With the busy real estate season beginning, we thought this would be a great time to pass along some helpful hints and friendly reminders of a few small things you can do to help assure a great closing.
O & Es
It only takes a minute to call for a free verbal O&E prior to doing a listing. This assures that all parties in title are signing off on the listing agreement and lets you know of any problem (or surprise) encumbrances.
It may be helpful to remember that Ownership and Encumbrance reports do not include a name search of the property owner. O&Es reflect only information recorded against the legal description.
For the most efficient and accurate service, try to have as much information as possible (address, legal description, etc.) at your fingertips before calling for an O&E.
The title company prepares all title and closing documents based on what is on the contract, so be sure to double check for accurate legal description, vesting, etc.
On the contract itself, it’s best to print clearly or even type.
More is better. Including as much (not as little) information as possible in the contract (and in the Closing Control Sheet) can save numerous phone calls back and forth between closer and real estate agent after the order has been placed.
When buyers or sellers have a common name, provide a middle initial and social security number when the order is placed. Most times, this will solve any issue before it becomes a problem – those embarrassing judgments may never even show up on the title commitment to needlessly alarm the clients.
Ordering Title Work
It is helpful to the title company when the Realtor can provide Homeowners Association information, including phone number, when placing the order.
When doing a tax-deferred exchange, give as much information as possible to the closing agent, including the name, phone, and fax number of the Qualified Intermediary.
When writing a contract, try to allow at least five days for the title commitment deadline. If the deal goes through counterproposals for several days, we can protect all parties by changing the deadline to allow ample time for production and delivery of the title commitment.
The title company can provide the most efficient service if they receive a complete legal description when the title order is placed.
If the last four digits of the seller’s social security number can be provided at the time title work is placed, it will help when ordering the payoff (most lenders require it) and will save the title company having to make a phone call later for this information.
Closing Control Sheets are available from the title company. Including a Closing Control Sheet with the real estate contract when the title order is placed is a great way to avoid those pesky games of phone-tag. (For example, existing lender, new lender, HOA, and commission information are not included on the contract, so the agent ends up being called for that information)
If you need HOA financials, by-laws, and minutes at the time of listing, call your closer, who will be happy to help you. Because the process of obtaining this information can be time consuming, please be sure to call as soon as you know you will need this information, preferably at the time of listing.
The Title Commitment
When receiving the first title commitment on a given order, review it thoroughly (for accurate spelling, correct sales price, etc.) and address any issues immediately with the title company. On any subsequent title commitments, the information that has been changed will be underlined so the realtor and their clients can find it quickly.
When you receive the title commitment, one of the first items to check is the sellers’ names. If one of the sellers is deceased, the title company might not know unless the death certificate has been recorded.
The title company will automatically give a reissue rate for up to three years if they have determined that a prior title policy (from any title company) was issued during this time.
Child support judgements remain attached to a property or person until they are satisfied.
Scheduling the closing
Real estate agents may want to call their closer first for available times before confirming a closing time with their customers.
It is a good idea to let the closer know ahead of time if you know there will be both a first and second mortgage at the closing. The closer will be able to schedule more time and not be late for his or her next closing.
Remember to schedule any closing with an FHA payoff prior to the last day of the month. If we don’t get lender funds on the day of closing, this can delay disbursement of the payoff and an additional month’s interest would be due to the payoff lender.
If the seller has a mortgage in existence, the client may save money by choosing not to close on Friday. If a lender receipt of the payoff funds is delayed by the weekend, the seller could pay three days’ additional interest.
Due to the large volume of closings at month-end, it may be easier to get your preferred closing time when you schedule closings at other times of the month. There is usually no financial advantage to closing at month-end.
The title company is more likely to get figures in advance when there is close communication between the selling agent and the buyer’s lender.
Remember that when the lender wires money, it’s not just a keystroke but a 3-4 hour process. For example, if funds are wired at 2:00 for a 2:00 closing, chances are the transaction will not fund that day.
