Closing/Settlement – Sandy Gadow

How to Find Open Permits
on the Property You Want to Buy

As a potential Buyer, you may have have no reason to suspect that an outstanding permit exists on a home you intend to purchase. After all, repair or remodel work may not be obvious during a visual inspection of the property and standard purchase contracts often do not include a contingency clause for verification of open permits.

Buyers rarely request that the seller disclose work that was performed years ago. The outstanding-permit issue may lay dormant until the new owner tries to modify an electric meter, remodel a room or repair a heating system, only to find that previous work has not been officially inspected and approved.

Since open permits or building code violations will not be listed in the preliminary title report nor be covered by the title insurance policy, it is important to clear up unpermitted work early on and avoid a possible delay in the closing.

Daniel and Janet were in the final stages of selling their house, when they awoke in the middle of the night to the sound of a loud alarm. Daniel called 911, the fire brigade arrived to discover that the home’s previous owner had put in an alarm system that was hidden from view and incorrectly installed. A permit for the work had never been closed out. Daniel and Janet were obligated to either have the system removed or correct the faulty installation before their sale of their home could go through.

Work done without a permit can also cause problems for a new owner. The residential alteration may have been completed according to the local building code, but if no permit was filed, the new owner may be liable for a fine. And if the work is found to not be up to code, the new owner will be required to fix the problem, bring the alteration up to standard and get a final inspection.

There are several reasons why previous homeowners did not obtain a permit. The owners may have used a local handyman to install a washing machine inside a small closet — a job that required new plumbing and electrical work but that would not be visible when the closet door was closed. The owners may have felt that a permit was not needed because — in their opinion — the job was relatively insignificant and took only a few days to complete.

In another scenario, the owners may have added a fence to their back yard and not have been aware that an ordinance required a permit for fences over a certain height.

Sometimes owners may avoid securing a permit either to get around paying the fees or because they are afraid that their property taxes might rise if the authorities become aware of their remodeling work. Or owners who did the work themselves may have been confident the job was done correctly and didn’t see the need to apply for a permit or submit to an inspection.

Before taking a listing, many real estate agents will ask Sellers if they are aware of any open permits that exist on the property. And then they will inquire if any upgrades or changes have been made that would have required a building permit.

Agents may also ask the local title company to run a courtesy permit history search, which should reveal all permits — whether pending or closed — on a property. In some parts of the country — such as Florida, where weather-related natural disasters have caused large-scale emergency repair work to be done on short notice — a permit search is common practice whenever a property sells.

Buyers can take the initiative and look up the permit history of a property by contacting the local regulatory building department for their area. A municipal search can also reveal unpermitted work.

When you hire a licensed contractor, he or she will be responsible for obtaining a permit for the work to be performed and closing out the permit after the job is completed. If you are doing remodeling work, large or small, remember to ask your contractor to give you a copy of the

closed permit for your files.

Use Contingencies To Protect Your Right To Cancel a Sale

Kristen and Ben had been looking for the right property to buy for over six months. They finally found a home that seemed to be about perfect, so they put down a deposit and signed a Purchase and Sales Agreement.They were excited to have their property search over with, but they still wondered if they had made the right choice. The house would be the biggest purchase they had ever made, a lot of money was involved, and they wanted to have an option available if for some reason they changed their mind.

“Contingencies” written into a Purchase Contract are one of the best ways to insure that you will have way to cancel the sale during the contingency period when inspections are made and the issues are either removed or resolved between the Buyer and Seller.

Contingencies will contain a time limit in which to fulfill the task. For example, an inspection contingency may give you 10 days in which to obtain and approve a pest or termite control report, a building inspection unless the property is purchased in “as is” condition. A contingency clause may allow 5 to 10 days for you to obtain a written loan commitment. The seller is generally given a certain number of days in which to deliver “marketable title” or a title report to the buyer. You then can review the exceptions listed in this report, and dispute any items which are in question. One common example of a title exception may be an easement. For example. If you plan to add a swimming pool in an area where an easement exists, you will want to be sure this will be possible.

Once a contingency has been approved, both the you and the Seller sign a document removing that contingency from the purchase contract. This agreement should be given to your closing agent and real estate representative. If the deadline for a contingency arrives, and both parties do not sign off on that contingency, this failure to act serves as acceptance of the contingency. For this reason, it is important to keep a calendar of the dates for removal of each contingency.

Contingencies help prevent problems at closing by eliminating last minute disputes covering inspections, the buyer’s inability to obtain financing, or repair work not being done according to contingency specifications.

Almost no contract automatically includes a clause that determines what will happen in case of death, since buyers assume your heirs (or the executor) will step up to close the deal. And, if the agreement is “silent” on what happens in case of illness or death, the contract continues to be enforceable, says real estate attorney Sam Tamkin, of Lawproblems.com.

A default clause describes what happens when a Buyer or Seller defaults under the contract. If the case goes to trial, a judge will decide what remedies are available. Some contracts provide that in case of default, the parties will go to arbitration. Your attorney should review the agreement to see whether everything was done properly. If not, then you may be able to cancel the agreement.

Common Contingencies

A financing contingency allows a specified amount of time for the Buyer to obtain a loan commitment and acceptable financing terms. These can be as specific as a designated interest rate or loan term. If not approved exactly as stated, the buyer has the option to cancel.

An inspection contingency, depending on your state law, can be written to include property inspections that cover possible structural problems or material defects. It can specify who will pay for necessary repairs, and to what extent each party is willing to pay for those repairs. This can also include termite damage; the presence of radon, lead or asbestos; and whether the property is in a flood or an earthquake zone.

Attorney approval means the contract is subject to passing legal scrutiny. That can include an attorney review, title report or any other legal paperwork (such as condominium documents) that relate to the purchase.

The sale can subject to the approval of a condominium or co-op board.

If you suspect recent remodeling or additions were done on the property, the purchase contract may be reliant on proof that the necessary building permits were obtained and building codes were enforced.

Recently, buyers from out of state made an offer to buy a newly built home. It was ideal, with amenities such as a swimming pool and location on a golf course. The buyers were envisaging decorating and furnishing this beautiful house. Several weeks into the sale process, the buyers realized the home was in a high-crime area, and bulgaries were common in the community. They also found that the morning traffic to go to their places of work would be a nightmare. The closing date was set. Their mortgage had been approved. The couple agonized how they could get out of the purchase without loosing their downpayment money. It seemed impossible

The day before the closing, the buyers noticed a clause in the purchase agreement that stated new palm trees must be planted in the driveway leading up to the

home. In their final inspection, there were no trees planted. They telephoned the seller’s closing agent and said that the deal was off. The builder had failed to live up to the contingency that the trees would be planted before the closing date, no exceptions allowed.

The buyers were refunded their full downpayment. They went on to find a home in a safer area, with a good commute, and although not a new home, with minor cosmetic work, the house would be perfect.

Confused About How to Hold Title to Your Property? Here Are Your Options

One of the most important decisions that needs to be made at closing is how you choose to hold title. It determines how you will be insured, but it can also have significant legal and tax consequences.

For example, there is an option available to married couples that provides protection from creditors in the event of the death of one of the spouses. There is also an option that affords a “right of survivorship” between unrelated owners. If not set up correctly, how you hold title can create unanticipated complications when you decide to sell or transfer the title to someone else.

Several years ago a married couple decided to take title to their house as “Joint Tenants” or joint owners. The husband had children from a previous marriage and intended to will his share of the property to his children. He was not aware that when one Joint Tenant dies, his or her interest automatically passes to the surviving owner and by law cannot be willed to anyone else. Fortunately, the couple discovered this stipulation before closing, and took title instead as “Tenants in Common.”

There are six common ways to hold title, and the first three are reserved exclusively for married couples.

Tenancy by the Entirety

This is a special type of joint tenancy with rights of survivorship that is recognized between married couples including same-sex marriages in Alaska, Arkansas, Delaware, Florida, Hawaii,Illinois, Indiana, Kentucky. Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina,Oklahoma, Oregon,Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, Tennessee and Wyoming. In order to form a Tenancy by the Entirety, a couple must acquire the property at the same time and the title to the property must be granted by the same instrument. Additionally, both partners must share the same interest in the property and must hold equal rights to possession of the property.

