Jesus M. Fernandez, REALTOR® 786-553-7530
Morris Williams Realty: 888-326-3949
There is no town like my hometown! I have it all here!
THE CLOSING PROCESS, EXPLAINED
This page contains information for both sellers and buyers regarding the closing process.
The last step in the selling and purchasing real estate, is the closing or settlement stage. By this point all the contract contingencies have been met, the buyer has secured a loan commitment from the funding lender (in any), and the buyer has obtained a title commitment from the title policy underwriter. At closing, the legal sale and purchase takes place, documents are signed by the parties to the transaction, then the seller transfers title to the property to the buyer, while the seller receives proceeds from the sale.
THE TITLE AGENT REVIEW
In Florida, title companies and attorneys typically handle the closing process for a real estate sale or purchase. They play several key roles on behalf of the parties to the transaction, including insurance companies, the seller, the buyer, and mortgage lenders.
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Their work includes a thorough review of all documents unique to the transaction—especially an examination of the title being transferred—as well as coordinating funding, holding escrow deposits, preparing the final closing statement, and filing records with the local public recorder’s office.
What happens after the sale and purchase contract is executed?
After the buyer and seller execute the purchase and sale contract, one of the parties—usually either the buyer or the seller—typically chooses the title company or attorney to handle the closing. (If the contract allows it, each party may use their own closing agent.)
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Once the title agent receives the file, including a copy of the executed contract, the names of the parties, the buyer’s lender information (if any), and the homeowners’ association contact information, the agent gathers the remaining details and begins examining the legal documents recorded in the public records.
What does the title company or closing attorney actually do?
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The title agent begins by searching the public record, to make sure the seller(s) is/are the rightful owner(s) of the property, being sold.
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They search for all liens, including judgements against the owner(s) on title, which can include code violations, fines and other title encumbrances, attached to the property; voluntarily or involuntarily.
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They contact the seller and ask or permission to contact their lender for any mortgage payoff, on any outstanding loans, attached to the property.
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They establish contact with the buyer's lender (if any) to confirm funding.
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If applicable, they receive the good-faith deposit from the buyer and provide the seller with the escrow letter, affirming the receipt of funds.
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If requested by the buyer's lender, they may coordinate the survey of the property.
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They will contact the buyer's homeowner insurance provider, to confirm the cost of the premium.
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After a search of the public record for liens or other encumbrances to the property's title, they pass the file to the title insurance underwriter for further review and to make a final determination on underwriting the title policy.
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If no issues are found with the property's title, they inform all parties to the transaction, via preliminary title report or commitment to title insurance.
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Afterwards, they calculate the closing costs to the seller and buyer and prepare the preliminary final closing documents and the Closing Disclosure, (if the purchase is being financed) for review, by the parties and the buyer's lender (if any). Federal law requires that the buyer is provided with the Closing Disclosure, at least three days from the closing date.
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If all the calculations are in order, they proceed to produce all the required legal documentation and coordinate the closing.
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They also coordinate the funding coming from the buyer or the buyer's lender, for distribution, at closing.
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Lastly, they file the deed and any mortgage instrument, with the local recorder's office.
What happens if issues are found with the title of the property?
If the title agent finds issues during the discovery stage, they can delay your sale and, in some cases, end it altogether. The good news is that most title issues, or “defects,” can be resolved by the closing date. The seller’s unpaid fines and municipal liens on the property can usually be cured before closing or at the closing table.
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"An ounce of prevention, is worth a pound of cure!"
-Benjamin Franklin
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What happens if a title defect cannot be resolved by closing?
Occasionally, a title defect cannot be cleared by the closing date. When that happens, the title insurance underwriter will not issue a policy to the buyer or the lender. Without title insurance, the seller cannot transfer title and the buyer usually cannot complete the purchase.
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Title defects can include previous deed forgeries that the title agent has now discovered, recording errors, an improper transfer to heirs (which may force the property into probate), unresolved boundary or survey problems, and impersonation of the owner.
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That is why the seller needs to know the current condition of the property’s title. Otherwise, the sale may not be possible.
What is title insurance and why is it important?
