction. Once the parties confirm and consent to the terms of the Closing Disclosure, the parties are then ready to exchange paperwork and “close” the deal.
The purpose of closing is to allow the parties the opportunity to sign and exchange all the documents necessary to convey title, secure the lender, and deal with collateral issues such as leases, right-of-ways, etc. Additionally, the title company will typically collect the purchase money funds from the buyer and lender at the closing, as well as the settlement costs from each party. With these funds, the title company then pays all of the expenses of the transaction, pays off any existing mortgages, and pays the seller the net proceeds of sale.
After the closing, the title company will record the legal documents (deed, mortgage, assignments, etc.) at the county register of deed’s office where the property is located and then return the original documents to the correct party. New property owners will receive the newly recorded deed to their property (which they should store in a bank lock box or other secure location). The lender will receive the original mortgage documents which they hold until the loan is paid in full. Lastly, once the loan is paid in full, the lender will “release” their lien against the property and will forward the original mortgage documents to the home owner.