Property held under Tenancy by the Entirety cannot be sold, mortgaged, or used as collateral by one spouse without the consent of the other spouse. It allows spouses to own property as a single legal entity, offering protection to a surviving spouse from creditors of the deceased spouse. Tenancy by the Entirety cannot be used in Community Property states.

Community Property

Community property is a legal distinction that determines ownership of a married couple’s assets and is available in Arizona, California, Idaho, Louisiana,Nevada, New Mexico, Texas, Washington and Wisconsin. Property held in this manner does not have to pass through probate when one spouse dies, and the title passes directly to the other spouse. It is similar to holding title in Joint Tenancy, but it is limited to married couples or registered domestic partners. Although Alaska, Florida, Kentucky, South Dakota and Tennessee are not a community property states, they have an opt-in community property law. Spouses can designate their property by community property standards by way of a property agreement to by establishing a community property trust.

Community Property With Right of Survivorship

In Community Property ownership all assets obtained during the marriage are owned 50/50 but any assets acquired by a spouse prior to the marriage still belongs to that spouse alone. If the asset-owing spouse dies, the asset (a house) would not be inherited by their surviving spouse unless specifically stated in a will. To avoid probate or other problems, coupes can instead take title as Community Property with the Right of Survivorship. This is a fairly new designation of ownership and it ensures that when one spouse dies, their half of a shared community property goes directly to the other spouse—and to no one else. Survivorship with Community Property is only available to married couples or registered domestic partners in these sates: Alaska, Arizona, California, Idaho, Nevada, and Wisconsin. To turn property into Right of Survivorship community property you simply put the words on the title deed. Spouses are free to change their minds and remove the survivorship provision later, but it must be done in writing in a new deed.

Sole and Separate property

Sole and separate property means that no one else has any interest in the property. If you are married and want to take title this way, you should record a quitclaim deed from your spouse to yourself so that no “community interest” could be claimed at a later date. This applies only in community property states.

Joint Tenancy

The distinguishing characteristic of Joint Tenancy is the right of survivorship. If one of the joint tenants dies, his or her interest automatically passes to the surviving party or parties instead of being tied up in lengthy probate proceedings. Joint tenants own an undivided equal interest in the property and have the same rights to the use it. For example, neither co-tenant can distinguish which portion of the property he or she owns. Once a joint tenancy has been created, no joint tenant can sell his or her interest without terminating the joint tenancy. If either sells his or her interest, the buyer comes in as a tenant in common rather than as a joint tenant.

Tenancy in Common

When two or more people buy property together, whether their shares are equal or unequal, they can hold the property as Tenants in Common.Tenancy in Common is so standard as a form of ownership for unrelated buyers that it is generally presumed to be the way they hold title if nothing else appears to the contrary. The shares are also presumed to be equal, unless they are listed otherwise on the deed, and each of the tenants has equal rights of possession. Each co-tenant owns an undivided interest, but unlike a Joint Tenancy, these interests need not be equal, may arise from different conveyances, and do so at different times.

At some point, you may decide that you want to change the way you hold title to, for example, place the property in trust for a child or to

gift property to adult children. It can be a relatively simple matter to change the form of ownership. Single people can use a Quitclaim Deed to transfer the property from themselves to themselves in the new category in which they wish to hold title. Married couples would follow the same procedure using an inter-spousal deed.

Alternate Ways to Hold Title

Other ways to hold title (often used for estate planning purposes) are revocable trusts or living trusts where of one of the spouses has part ownership of the home among two trusts, or variations of these types of ownership. Limited Liability Partnerships (LLC) can be an option in other circumstances.

Depending on your area’s regulations, you may need to use particular wording in your deed, so it is a good idea to get the advice of a professional or lawyer first. You will need to get the deed acknowledged before a notary public, and then have it recorded at the clerk’s land records office.

How to Compete Against an “All-Cash” Buyer

Let’s assume that you are in the category of buyers who need to find a property now and who must also get a mortgage to finance the deal. What can you do to improve your chances that will set you above competing buyers? The first step will be to get financing in place before you make your purchase oﬀer. There are three ways to do this: ask your lender for a “pre-approval” for a loan up to a certain amount; apply to get “pre-qualified”or (and the best option) is to be get a “TBD” approval.

Pre-approval: You will turn in an oﬃcial mortgage application and will provide the lender with your financial documentation – including having your credit pulled. The lender will examine the documents to confirm that the information in the application matches the actual documents collected. The bank will determine the program types and maximum payment you will be approved for. A pre-approval is not a guaranty for a mortgage as you still need to have an underwriter sign oﬀ on all items for final approval. It does not include and appraisal or title work.
Pre-qualification: This is the easiest and quickest method to get an idea of what you can aﬀord for a property purchase. Keep in mind, however, that this approval carries the least amount of weight for your oﬀer. It does not include a credit check and it is not a firm loan commitment by the lender.
TBD Approval: To-Be-Determined (TBD) approvals are the strongest and best method to use for your pre-approval loan process. Your loan file will be underwritten to the furthest extent possible and you do not have to identify a specific property. The lender will ask for a complete loan application—including income, assets and liabilities. If your financial picture meets the lender’s criteria, you will be given a “hard approval” for the maximum monthly mortgage payment allowed. The process may take a few days but allows you to guarantee a quick closing to the seller and set you above other potential buyers with lesser approval letters.

Income

Documents Needed for a TBD Approval Letter

Tax returns: Copies of your two most-recent federal and state tax returns

W-2 wage earners: Copies of your two most recent payroll stubs.

Self-employed, freelancers and independent contractors: Up to-date profit and Loss statement and two years of records, including Form 1099s

Real estate income: Rental income, address, lease and current market value

Assets

Bank statements: Two months of statements

Retirement and brokerage accounts: Two months of statements

Personal Property: Include your car, furniture, jewelry, or valuable collections such as art work, antique cars, cameras, and so forth.

Debt

Monthly debt payments: Lenders use this total amount to calculate you debt-to- income ratio. Include any recurring monthly payments such as health insurance, car payments, minimum payments on credit cards, utility bills, car insurance, etc.

Divorce: Your lender may ask for a copy of your court divorce decree and any child support or alimony payments if applicable.

Bankruptcy and foreclosure: Ask your lender what documents they may need and how long you need to wait after bankruptcy or foreclosure to be eligible to apply for the loan.

Down payment gift letters: Lenders will want to see the sources of the money you plan to use for the downpayment. If that includes gifts, get a letter from your donors to show they don’t expect to be paid back.

State-by-State COVID-19 Addendum

Most real estate associations have prepared COVID-19 addenda similar to those found in the California addendum, though the wording and scope may vary among them. Click your state below to find the pertinent information.

Alabama	Kansas	New Mexico	Utah
Arizona	Kentucky	New York	Vermont
Colorado	Louisiana	North Carolina	Virginia
Connecticut	Maine	North Dakota	Washington
Delaware	Maryland	Ohio	West Virginia
District of Columbia	Massachusetts	Oklahoma	Wisconsin
Florida	Missouri	Oregon	Wyoming
Georgia	Montana	Pennsylvania
Hawaii	Nebraska	South Carolina
Idaho	Nevada	South Dakota
Illinois	New Hampshire	Tennessee
Iowa	New Jersey	Texas

How Will Real Estate Closings be Handled Since COVID-19?

By Sandy Gadow

Title and escrow companies are adapting to the new environment brought on by the COVID-19 virus and taking guidance from the Centers for Disease Control (CDC) and World Health Organization (WHO) on how to conduct business to keep their customers and employees safe. Fortunately, more than 95% of the work a title company does is “behind the scenes” and away from public interaction. The actual in-person signing of documents is just one small piece of the entire closing process.

Many title employees across the nation are working from home and available through normal channels including web-based tools, e-mail or telephone conferencing. Closings are held by appointment only. Agents, lenders and any other unnecessary parties do not attend, and limits on the number of people who are allowed to physically attend are enforced. Electronic transmission of documents and e-signing will be even more widely used than before and funds wired to and from banks and lending institutions. The use of mobile notaries and in-home closing will likely increase.