A federal tracking number does not mean the funds are available for closing. By law, Colorado title companies must have physical funds in the bank in order to disburse.
The new lender will require evidence of hazard insurance on the subject property at closing.
Prior to Closing
If the title company is to hold earnest money, make sure the check is payable to or endorsed to that title company. They will immediately send out escrow instructions directly to buyers and sellers.
It is extremely important that the closer have copies of all addendums to the contract as well as counter proposals.
When dealing with a foreclosure, ask your closer for an explanation of how the transaction will be different. The closer can explain the importance of dates and time frames and why the title company closes in escrow.
When there is a private party lender payoff, the title company will want to look at the original promissory note, deed of trust, and release prior to closing. Also, the private party lender must supply the payoff figures.
Let the title company sales rep or the closer know in advance of any special needs at closing – interpreters, blind or deaf clients, if there’s a divorce situation that would require two separate closing rooms, etc.
If you need cashier’s checks at closing, please notify your closer ahead of time.
Important pre-closing communication
The closer is going to briefly explain each document at closing. They are happy to provide a complete closing package prior to closing for those clients who would like to read through all documents at their leisure. For your convenience, these documents can be e’ mailed.
If a seller has had a name change due to marriage or divorce, proof of that change will be required at closing for notary purposes.
If the person’s driver’s license does not match the name on the deed, the will need a marriage certificate or divorce decree.
If time allows, the realtor may want to go over the settlement statement with the client prior to closing. Some clients feel more comfortable asking their realtor questions rather than asking a stranger at the closing table, and it may give the clients a greater sense of privacy.
The buyers need to bring certified funds to the closing table (not bank checks, cash, money orders, mutual fund checks etc.)
When working with a foreign seller, the sellers may want to speak to an accountant regarding the 10% FIRPTA withholding. An accountant can help them apply for an exemption in advance. Please notify the closer if you are a foreign seller.
If the purchase price is over $100,000 and the seller is moving out of state, Colorado has a 2% tax withholding rule. You may also want to notify the closer so the withholding tax amount, if applicable, can be included in the figures.
Remember that buyers and sellers should be on time for their closing. One person a half an hour late can create problems not only for the title company but for all the buyers and sellers who are scheduled to close after them.
Both buyers and sellers will need their drivers licenses at the closing, as well as need to know their social security numbers.
The customers may want the Real Property Transfer Declaration explained to them before closing so they have a thorough understanding of it.
Reviewing final figures immediately upon receiving them gives you more time to contact the lender and address any issues prior to closing.
Deeds and other documents
If you need a Power of Attorney, the title company can provide the form to you. They prefer to provide this document whenever possible. If there is an existing Power of Attorney, they must approve the form prior to closing.
A Personal Representative’s Deed must be prepared by an attorney.
Where there is a Conservator’s Deed involved, the title company must obtain an order from the court approving the transaction, and the conservator’s deed must be prepared by an attorney.
At the closing
State law requires that money brought to the closing must be in the form of “good funds.” Good funds must be a cashier’s check, certified check, or wired funds. Money orders and personal checks do not constitute good funds and cannot be accepted.
At the closing table, it’s sometimes better to have the sellers and their agents take a “break” in the lobby during the loan package presentation. This allows the buyers more privacy and comfort to ask questions about some very personal information.
After the closing
If the sellers had an FHA loan that was paid off at closing, they can call the U.S. Department of Housing and Urban Development at 1.800.697.6967 to see if they are eligible for a partial refund of their original mortgage insurance premium. The Consolidated Appropriations Act 2005 amended the National Housing Act to eliminate refunds of the FHA’s up front mortgage insurance premiums for all FHA loans endorsed for insurance on or after December 8, 2004, except when the borrower refinances to another mortgage to be insured by FHA.
You may want to ask your closer to make a copy of the HUD-1 for each buyer and seller to put in their “Tax Return” file for tax time the following year.