Understanding the Closing Process
March 13, 2016By David P. Modell, Esq.
When purchasing a home, there are so many details to take care of that the last thing you need to worry about is a problem with your closing. Hire skilled professionals to handle the details and make sure everything runs smoothly.
The behind-the-scenes work begins as soon as your offer is accepted by the seller. Here’s how the settlement process typically works.
If you are working with a real estate agent, he or she will place an order with a “settlement agent” as soon as your sales contract is accepted. In Maryland and the District of Columbia, the settlement agent can be a law firm or a title and escrow company, either of which can be licensed to issue title insurance. In Virginia, only a title and escrow company can issue title insurance.
The settlement agent will oversee the closing process and make sure everything happens in the right order and on time, without unnecessary delays or glitches. If the contract designated the settlement agent to hold the earnest money deposit, then those funds will be placed in an escrow account where they will remain until the time of closing. In all three jurisdictions, homebuyers can choose their own settlement agent. Your real estate agent should be able to recommend a settlement agent – someone they work with regularly and know to be professional, knowledgeable, reliable and efficient.
Next, the title search is performed. The title company obtains an exhaustive search of the public records to make sure there are no issues with the title such as unreleased mortgages, tax liens against the property or judgments against the seller, etc. If a problem is discovered, most often your title agent will work with the seller to take care of it without you even knowing or having to worry about it. After the title is cleared, they can provide title insurance.
There are two kinds of title insurance coverage – a Loan Policy, which covers the lender for the amount of the mortgage loan, and an Owner’s Policy, which covers the homebuyer for the amount of the purchase price. If you are obtaining a loan, the lender will require that you purchase a Loan Policy. However, it only protects the lender.
We always recommend you obtain an Owner’s Policy to protect your investment. The homebuyer pays for their Owner’s Policy. Ask your settlement agent about the different types of Owner’s Policies available for purchase and the different types of coverage provided.
Once the title search is complete, the settlement agent will issue a title commitment to your lender and to you, the purchaser. Meanwhile, the settlement agent is simultaneously coordinating other important details. If the transaction requires that an existing mortgage to be paid off, the agent will order payoff figures from the seller’s existing lender. The settlement agent can also advise you about the types of land surveys available and why you should consider obtaining one as part of the closing process. Each closing is unique, which is why it requires a skilled professional to oversee the process.
Any problems or discrepancies discovered by the settlement agent are reported to the appropriate parties so that they can be corrected prior to settlement. The agent’s role is to facilitate cooperation, coordination, and compliance between all of the settlement service providers.
If you are obtaining a loan, your lender will be providing you with a number of disclosures containing the loan terms and costs. When your loan is approved, the lender provides final loan instructions and loan documents to the settlement agent. The lender then completes the Closing Disclosure and delivers it to the buyer prior to closing. Items shown on a typical Closing Disclosure include the loan terms and monthly payment amount, proration of property taxes, escrows, lender fees and closing and title charges paid at closing, as well as pre-paid costs such as your earnest money deposit or loan application fee, if applicable.
As closing day approaches, the settlement agent orders any updated information that may be required. Once the settlement agent is satisfied that the paperwork is in order, he or she confirms the date, time, and location of the closing with all the parties involved.
On closing day, all of the behind-the-scenes work is done. While you’ve been busy packing, scheduling new utility accounts and coordinating the movers, the closing process has been happening behind the scenes so that your new home is ready for you. After you finish the closing, the settlement agent records your new deed and any new mortgage and sends the payoff for existing mortgages. You are on your way with the keys to your new home.
Attorney David Modell is also a MD and DC licensed title agent (Law Office David P. Modell). He has handled thousands of residential and commercial real estate purchase, sale and refinance transactions for over 25 years. David Modell is also a licensed Virginia title agent, and in conjunction with Closeline Settlements, can handle your Virginia purchase and refinance transactions. We welcome the opportunity to work with you towards the successful completion of your real estate transaction. Should you have any questions, please contact our office at (301) 634-9820 or info@modell-law.com.
David Modell, Esq.
Law Office David P. Modell
7316 Wisconsin Avenue #200
Bethesda, Maryland 20814