It may take longer to process and record documents since the title business relies on government offices to obtain and record legal documents. Title agents record deeds and search ownership documents, liens, judgments, etc. at the county court house. However, many county recording offices accept and process electronic recordings which help speed up the closing process. Your title agent will regularly monitor the status of government recording offices for their ability to record pending transactions and plan accordingly for your closing date.

Keep in constant contact with your closing agent, as rules may change quickly — county by county or state-by-state—as the situation evolves.

Most closing agents are taking strict precautions for the safety of both their clients and employees, including:

Conducting most closings and/or meetings by appointment only
Asking that non-essential parties refrain from attending closings and/or meetings
Making hand sanitizer available in all areas of the office
Wiping down tables and chairs, doorknobs, counters and other areas of public contact throughout the day
Providing new pens for each signing
Providing separate closing rooms, if available
Promoting best practices for personal hygiene and workplace cleanliness to employees
Restricting non-essential travel as well as employee attendance at industry conferences and events
Directing any employee with symptoms of illness to stay home

6 Tips to Ensure a Smooth House Closing

Real estate closings can be fraught with complications and setbacks, but they can go smoothly and quickly — if planned for carefully.

You may think that an “all cash” deal would go through closing faster than a sale that involves a mortgage — but that is not always the case. Unresolved title issues, such as an unknown mechanics lien from a former building contractor or boundary or unsettled disputes from the past can show up.

Also, serious structural problems with the property may be revealed in an inspection report, and they can cause weeks or even months of delay. The buyer’s cash to close might not arrive to the closing agent in time, or the wrong amount may be received. In order to prevent these potential problems — and others — there are several things you can do.

One common issue that often delays a closing is repair disputes. If you are the seller, it’s a good idea to have a general building inspection before you list your house for sale. You may find problems that you were previously unaware existed, and you can then either correct them, or consider selling your property in an “as is” condition.

Keep in mind, however, that you may be required by law to disclose any “known” structural defects to the new buyer. You may not necessarily have to repair the problem, but you would need to be sure that you make an exclusion for that needed repair in your agreement with the buyer. Prior to closing, be sure that the property is in the condition promised — all required repairs completed and the house and yard cleared of any personal items, including old cars, tools, trash.

Ask a real estate agent, local title company or closing agent to perform a “preliminary title report” for your review — especially if you suspect there is or might be a possibility of a prior lien, estate or divorce problem that could affect your title to the property. If you review this report early on — even before you offer your house for sale — and clear up any existing issues, you will avert a possibly long delay due to title defects.

If you are a buyer who will be getting a mortgage to finance the property, there are several things you can do to speed up the loan process and be sure the deal closes on time:

Get conditional approval before making the offer. Getting pre-approved for a loan will help you determine how much you can afford and give you a realistic expectation of the price range for your new house. Buyers who have been pre-approved by a lender are generally those who are able to finalize their loan application faster and more efficiently than ones who have not been pre-qualified.
Have your documents together. Assemble your bank statements, pay stubs, tax returns and other documents as soon as possible — even before you begin looking for a house to buy. Often, getting these documents together takes time and the better you prepare, the faster your loan will be approved — and processed. If you are unsure of which documents you need, ask your local bank for a “mortgage loan checklist.” Most lenders post these checklists online, and they will readily give you a guideline regarding what you will need to provide.
Work with an experienced mortgage lender. Whether you use a mortgage broker, or work directly with a lender, ask what the average time is for processing a loan application and, specifically, how quickly they will be able to complete your mortgage. Try to anticipate potential setbacks, like any credit or employment-related problems you know exist and ask what you need to do to clear those up.
Make sure that you have the money for closing costs. The lender will require proof that you have sufficient funds for the down payment and closings costs prior to closing. Be sure those funds are readily available, and be prepared to wire or present a cashier’s check on the day before closing.
Create a timeline for any repairs the seller is obligated to make. Make sure any repairs the seller has agreed to make are completed on time — ideally, at least several days before your scheduled closing. Do the final walk-through inspection the day before closing, or sooner, if the seller agrees.
Contact your lender on the day before and on the day of closing. Lenders notoriously ask for information at the last minute — a copy of a canceled check, proof of insurance, or a recent bank statement. A day or two before closing, contact your lender and ask if everything will be ready for the closing date. On the day of closing, verify with your closing agent that the loan documents have been received. If not, ask what is causing the delay and if there is anything you can do to help speed things up. Often, it is a case of just one missing document or one final verification.

Once the repairs have been made, the title issues resolved, the loan approved, and all the documents prepared for signature, both the buyer and seller can further assure the closing goes smoothly by reviewing all of the documents at least 24 hours before all the concerned parties meet. (If you close after Aug. 1, you will be able to review documents three days before settlement.) This is your chance to ask any final questions you may have or point out any errors you notice.

Stay in control of your closing, and try to be as involved in the process as possible.

These Common Title Problems Can Snag Your Home Closing

In almost all real estate transactions, there are title issues that must be cleared up in order to transfer ownership of the home from the seller to the buyer.

Does the seller have the legal right to sell the property? Is the home’s title free of “clouds” or “defects” — such as judgments, liens or bankruptcies — that would prevent the seller from transferring “clear” or “marketable” title to the buyer? How can you be sure?

Title companies report that in more than one-third of all real estate transactions they must undertake “extraordinary work” to address title issues. The title company will examine public records — often going back 50 years or more — to look for past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments and tax records that may be defective or outstanding.

No matter how small a problem it may be, any title issue will need to be resolved in order to offer a clear title to the buyer. The results of the search will be compiled into a preliminary title report that will be given to the buyer, seller, real estate agent, lender and attorney involved in the sale.

Mechanic’s liens are common. They are liens placed against a property that a general contractor — or anyone who provides services to improve the property — files before starting the work. It’s a way to ensure that they will get paid; the lien is supposed to be released when the job is done.

Specific laws, which vary from state to state, dictate how a mechanic’s lien must be filed, processed and/or acted upon. The procedure for the District can be different from that in Virginia, Maryland or any other state in the country. Whether it will take precedence over other liens on the property will also be specific to the jurisdiction where the work was performed.

Problems arise when the contractor fails to file a “satisfaction” of the lien and it remains on the property’s title, or when the lien is contested. The title company must determine whether the lien was filed properly and recorded in the public records, and whether notice was given in accordance with state law. Most mechanics’s liens do not have an indefinite lifespan and will expire if not acted upon in the prescribed amount of time. Mechanic’s liens usually are able to be resolved, but the process can be time-consuming — for example, if the contractor has left the area or cannot be found — and could cause the closing to be delayed.

The procedural guidelines for filing and processing a mechanic’s lien for the District, as well as Maryland, Virginia and other states, can be found at www.fullertonlaw.com.

Bankruptcies are another source for potential title issues. For example, a seller could have bought a house while single, and then married someone with a recent bankruptcy. The title company would need to be sure not only that the new spouse had signed off on the deed, but that the bankruptcy case had been discharged. If not, it would be necessary to petition the court to release the property from the bankruptcy process.

Another common type of lien occurs when a divorced spouse either forgets or doesn’t remove a lien for child support — even though the debt may have been resolved decades ago. A child could inherit his father’s house and decide to sell the property. A lien placed by his mother years ago — but since resolved — could show up in the title search and prevent the sale. The child would have to get his surviving parent to sign a “release of judgment” that states that the debt has been paid in full in order to have clear title.

Liens for past-due spousal support or delinquent taxes are also common. The American Land Title Association recently found that fraud and forgery issues between spouses have become more prevalent over the past several years and must be dealt with before a property can change hands. A typical spousal fraud issue could be that a spouse signs the signature of the other spouse on a document or deed — without telling them — to either eliminate an interest or add someone else to the title. It’s similar to when a spouse signs a joint tax return for both spouses — and one spouse is not aware of what he or she is now responsible for.