Title insurance may be the best insurance you can buy: you purchase it only once, and it covers you for as long as you own the property. The policy protects you against future claims against the title.
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If you finance the purchase, your lender will require a lender’s policy and will usually expect you to buy an owner’s policy as well. If you are paying cash, it is still a good idea to buy title insurance to protect yourself against a future claim.
What happens if title defects are found and not resolved by the closing date?
If a title defect is uncovered by the title agent, during the public records search and examination of the abstract, and because of its nature, it cannot be resolved in time before closing, the sale may not be able to close, as contractually agreed. The buyer (if financing) will not be able to purchase title insurance, therefore, the buyer will be unable to proceed and will be entitled to receive their good-faith deposit, since the seller could not deliver a clear title. If the buyer is purchasing with cash only, the buyer may choose to accept the property with the tile defect or ask for his good-faith deposit back.
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Occasionally, title issues may require additional time to resolve, which can go past the closing date. At this point, the seller and buyer can agree to extend the closing date, to give the seller enough time to resolve the defect, and the sale can be saved.
Note: Buyers typically lock their loan commitments with lenders, and many of those commitments expire on the closing date. To extend the lock, the lender may charge the buyer a fee. At that point, the buyer may be unwilling to pay more and may ask you to cover the fee, or demand the return of the good-faith deposit because you could not deliver free and clear title by closing.
What are the most common title problems, discovered by title agents?
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Tax liens- they encumber a property's title, when owners have an outstanding unpaid tax bill to the local taxing authority or the IRS.
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Municipal liens- these come about due to unpaid fines, open permits and code violations, attached to the property.
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Clerical errors- if errors occurred in the recording of the previous deed, it can cause havoc and impend the sale, until errors are corrected.
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Unknown liens- these can come about, when creditors have filed liens against the current or previous owner and are now discovered.
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Mechanical liens- these types of liens are typically filed by contractors, who have made a claim against the seller, for an unpaid balance.
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Judgement lien- these are place on a property's title when the seller has been sued and the judgement amount has not been paid.
Note: There are many more types of encumbrances that can affect a property’s title. If you, as a seller, suspect there may be a cloud on the title of your property, it is best to uncover it before placing the property up for sale. Waiting until the property is under contract can jeopardize your sale.
How much does title insurance cost?
In Florida, the state determines the cost of title insurance, which is based on the purchase price of the property. To figure your title insurance cost, you'll need to do a little math.
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Purchases up to $100,000 are calculated at $5.75 per thousand.
Purchases above $100,000 are calculated at $5.00 per thousand.
EXAMPLE:
Purchase price $100,000
(100 x $5.75) = $575.00
Purchase Price $200,000
(200 x $5.00) = $1,000.00
How much does a title company or attorney charge for their services?
The fee for handling the closing process can vary slightly between different title companies and attorneys. Call any of the title companies or attorneys advertising on this page, to inquire about their closing fee.
What are the seller's total closing costs?
Typically, the seller's closing costs are around 2% of the sales price. However, the costs can be higher, if property taxes are still due and if the seller agrees to give the buyer any credit or pay for any part of the buyer's purchasing costs.
What are the buyer's total closing costs?
The buyer’s closing costs will depend on whether it is a cash purchase or financing is involved. On an all-cash purchase, the average is 2% of the sale price. On financed purchases, closing costs can average between 3% and 5% of the purchase price. These costs will include the appraisal, survey, escrow funds for taxes, and prepaid homeowners insurance.
If you need assistance, we are here to help!
Although we may not be able to do a complete and thorough examination of your property’s title, we may be able to identify potential issues that can be addressed and resolved ahead of time. Call us. We are happy to help and answer your questions.
Judgement liens, must be satisfied at closing. It is wise prior to selling your home, to try and negotiate a lower amount, with any party awarded a judgment against you.
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Mechanical liens, like all recorded liens must be satisfied at closing. It is wise prior to selling your home, to negotiate a lower amount, with any contractor that has placed this type of lien on your property.
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Tax liens or statutory liens, must be satisfied at closing. Unfortunately, they cannot be negotiated to a lower amount.
Call us for a private consultation, about your personal selling situation.