As closing nears this week for me, it’s time as the seller to prepare for the closing. I emailed over the authorization to release form for the title company so that they could call my 1st and 2nd lender to get the payoff figures available.  They also checked on any levied assessments or past due property taxes or prorated property tax amounts.  Also it’s good that all water bills be current for the new buyer, I mailed in my water bill to pay it in full.  The Listing agent, buyer’s agent, buyer, seller, loan officer will receive some type of letter from the title company about the upcoming closing.  The letter will mention the closing date as well as the address and location, and may even mention who the closer is.  The title company asks the buyer and seller to have their social security #, their driver’s license or picture ID, and where(addresses) they lived the last 10 years.

Schedule A portion of the title commitment lists the effective date, the policy for the new lender.  It mentions that I had fee simple estate as a single status owner.  If I was married I would have to have my spouse also sign the deed and paperwork when I sell. Schedule A also lists the legal description, as well as the address to the property.

Other sections require for the title insurance to take effect that 1st and 2nd mortgage must be satisfied and paid off in full.  Any other liens for the county and or name that have attached to the property would have to be paid off.  Warranty deed must be signed and passed from seller to buyer.  Association dues if their were any would have to be paid in full.  Sometimes additional things are added.

Let me give you an example of an exceptions part of the title commitment, which basically says what’s excluded from coverage.  An insurance company excluding something? NO.

The policy or policies to be issued will contain exceptions to the following unless the same are disposed of to the satisfaction of the Company.

1.       Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the Effective Date hereof but prior to the date the Proposed Insured acquires for value of record the estate or interest or mortgage thereon covered by this Commitment.

NOTE: Upon closing with X_ Title, Inc., Item 1 on Schedule B-II will be deleted. The Final Policy will extend coverage as to the gap between the Effective Date listed in Item 1 of Schedule A and the date of recording of the instruments creating the interest to be insured.

2.       Rights or claims of parties in possession not shown by the public records.

3.       Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land.

4.       Easements or claims of easements, which are not shown by the public records.

5.       Any lien or right to a lien for services, labor or material heretofore or hereafter furnished, imposed by law and not shown by the public records.

6.       Taxes or special assessments which are not shown as existing liens by the records.

7.       General and special taxes and assessments as hereafter listed, if any (all amounts shown being exclusive of interest, penalties and costs).

8.       No coverage is provided for municipal code compliance matters and fees including, but not limited to, utilities, water or sewer services, or fees for tree, weeds, grass, and snow or garbage removal, police boarding, vacant building registration and zoning.

9.       Taxes payable in the year 2008 in the amount of $X Total, unpaid plus penalty on unpaid 1^st half;  (27-119-22-43-0015)  Base Tax:  $X, Non-Homestead.
Note: 1st Half Taxes are payable on or before May 15th and 2nd Half Taxes are payable on or before October 15th.

10.   Levied special assessments are as follows:
 St/Ut/Delut…..$X balance…..$X certified to 2008 taxes.
There are no pending special assessments.

11.   Covenants, conditions, restrictions and provisions as set forth in Document Number 4752588.  (These restrictions contain no forfeiture provision.) (Omitting any covenants or restrictions, if any, based upon race, color, religion, sex, sexual orientation, familial status, marital status, disability, handicap, national origin, ancestry, or source of income, as set forth in applicable state or federal laws, except to the extent that said covenant or restriction is permitted by applicable law.)

12.   Drainage and utility easements over the subject property as shown on the recorded plat.

13.   Easements as to common areas.

If there are any questions regarding this Commitment, please contact —– at (555) 555-1212 or by email at test@x_title.com

This is just one thing that a seller reviews before getting to closing.

I will do future blog posts about title and paperwork for closing.