If the seller is not aware that a lien or other encumbrance is attached to the property, it can take days — or weeks — to resolve the problem. The seller may have inherited the property from a trust and be unaware that one of the beneficiaries or co-owners now lives overseas and cannot be found. The co-owner’s signature would be necessary to transfer the title, and if the owner can’t be located the legal steps to remedy the problem could take months.

Title companies do most of their remediation work behind the scenes. You may not even be aware that some title defects existed and were taken care of before the closing. Other times you may be asked to sign a document to remove or release the lien or title defect. Many title issues can be resolved by filing one of three common documents:

A quit claim deed removes an heir and clears up title among co-owners or spouses.
A release of lien/judgment removes a paid mortgage or spousal or child support lien.
A deed of reconveyance records payment of a mortgage under a deed of trust.

What about defects in the title that are not recorded — or defects that the title company has no way to know exist?

There could have been forgeries, claims from the use of an “alias” or fictitious name, a deed given under duress or fraud, deeds affecting property of a deceased person, a deed following administration of an estate of a missing person who later appears, an undisclosed but recorded federal or state tax lien, errors in the legal description, a right of access wiped out by foreclosure on a neighboring land, and many others.

For a list of more than 70 possible title issues, go to www.firstam.com/title/resources.

If you suspect that there may be title issues (unknown or unresolved liens) on your property, you can do a search of the title yourself. Recorded documents are filed at the county recorder or clerk’s office and are available to the public.

You may find an unreleased mortgage that the lender did not report as paid in full or a lien from someone you have never heard of.

A title insurance policy will be your best protection against those and many other title problems that may become known after you close on your transaction. The cost for the policy is a one-time fee, and the policy will remain in effect for as long as you own the property.

But in order to purchase title insurance, you’ll need a complete title search conducted by a title company.

When Selling a House, Avoid Awkward Misunderstandings Over Fixtures and Furnishings

State-of-the-art appliances, sleek lighting fixtures and tasteful window treatments can all make a memorable impression on potential home buyers. Silk curtains that match the wall or floor coverings, elegant chandeliers or crystal knobs on cabinet doors are features that buyers could understandably “assume” would be included in the sale.

Sellers may have a different view. Frequently, they plan to take pricey extras — like an heirloom chandelier, curtains made to coordinate with a bedroom set, an expensive, custom-designed kitchen exhaust fan that poses as a hanging light fixture or an imported wine cooler — with them when they move.

Problems and delays can arise at closing if the buyer discovers during the final inspection that desired items in the home have been removed or even replaced. This type of “misunderstanding” can prompt disappointed buyers to refuse to close the deal.

Most well-written purchase agreements contain a clause that provides for improvements and fixtures that will be included in the sale. Built-in appliances, light fixtures, wall-to-wall carpeting, window treatments and curtain rods, security systems, garage door openers and storm shutters are the types of things that may be listed. The lines can become blurred, however, when personal property items — such as curtains, free-standing appliances or a favorite light fixture — are not specified in the contract and/or the sellers’ intentions are not made clear.

Will the specialty Swedish washing machine stay or go? Will the expensive Sub-Zero refrigerator stay with the house or be removed at closing? Trees in free-standing pots in the patio or children’s play equipment in the yard can also come into question. Buyers have no way to be certain that “what they see will be what they get” unless those items are referred to specifically in the purchase contract.

Furniture may seem clear-cut and indisputable, but — in some instances — it still can cause disagreements. A large, irregular-shaped sofa that matches the wall color exactly and appears to be built into a wall of the living room might be assumed to be “real property.” But, in fact, the sofa might be a custom-made, free-standing fixture that the sellers have no intention of leaving behind.

Personal property becomes real property when it is attached in some way to the house — that may be bolted, built in to cabinets, cemented, nailed or wired behind the walls. There are five legal tests, adhered to by most states, that help determine when personal property — such as light bulbs in a chandelier — becomes, instead, real property, or part of the structure.

The first and most important test is the method of attachment. If the item has been permanently attached with some sort of fastener (such as nails, screws or bolts) or with bonding material (such as glue or cement), then it has officially become a fixture. These features are real property and (unless excluded in the agreement) must be included in the sale. Pertinent examples would include hanging light fixtures, door and cabinet hardware, and window treatments.
The second test is the adaptability of a particular item for use with the property. Built-in equipment that requires special wiring (such as an audio speaker, a burglar alarm or an intercom) is personal property that has been adapted to the structure and, consequently, has become real property.
The third test is the intention of both the buyer and the seller. If the exhaust fan mounted over the stove has been mentioned in the purchase agreement as “not included in the sale,” then there is no question about the seller’s intention.
The fourth test is the actual agreement between buyer and seller. The purchase agreement should list everything that might cause controversy later on, and should state exactly how each item will be handled. Everything is negotiable, and both personal and real property items should be agreed upon, and listed in the initial purchase offer.
The fifth test is the relationship of the parties. In determining whose assumptions are correct, in any litigation about whether something is either personal or real property, be aware that many observers feel that courts tend to favor buyers over sellers, tenants over landlords and lenders over borrowers.

Of course, the law can vary from state to state. Since real property in Maryland could be considered personal property in California, it’s best to check with a local attorney if or when a legal opinion is needed.

“Buyers need to imagine themselves cooking in the modern kitchen, entertaining in the elegant dining room or relaxing in the tasteful living room,” says Kristie Barnett, an expert home stager and author of the book “Psychological Staging.”

“Updated window treatments and light fixtures are important to home buyers and can cause problems at closing if the buyer finds they have been removed — or replaced with an unacceptable or inexpensive alternative,” Barnett added.

Barnett helps professional property stagers learn how to help sellers maintain their home’s appeal by replacing an expensive or sentimental fixture with an updated — cost-effective — replacement. Light fixtures, towel bars and drawer knobs may have unique drill or hole configurations, so the replacement fixtures will have to conform to those specifications.

“Outdated or large special-purpose items — such as an older swing set in the back yard or gym equipment in the basement — can cause problems at closing, particularly if the seller leaves them behind,” says Fiona Dogan, a realty agent with Julia B. Fee Sotheby’s in Rye, N.Y. “When it comes to personal property items, it pays to take extra precautions and be clear as to the buyer’s and seller’s intentions. Sellers have been known to change their minds — and often at the last minute.”

Experienced closing agents know that it can often take striking a compromise at the closing table to save a deal that appears destined to fail. Often, it takes being in the presence of an impartial third party — the closing agent or attorney — for stubborn sellers and emotional buyers to reach an agreement.

I Heard That My Builder Will Be Handling My Escrow. How Can I Protect Myself?

It may be common for you to hear that the builder of the new home you will be buying will be handling the escrow for you. The builder may also be helping you with the mortgage to finance your new home. Are there certain safeguards you should look for? Who will be protecting your interest at the time of closing?

In many areas of the country, there are numerous new home construction projects underway. In Las Vegas, Nevada, for example, there are over 330 new home builders. It is typical for agents working for the builder to handle the closing. These agents will prepare all the necessary paperwork and help you find a lender. Often times, the builder may have an arrangement with a lender to help prequalify you for a loan. There is no problem with this arrangement and you will receive title insurance protection as if you were purchasing an existing home. If you are a first-time home buyer or feel that you would like someone working “for you” in your purchase, there are several things you can do.

You can work with a realtor who is independent of the builder. The real estate associate will be working for you, looking out for your best interests, and can help you negotiate price and terms with the builder. The associate can help you find legal counsel, if you want to have a legal opinion on your purchase agreement with the builder. Although buying directly from a new home builder can work just fine, there may be instances where you might want your own realtor involved in the transaction.

Upon completion of the home, you will want to walk thru the property, perform a final inspection, and perhaps have the house looked at by a building inspection company of your choice. There are many things to look for when buying new construction, such as wiring and plumbing and other systems being installed to code, proper installation of appliances, being certain that everything works as it should, including outside garden systems, such as sprinklers, pool heaters, garage door openers, and the like. You will want to be clear as to the warranties given on areas of the home such as the roof, appliances, heating and plumbing systems, pool and electrical systems. You may feel that you are confident to perform these inspections yourself, but with or without a real estate agent, a licensed outside building inspection company is typically well worth the cost to help you with your final inspection. A reputable inspection company will look at such specific structural issues as joists, roof trusses, radon vents, adequate sealed electrical outlets, adequate slope on plumbing drains, heating and cooling filter slots, any ductwork, and so on.