Home Closing Costs : A Seller’s Title Company

If you are a real estate agent make sure to call the seller/builder etc with the title company name and phone number. If it’s a builder the builder may already have a title company it has worked with in the past and purchased title insurance through for it’s land, lots, etc.  Sometimes the builder likes to use the same title company as the cost to reissue title insurance is very minimum and has less room for error due to the fact all county and tax info was pulled recently.  Sometimes the seller’s title company will need to stay in touch with the buyer’s title company.  Sometimes the same title company closes for the buyer and for the seller.   Most people are familiar with the HUD statement and how much paperwork the buyer has to sign for loan documents, promissory notes, and disclosures for the lenders.  Let’s go over some of the things the seller or builder will need to bring to closing or need for the title company before the closing.  The seller should bring garage door opener remotes, and any keys they may have to the closing.  Any warranty info for appliances is appreciated, but kept in the kitchen drawer next to the appliance is a good spot also.  If it’s new construction based on the season you’ll want to see if the sod was put in, and the driveway was put in.  If it’s winter this may not be easy to do, and the city may require 1 1/2 times in escrow.  Each city has different covenants in how they work.

The seller will get account information to the title company, like lenders, account #’s, and previous abstracts, whether it’s torrens or abstract.  The title company needs this when doing title searches , when they make up an abstract, when they do name searches, they may want to know what will show up as liens under your name.  Also title companies can call the lenders and ask for a ” payoff “. The payoff amount is usually good for a week or two and has a per diem afterwords for the interest.   The title company uses this to know what the payoff figure is to put on the settlement statement HUD-1.  If the title company is working with the builder, then they may request a sworn construction statement, the title company may require all sub names and phone #’s.  The title company will want to know what work was performed and why each subcontract is being paid, what services rendered were done?  The title company would like to see signed lien waivers from the subcontractors to be able to protect and clear the title as well as provide title insurance coverage.  The builder may have a lot of this ready or may need a few days to put all the numbers together.  The title company usually has a HUD statement with all of the list of contractors and everyone getting paid.

Let’s go over some of the expected fees a seller can pay on a closing.  It’s very standard that the purchase agreement was set up so that a builder or seller has to pay 3% closing costs of the buyers.  They most likely got paid 3% more for the property and simply just is doing a “seller contribution” for the 3%.  This is pretty common.  I would say in 6 years of real estate I have never done 1 deal without “seller contributions” for closing costs rolled into the loan.   The seller will pay a prorated amount of taxes that haven’t been paid.  In Minnesota taxes are due on May 15th and October 15th every year.  Two times per year.   Seller’s will be paying real estate commissions, this amount may vary some.  Many times the listing agent gets paid, the agent working with the seller, and that agent splits their commissions with the buyer’s agent.  Seller’s will be paying interest on their loan , interest is paid in the arrears, not like rent which is paid up front.  The seller will pay a title fee to the title company for doing the paperwork and closing.   Seller could pay for title examination, and title search.  The seller may pay for an assesment search.

The seller may have to pay the title company to send in the payoff as well as release of that deed to be recorded which is known as a satisfaction.  This may just be a average recording fee of $46 as it is as a flat fee these days.  The seller may have courier fee, recording of mechanic’s liens, may be charged for sworn handling. Also their will be parts of the HUD that list our and itemize all of the subs and contractors getting paid for this transaction, this list can be quite large, sometimes 1 1/2 pages long.   If it’s a seller and not a builder you won’t see anything like this.  If a seller has judgments and liens in their name, they may have to pay off those liens at the time of closing, which could come up on a name search performed by the title company.  A seller needs to provide clear title to the next buyer, the buyer’s lender will require it.  I could write many blogs on the title process and how it all works, maybe I will in the coming weeks.

Residential Real Estate Closings: Let’s Review Closing Day

Let’s talk about closing day. For sure the buyer is going to want to bring their down payment to closing. This will likely be a cashier’s check made out to themselves, or to the title company. Most title companies either will not accept personal checks or small checks under $1000 if they do. It’s recommended that you view the HUD-1 closing statement 24 hours before closing. That’s really the rules. Now if you want me to be realistic with you, most who have been in the business awhile say that last minute changes hours before closing is common most of the time. It’s just a good idea to view most of that info ahead of time. You can go over it with your agent or your loan officer. There are a lot of fees on there, I’ll just tell you now upfront, be prepared.