Certain items may not be installed by the time your closing is ready to take place. The trees in the front of the house may not be planted, the deck may not be fully painted or installed, or other items may not be finished. The builder may have a specified period of time in which to finish these items, but it is important that you have a signed agreement between yourselves and the builder as to what is agreed and who is to do what and by which date. It may be advisable to hold some money “in escrow” from the sales proceeds until the work is completed to your satisfaction.

It is important to be clear at your closing what your builder will be agreeing to do after the closing. There always seem to be some items which need to be repaired or replaced in a new home, perhaps a pipe that was not installed correctly, or an electrical outlet not wired to your specifications, but typically the builder allows for these contingencies, and will fix these problems without any question. Any defects which are found are probably not due to any intentional cost cutting by the builder, but rather a result of a lack of attention to detail or supervision. In some states, builders are required to offer a one-year warranty on any building code violations which are discovered. Many purchase agreements may state that the builder must construct the home according to good construction practice or industry standards, which may cover items which are not code related.

Check over your title insurance policy, checking boundary lines or any new fence lines. Check for any outstanding judgments or liens on the property. You may want to walk the property boundaries, checking for any easements which may have been created. Often in a new home community, easements and right-of-ways may be created for access purposes, and it is important that you understand where these easements and access pathways are located. There may be common shared areas in the development. Be sure to ask if you will be responsible for any monthly or annual charges to maintain these common areas. If your new home is in a gated community, ask to review the documents which govern the maintenance of the common areas.

You might ask if a discounted title insurance rate is available, as the builder may have recently purchased title insurance on the land and you may qualify for the lower rate. This discounted rate may be called a “binder or a re-issue” rate. Typically in a title insurance policy there will be a list of ‘Standard Exceptions.” Ask to have these exceptions deleted from the policy. The builder may need to sign an affidavit stating that there are no judgments or liens on the property. A Notice of Completion will typically be recorded concurrently with your deed and mortgage documents. When negotiating the purchase with the builder, get a copy of an estimate of possible closing costs from the agent who will be handling the closing. Look over the escrow and title fees carefully. Some of these fees may be a negotiable with the builder.

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Will My Escrow Agent Have to Report My Sale to the IRS?

The Tax Reform Act of 1986 required anyone responsible for closing a real estate transaction, which may include the escrow agent, title company, or attorney, to report a real estate sale or exchange to the IRS on Form 1099-S. In addition, they were required to furnish a statement to the seller of the gross proceeds of the sale. In 1998, with the passage of the Tax Payer Relief Act of 1997, an exception to this reporting requirement was allowed.

If the sale price of your residence is $250,000 or less ($500,000 or less for married sellers) and you have lived in the property, as your principal residence, for the last two out of the last five years, your closing agent will not be required to file Form 1099-S with the IRS. The gross proceeds of the sale need not be reported to the IRS if these conditions are met.

Be sure that your closing agent has your written confirmation that your sale is exempt from the IRS reporting rule. Most closing agents have a form, called a “Certification for No Information Reporting on the Sale or Exchange of a Principal Residence” which you will you be asked to sign at closing. The form will ask for your seller information, social security number, address, and certification that you have met the exemption requirements.

Closing Checklists

Buyer’s Home Closing Checklist

Have you made a final walk-thru inspection of the property?
Is the condition of the house or property as it should be? Are there any personal property items left behind by the Seller. Is everything in working order? Did you order a Home Warranty policy for future repairs? If so, did you review that policy?
Are you satisfied that the Seller provided you with all required disclosure documents or any known defects on the property?
Have you carefully reviewed your mortgage closing documents? Are the lender’s closing costs as they represented they would be? Are there any “junk fees” added on that you do not agree to? Are the names correct on the mortgage or Deed of Trust documents?
Is the loan amount, interest rate, term of the loan, and prepayment penalty correctly stated? When will your first mortgage payment be due? Where will the payment be made?
Do you agree with the title fees being paid to the title company, attorney, or escrow agency? Are they the same as previously quoted to you?
Do you understand the prorations, those items or costs of which you will pay a portion of or be given a credit for? Are the prorated dates and amounts correct?
It is clear on which day you will take possession of the property? Will the Seller hand over the keys on the day of closing or at a later date?
Is the purchase price correct on the closing documents?
Have you been credited for all deposits put into escrow either by you or on your behalf?
Is your name correct on the grant deed? Is it spelled correctly, and does it include your correct middle initial? Is the manner in which you will take title stated correctly? Is the legal description of the property correct? Does this description conform with the one given in the title report? Are all the easements and rights-of-way properly listed?
Were any questionable items on the title report removed or explained to your satisfaction?
If there is any personal property included, are you being given a Bill of Sale, and do you agree with the items included?
Are you paying for fire insurance yourself outside of escrow or through the closing agent? Is the premium correct and is the policy for a full year?
Are the property taxes being paid in full? Ask when the next property tax bill will become due.
Does your state allow a Homestead exemption? If so, and you want to choose this option, ask how you file for Homestead exemption status.
Check that the return address on the Deed is where you will want the recorded Deed to be sent. (you will want to keep this official document in a safe place).

Seller’s Home Closing Checklist

Have you removed all your personal property items?
Have you left the property in the condition you promised you would?
Is the Sale Price and payoff information correct on your closing documents?
Were you given credit for any items agreed upon to be credited to your account?
Is a satisfaction of mortgage or payoff document being prepared for your old loan?
If you will be signing a Bill of Sale for personal property items, are those correct?
Are the prorations correct? Check the dates on these debit and credit items.
Do you know what day you must vacate the property? Is it the day of closing?
Have you agreed to perform any repairs or other work before or after closing?
Are the title and closing costs as you understood them to be?
Is the attorney fee, closing agent, transfer tax, or title insurance fees correct?
Did you correctly make any disclosures as required by your state or federal law to the new buyer? Or, did you sell the property in “as is” condition?
If there was a Realtor involved in the sale, is that fee correct?
Is any money being held back in escrow on your behalf? If so, how and when will it be released?

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

State by State Closing Guide

This summary is merely a general reference guide. Local practices within your city or county may differ. Contact a local title company or real estate attorney for specific information.

This is not intended as a legal advice, but merely as a general reference guide.” For further explanation and an in-depth resource guide for your state refer to The Complete Guide to Your Real Estate Closing, available at www.amazon.com or sandygadow.com/order.html.

Please choose a state:
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ALABAMA

Attorneys and title companies handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks on a county-by-county basis. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who is going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1st.

ALASKA

Title companies, lenders, and private escrow companies all handle real estate escrows. Conveyance is by warranty deed. Deeds of trust with private power of sale are the customary security instruments. Foreclosures take 90-120 days. Alaskans use ALTA owner’s and lender’s policies with standard endorsements. There are no documentary or transfer taxes. Buyer and seller usually split the closing costs. Property tax payment dates vary throughout the state.

ARIZONA

Title companies and title agents both handle closings. Conveyance is by warranty deed. Whereas deeds of trust are the security instruments most often used, mortgages and “agreements for sale” are used approximately 20% of the time. Foreclosure depends upon the security instrument. For deeds of trust, the foreclosure process takes about 91 days. Arizonans use ALTA owner’s and lender’s policies, standard or extended, with standard endorsements. The seller customarily pays for the owner’s policy, and the buyer pays for the lender’s policy. They split escrow costs otherwise. There are no documentary, transfer, or mortgage taxes. The first property tax installment is due October 1st and delinquent November 1st; the second half is due March 1st and delinquent May 1st. Arizona is a community-property state.

ARKANSAS

Title agents handle escrows, and attorneys conduct closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosure requires judicial proceedings, but there are no minimum time limits for completion. Arkansans use ALTA policies and endorsements and receive a 40% discount for reissuance of prior policies. Buyers and sellers pay their own escrow costs. The buyer pays for the lender’s policy; the seller pays for the owner’s. The buyer and seller split the state documentary tax. Property taxes come due three times a year as follows: the third Monday in April, the third Monday in July, and the tenth day of October.

CALIFORNIA
Not only do escrow procedures differ between Northern and Southern California, they also vary somewhat from county to county. Title companies handle closings through escrow in Northern California, whereas escrow companies and lenders handle them in Southern California. Conveyance is by grant deed. Deeds of trust with private power of sale are the security instruments used throughout the state. Foreclosure requires a three-month waiting period after the recording of the notice of default. After the waiting period, the notice of sale is published each week for three consecutive weeks. The borrower may reinstate the loan at any time prior to five business days before the foreclosure sale. All in all, the procedure takes about four months. Californians have both ALTA and CLTA policies available. In Southern California, sellers pay the title insurance premium and the transfer tax. Buyer and seller split the escrow costs. In the Northern California counties of Amador, Merced, Plumas, San Joaquin, and Siskiyou, buyers and sellers share title insurance and escrow costs equally. In Butte County, sellers pay 75%; buyers pay 25%. In Alameda, Calaveras, Colusa, Contra Costa, Lake, Marin, Mendocino, San Francisco, San Mateo, Solano, and Sonoma counties, buyers pay for the title insurance policy, whereas sellers pay in the other Northern California counties. Each California county has its own transfer tax; some cities have additional charges. Property taxes may be paid annually on or before December 10th, or semiannually by December 10th and April 10th. Annual taxes are set at no more than 1 percent of the property’s base value or purchase price. Each year following this, a two percent increase is permissible. (Proposition 13). A property transfer between husband and wife will not result in a new tax assessment of one percent of the fair market value.

The homeowner’s exemption allows an owner to be exempt of the first $7,000 of the property’s full cash value. This exemption is allowed only for primary residences. Homeowner must obtain a form from the county tax assessor, and submit it by February 15 of the current tax year to be eligible for the exemption. Californians over the age of 55 also have the option of moving primary residences and taking their prior “old” tax base with them to the new property. This exception may be used only once in a lifetime. Referred to as the” Senior Citizen’s Replacement Dwelling Benefit”, Proposition 60 was a constitutional amendment approved by the voters in 1986. It is codified in Section 69.5 of the Revenue & Taxation Code, and allows the transfer of an existing Proposition 13 base year value from a former residence to a replacement residence, if certain conditions are met. California is a community-property state.
COLORADO

Title companies, brokers, and attorneys all may handle closings. Conveyance is by warranty deed. Deeds of trust are the customary security instruments. Public trustees must sell foreclosure properties within 45-60 days after the filing of a notice of election and demand for sale, but they will grant extensions up to six months following the date of the originally scheduled sale. Subdivided properties may be redeemed within 75 days after sale; agricultural properties may be redeemed within 6 months after sale. The first junior lien holder has 10 additional days to redeem, and the second and other junior lienholders have an additional 5 days each. The public trustee is normally the trustee shown on the deed of trust, a practice unique to Colorado. Foreclosures may be handled judicially. Coloradans have these title insurance policy options: ALTA owner’s, lender’s, leasehold, and construction loan; endorsements are used, too. Although they are negotiable, closing costs are generally split between buyer and seller, and seller normally pays for title insurance. Sellers pay the title insurance premium and the documentary transfer tax. Property taxes may be paid annually at the end of April or semiannually at the ends of February and July.

CONNECTICUT

Attorneys normally conduct closings. Most often conveyance is by warranty deed, but quitclaim deeds do appear. Mortgages are the security instruments. Judicial foreclosures are the rule, either by a suit in equity for strict foreclosure or by a court decree of sale. Court decreed sales preclude redemption, but strict foreclosures allow redemption for 3-6 months, depending upon the discretion of the court. There are lender’s and owner’s title insurance policies available with various endorsements. Buyers customarily pay for examination and title insurance, while sellers pay the documentary and conveyance taxes. Property tax payment dates vary by town.

DELAWARE

Attorneys handle closings. Although quitclaim and general warranty deeds are sometimes used, most conveyances are by special warranty deeds. Mortgages are the security instruments. Foreclosures are judicial and require 90-120 days to complete. ALTA policies and endorsements are prevalent. Buyers pay closing costs and the owner’s title insurance premiums. Buyers and sellers share the state transfer tax. Property taxes are on an annual basis and vary by county.

DISTRICT OF COLUMBIA

Attorneys, title insurance companies, or their agents may conduct closings. Conveyances are by bargain-and-sale deeds. Though mortgages are available, the deed of trust, containing private power of sale, is the security instrument of choice. Foreclosures require at least six weeks and start with a 30-day notice of sale sent by certified mail. ALTA policies and endorsements insure title. Buyers generally pay closing costs, title insurance premiums, and recording taxes. Sellers pay the transfer tax. Property taxes fall due annually or if they’re less than $100,000, semiannually, on September 15th and March 31st.

FLORIDA

Title companies and attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are judicial and take about 3 months. They involve service by the sheriff, a judgment of foreclosure and sale, advertising, public sale, and finally issuance of a certificate of sale and certificate of title. ALTA policies are commonplace. Buyers pay the escrow and closing costs, while county custom determines who pays for the title insurance. Sellers pay the documentary tax. Property taxes are payable annually, but the due and delinquent dates are months apart, November 1st and April 1st. Under Florida law, a widow or widower has the right to live in their deceased spouse’s house for the remainder of his or her life, even if the home is willed to someone else. A Homestead Exemption exists for an owner’s residence in Florida. Florida’s exemption is unique because it lacks any monetary cap on the homestead protection, while other states which offer a homestead exemption usually place a limit on the valuation which can be protected.

GEORGIA

Attorneys generally take care of closings. Conveyance is by warranty deed. Security deeds are the security instruments. Foreclosures are non-judicial and take little more than a month because there’s a power of attorney right in the security deed. Foreclosure advertising must appear for 4 consecutive weeks prior to the first Tuesday of the month; that’s when foreclosure sales take place. Georgians use ALTA title insurance policies, including owner’s and lender’s, and they use binders and endorsements. Buyers pay title insurance premiums and also closing costs usually. Sellers pay transfer taxes. Property tax payment dates vary across the state.

HAWAII

By law, only attorneys may prepare property transfer documents, but there are title and escrow companies available to handle escrows and escrow instructions. Conveyance of fee-simple property is by warranty deed; conveyance of leasehold property, which is common throughout the state, is by assignment of lease. Condominiums are everywhere in Hawaii and may be fee simple or leasehold. Sales of some properties, whether fee simple or leasehold, are by agreement of sale. Mortgages are the security instruments. Hawaiians use judicial foreclosures rather than powers of sale for both mortgages and agreements of sale. These foreclosures take 6-12 months and sometimes more, depending upon court schedules. Title companies issue ALTA owner’s and lender’s policies and make numerous endorsements available. Buyers and sellers split escrow fees. Sellers pay the title search costs and the conveyance tax. Buyers pay title insurance premiums for the owner’s and lender’s policies. Property taxes come due twice a year, on February 20th and again on August 20th.

IDAHO

Closings are handled through escrow. Conveyance is by warranty deed or corporate deed, though often there are contracts of sale involved. Either mortgages or deeds of trust may be the security instruments. Deeds of trust which include power of sale provisions are restricted to properties in incorporated areas and properties elsewhere which don’t exceed 20 acres. After the notice of default has been recorded, deed-of-trust foreclosures take at least 120 days, and there’s no redemption period. Judicial foreclosures for mortgages take about a year, depending upon court availability, and there’s a 6-12 month redemption period after that, depending on the type of property involved. Idahoans use ALTA policies and various endorsements. Buyers and sellers split escrow costs in general and negotiate who’s going to pay the title insurance premiums. There are no documentary taxes, mortgage taxes, or transfer taxes, but there are property taxes, and they’re due annually in November and delinquent on December 20th or semiannually on December 20th and June 20th. Idaho is a community-property state.