For years, I wanted to call all of these fees in my own mind, “junk fees”. Let me assure you that 95-99% of all of those fees have real live people performing hard work to get those fees. Most of the lenders fees are non negotiable anyways. Appraisers, loan officers, agents, title people, most people all get paid at closing. Some appraisers and inspectors will get paid upfront(paid at the door). Appraisals in my state are $350-400. If it’s a duplex, or very large home it can be $750.
On the HUD-1 settlement statement, please keep in mind the first page is really a summary of your credits and debits. Your money coming in and your money going out. For example “seller paid closing costs” is a credit. Where is a down payment “going out”, is a debit. The right side of the HUD-1 settlement statement will show the debits and credits for a seller as well. For a seller the debits will be closing costs they have to pay, commissions they have to pay, taxes, etc. Usually this is all added up into one line. They will also have payoff of current loans. For credits it will show the loan coming in from the buyer’s lender.

The 2nd page of the HUD-1 shows about everything in detail. I could write many posts on just the 2nd page of the HUD-1 line by line, and maybe I will later. It will include prorated taxes, interest. It will include loan fees on the buyer’s side, lender fees. The seller’s side will include taxes, commissions, etc. There will be county fees you have to both pay. Their will be recording fees, courier fees, closing fees. The title company makes a lot of their money from owner’s insurance policies. Owner’s insurance policies will be covered in another post. The seller will want to know their addresses from the past 10 years, this may have changed, last 10 years may not be needed anymore. Seller will need to sign a deed, and will need to provide a forwarding address. Both buyer and seller will need to sign the HUD statement. I’d say that the buyer has 8-10 times more paperwork to sign then the seller. This is in the cases where the buyer is getting a loan, it’s mostly paperwork for the lender. After you close, usually 45minutes to 1 hour, checks will be cut, and most title companies
will give you a nice folder with a copy of some of the paperwork. Seller’s will need to sign some forms for 1099, etc, tax forms about how long they’ve lived in the property, etc.

Usually the buyer will only see the buyer’s side of the HUD, and the seller only sees the seller’s side of the HUD, that’s for privacy reasons. I find most closings go pretty smooth because most all of the work has been done ahead of time. After everything is signed, typically the closer goes in the other room and makes copies for 10-15 minutes. and faxes the lender. Hopefully the lender releases funds so everyone can be paid, with checks cut. If you sign all paperwork, and it doesn’t fund, no payouts that day, it’s said to be a dry closing. If you close late in the day like 3 or 4pm, it’s mostly likely going to be a dry closing, but not always. often the wire is already at the title company before signatures, but not always. I know many people get nervous at a closing because it’s such a big moment, or they are afraid to say something. I would say buyer’s should bring their hand and get ready to sign a lot of papers. Have that down payment. Both parties should have ID’s. Seller’s should have the spouse, or others on title at the closing to sign as well. Buyer’s just need to make sure they don’t make any new or big purchases before closing as this could really kill the entire deal. Seller’s need to make sure to bring the keys, front door, back door, garage keys, shed keys, they should bring the garage door openers. Any warranties they may have for appliances, or warranties to transfer. You can actually get very use to closings after you have done a lot of them, and understand the process.
I had a closing 4 days ago, and I drover right over, knew it would take 25 minutes, and I wasn’t even 1% nervous as the seller, I knew the hard work had already been done, and to me it was like just stopping
at the store for 20 minutes, it’s something you can get use to. I find that reviewing the HUD-1 3-24 Hours ahead of time really helps me feel more comfortable. email me at ron@minnesotainvestors.com with any questions

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