ILLINOIS

Title companies, lenders, and attorneys may conduct closings, but only attorneys may prepare documents. Lenders generally hire attorneys and have them prepare all the paperwork. Conveyance is by warranty deed. Recorded deeds must include a declaration of the sales price. Mortgages are the customary security instruments. Judicial foreclosure is mandatory and takes at least a year from the filing of the default notice to the expiration of the redemption period. Illinoisans use ALTA policies. Buyers usually pay the closing costs and the lender’s title insurance premiums; sellers pay the owner’s title insurance premiums and the state and county transfer taxes. Property tax payment dates vary. Larger counties typically schedule them for March 1st and September 1st, and smaller counties schedule them for June 1st and September 1st.

INDIANA

Title companies, lenders, real estate agents, and attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Judicial foreclosures are required; execution of judgments varies from 3 months after filing of the complaint in cases involving mortgages drawn up since July 1, 1975, to 6 months for those drawn up between January 1, 1958, and July 1, 1975, to 12 months for those drawn up before that. Immediately following the execution sale, the highest bidder receives a sheriff’s deed. Hoosiers use ALTA policies and certain endorsements. Buyers usually pay closing costs and the lender’s title insurance costs, while sellers pay for the owner’s policy. There are no documentary, mortgage, or transfer taxes. Property taxes fall due on May 10th and November 10th.

IOWA

Attorneys may conduct closings, and so may real estate agents. Conveyance is usually by warranty deed. Mortgages and deeds of trust are both authorized security instruments, but lenders prefer mortgages because deeds of trust do not circumvent judicial foreclosure proceedings anyway. Those proceedings take at least 4 -6 months. Since Iowa is the only state which does not authorize private title title insurance, Iowans who want it must go through a state administered title company or fund. Buyers and sellers share the closing costs; sellers pay the documentary taxes. Property taxes are due July 1st based upon the previous January’s assessment.

KANSAS

Title companies, lenders, real estate agents, attorneys, and independent escrow firms all conduct closings. Anyone who conducts a title search must be a licensed abstracter, a designation one receives after passing strict tests and meeting various requirements. Because many land titles stem from Indian origins, deeds involving Indians as parties to a transaction go before the Indian Commission for approval. Conveyance is by warranty deed. Mortgages are the customary security instruments. Judicial foreclosures, the only ones allowed, take about 6 months from filing to sale. Redemption periods vary, the longest being 12 months. Kansans use ALTA policies and endorsements. Buyers and sellers divide closing costs. Buyers pay the lender’s policy costs and the state mortgage taxes; sellers pay for the owner’s policy. Property taxes come due November 1st, but they needn’t be paid in a lump sum until December 31st. They may also be paid in two installments, the first on December 20th and the second on June 20th.

KENTUCKY

Attorneys conduct closings. Conveyance is by grant deed or by bargain-and-sale deed. Deeds must show the name of the preparer, the amount of the total transaction, and the recording reference by which the grantor obtained title. Mortgages are the principal security instruments because deeds of trust offer no power-of-sale advantages. Enforcement of any security instrument requires a decree in equity, a judicial foreclosure proceeding. Kentuckians use ALTA policies and endorsements. Sellers pay closing costs; buyers pay recording fees. Responsibility for payment of title insurance premiums varies according to locale. Property taxes are payable on an annual basis; due dates vary from county to county.

LOUISIANA

Either attorneys or corporate title agents may conduct closings, but a notary must authenticate the documentation. Conveyance is by warranty deed or by act of sale. Mortgages are the security instruments generally used in commercial transactions, while vendor’s liens and seller’s privileges are used in other purchase money situations. Foreclosures are swift (60 days) and sure (no right of redemption). Successful foreclosure sale bidders receive an adjudication from the sheriff. Louisianians use ALTA owner’s and lender’s policies and endorsements. Buyers generally pay the title insurance and closing costs. There are no mortgage or transfer taxes. Property tax payment dates vary from parish to parish (parishes are like counties). Louisiana is a community-property state.

MAINE

Attorneys conduct closings. Conveyance is by warranty or quitclaim deed. Mortgages are the security instruments. Foreclosures may be initiated by any of the following: an act of law for possession; entering into possession and holding the premises by written consent of the mortgagor; entering peaceably, openly, and unopposed in the presence of two witnesses and taking possession; giving public notice in a newspaper for three successive weeks and recording copies of the notice in the Registry of Deeds, and then recording the mortgage within 30 days of the last publication; or by a bill in equity (special cases). In every case, the creditor must record a notice of foreclosure within 30 days. Judicial foreclosure proceedings are also available. Redemption periods vary from 90-365 days depending on the method of foreclosure. Mainers use ALTA owner’s and lender’s policies and endorsements. Buyers pay closing costs and title insurance fees; buyers and sellers share the documentary transfer taxes. Property taxes are due annually on April 1st.

MARYLAND

Attorneys conduct closings, and there has to be a local attorney involved. Conveyance is by grant deed, and the deed must state the consideration involved. Although mortgages are common in some areas, deeds of trust are more prevalent as security instruments. Security instruments may include a private power of sale, so it naturally is the foreclosure method of choice. Marylanders use ALTA policies and endorsements. Buyers pay closing costs, title insurance premiums, and transfer taxes. Property taxes are due annually on July 1st. Police officers in Prince George’s County who are first-time home buyers get a break on their transfer taxes at closing under a law that took effect July 1, 2006. Officers pay 1 percent of the purchase price rather than 14%, the regular rate. County school teachers were made eligible for the same tax break in an earlier law without the first-time buyer limitation. Teachers must commit to living in the house for at least three years and maintain their teaching position with the county during that time.

MASSACHUSETTS

Attorneys handle closings. Conveyance is by warranty deed in the western part of the state and by quitclaim deed in the eastern part. Mortgages with private power of sale are the customary security instruments. Creditors forced to foreclose generally take advantage of the private power of sale, but they may foreclose through peaceable entry (entering unopposed in the presence of two witnesses and taking possession for 3 years) or through the rarely used judicial writ of entry. Frequently, cautious creditors will foreclose through both power of sale and peaceable entry. People in Massachusetts use ALTA owner’s and lender’s title insurance policies and endorsements. Buyers pay closing costs and title insurance fees, except in Worcester, where sellers pay. Sellers pay the documentary taxes. Property taxes are payable in two installments, November 1st and May 1st.

MICHIGAN

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed which must give the full consideration involved or be accompanied by an affidavit which does. Many transactions involve land contracts. Mortgages are the security instruments. Private foreclosure is permitted; it requires advertising for 4 consecutive weeks and a sale at least 28 days following the date of first publication. The redemption period ranges from 1 to 12 months. Michiganders use ALTA policies and endorsements. Buyers generally pay closing costs and the lender’s title insurance premium, and sellers pay the state transfer tax and the owner’s title insurance premium. Those property taxes which pay for city and school expenses fall due July 1st; others (county taxes, township taxes, and some school taxes) fall due on the first of December. In many tax jurisdictions, taxpayers may opt to pay their taxes in two equal installments without penalty.

MINNESOTA

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed. Although deeds of trust are authorized, mortgages are the customary security instruments. The redemption period following a foreclosure is 6 months in most cases; it is 12 months if the property is larger than 10 acres or the amount claimed to be due is less than 2/3 of the original debt. This is a strong abstract state. Typically a buyer will accept an abstract and an attorney’s opinion as evidence of title, even though the lender may require title insurance. People in the Minneapolis-St. Paul area use the Torrens system. Minnesotans use ALTA policies. Buyers pay the lender’s and owner’s title insurance premiums and the mortgage tax. Sellers usually pay the closing fees and the transfer taxes. Property taxes are due on May 15th and October 15th.

MISSISSIPPI

Attorneys conduct real estate closings. Conveyance is by warranty deed. Deeds of trust are the customary security instruments. Foreclosure involves a non-judicial process which takes 21-45 days. Mississippians use ALTA policies and endorsements. Buyers and sellers negotiate the payment of title insurance premiums and closing costs. There are no documentary, mortgage, or transfer taxes. Property taxes are payable on an annual basis and become delinquent February 1st.

MISSOURI

Title companies, lenders, real estate agents, and attorneys may conduct closings. In the St. Louis area, title company closings predominate. In the Kansas City area, an escrow company or a title company generally conducts the closing. Conveyance is by warranty deed. Deeds of trust are the customary security instruments and allow private power of sale. The trustee must be named in the deed of trust and must be a Missouri resident. Foreclosure involves publication of a sale notice for 21 days, during which time the debtor may redeem the property or file a notice of redemption. The foreclosure sale buyer receives a trustee’s deed. Missourians use ALTA policies and endorsements. Buyers and sellers generally split the closing costs. Sellers in western Missouri usually pay for the title insurance polices, while elsewhere the buyers pay. There are no documentary, mortgage, or transfer taxes. Property taxes are payable annually and become delinquent January 1st for the previous year.

MONTANA

Real estate closings are handled through escrow. Conveyance is by warranty deed, corporate deed, or grant deed. Mortgages, deeds of trust, and unrecorded contracts of sale are the security instruments. Mortgages require judicial foreclosure, and there’s a 6-12-month redemption period following sale. Foreclosure on deeds of trust involves filing a notice of default and then holding a trustee sale 120 days later. Montanans use ALTA policies and endorsements. Buyers and sellers split the escrow and closing costs; sellers usually pay for the title insurance policies. There are no documentary, mortgage, or transfer taxes. Montanans may pay their property taxes annually by November 30th or semi-annually by November 30th and May 31st.

NEBRASKA

Title companies, lenders, real estate agents, and attorneys all conduct closings. Conveyance is by warranty deed. Mortgages and deeds of trust are the security instruments. Mortgage foreclosures require judicial proceedings and take about 6 months from the date of the first notice when they’re uncontested. Deeds of trust do not require judicial proceedings and take about 90 days. Nebraskans use ALTA policies and endorsements. Buyers and sellers split escrow and closing costs; sellers pay the state’s documentary taxes. Property taxes fall due April 1st and August 1st.

NEVADA

Escrow similar to California’s is used for closings. Conveyance is by grant deed, bargain-and-sale deed, or quitclaim deed. Deeds of trust are the customary security instruments. Foreclosure involves recording a notice of default and mailing a copy within 10 days. Following the mailing there is a 35-day reinstatement period. After that, the beneficiary may accept partial payment or payment in full for a 3-month period. Then come advertising the property for sale for 3 consecutive weeks and finally the sale itself. All of this takes about 4 1/2 months. Nevadans use both ALTA and CLTA policies and endorsements. Buyers and sellers share escrow costs. Buyers pay the lender’s title insurance premiums; sellers pay the owner’s and the state’s transfer tax. Property taxes are payable in one, two, or four payments, the first one being due July 1st. Nevada is a community-property state.

NEW HAMPSHIRE

Attorneys conduct real estate closings. Conveyance is by warranty or quitclaim deed. Mortgages are the customary security instruments. Lenders may foreclosure through judicial action or through whatever power of sale was written into the mortgage originally. Entry, either by legal action or by taking possession peaceably in the presence of two witnesses, is possible under certain legally stated conditions. There is a one-year right-of-redemption period. The people of New Hampshire use ALTA owner’s and lender’s policies. Buyers pay all closing costs and title fees except for the documentary tax; that’s shared with the sellers. Property tax payment dates vary across the state.

NEW JERSEY

Attorneys handle closings in northern New Jersey, and title agents customarily handle them elsewhere. Conveyance is by bargain-and-sale deed with covenants against grantors’ acts (equivalent to a special warranty deed). Mortgages are the most common security instruments though deeds of trust are authorized. Foreclosures require judicial action which take 6-9 months if they’re uncontested. New Jerseyites use ALTA owner’s and lender’s policies. Both buyer and seller pay the escrow and closing costs. The buyer pays the title insurance fees, and the seller pays the transfer tax. Property taxes are payable quarterly on the first of April, July, October, and January.

NEW MEXICO

Real estate closings are conducted through escrows. Conveyance is by warranty or quitclaim deed. Deeds of trust and mortgages are the security instruments. Foreclosures require judicial proceedings, and there’s a 9-month redemption period after judgment. New Mexicans use ALTA owner’s policies, lender’s policies, and construction and leasehold policies; they also use endorsements. Buyers and sellers share escrow costs equally; sellers pay the title insurance premiums. There are no documentary, mortgage, or transfer taxes. Property taxes are payable November 5th and April 5th. New Mexico is a community-property state.

NEW YORK

All parties to a transaction appear with their attorneys for closing. Conveyance is by bargain-and-sale deed. Mortgages are the security instruments in this lien-theory state. Foreclosures require judicial action and take several months if uncontested or longer if contested. New Yorkers use policies of the New York Board of Title Underwriters almost exclusively, though some use the New York State 1946 ALTA Loan Policy. Buyers generally pay most closing costs, including all title insurance fees and mortgage taxes. Sellers pay the state and city transfer taxes. Property tax payment dates vary across the state.

NORTH CAROLINA

Attorneys or lenders may handle closings, and corporate agents issue title insurance. Conveyance is by warranty deed. Deeds of trust with private power of sale are the customary security instruments. Foreclosures are non-judicial, with a 10-day redemption period following the sale. The entire process takes between 45 and 60 days. North Carolinians use ALTA policies, but these require an attorneys opinion before they’re issued. Buyers and sellers negotiate the closing costs, except that buyers pay the recording costs, and sellers pay the document preparation and transfer tax costs. Property taxes fall due annually on the last day of the year.

NORTH DAKOTA

Lenders, together with attorneys, conduct closings. Conveyance is by warranty deed. Mortgages are the security instruments. Foreclosures require about 6 months, including the redemption period. North Dakotans base their title insurance on abstracts and attorneys’ opinions. Buyers usually pay for the closing, the attorney’s opinion, and the title insurance; sellers pay for the abstract. There are no documentary or transfer taxes. Property taxes are due March 15th and October 15th.

OHIO

Title companies and lenders handle closings. Conveyance is by warranty deed. Dower rights require that all documents involving a married person must be executed by both spouses. Mortgages are the security instruments. Judicial foreclosures, the only kind allowed, require about 6-12 months. People in Ohio use ALTA policies; they get a commitment at closing and a policy following the recording of documents. Buyers and sellers negotiate who’s going to pay closing costs and title insurance premiums, but sellers pay the transfer taxes. Property tax payment dates vary throughout the state.

OKLAHOMA

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may be by judicial action or by power of sale if properly allowed for in the security instrument. Oklahomans use ALTA policies and endorsements. Buyers and sellers share the closing costs, except that the buyer pays the lender’s policy premium, the seller pays the documentary transfer tax, and the lender pays the mortgage tax. Property taxes may be paid annually on or before the last day of the year or semi-annually by December 31st and March 31st.

OREGON

Closings are handled through escrow. Conveyance is by warranty or bargain-and-sale deed, but land sales contracts are common. Mortgage deeds and deeds of trust are the security instruments. Oregon attorneys usually act as trustees in non-judicial trust-deed foreclosures. Such foreclosures take 5 months from the date of the sale notice; defaults may be cured as late as 5 days prior to sale. Judicial foreclosures on either mortgages or trust deeds allow for a one-year redemption period following sale. Oregonians use ALTA and Oregon Land Title Association policies. Buyers and sellers split escrow costs and transfer taxes; the buyer pays for the lender’s title insurance policy, and the seller pays for the owner’s policy. Property taxes are payable the 15th of November, February, and May; if paid in full by November 15th, owners receive a 3% reduction.

PENNSYLVANIA

Title companies, real estate agents, and approved attorneys may handle closings. Conveyance is by special or general warranty deed. Mortgages are the security instruments. Foreclosures take 1-6 months from filing through judgment plus another 2 months or more from judgment through sale. State law restricts aliens in owning real property with respect to acreage and income and includes special restrictions affecting farmland. Pennsylvanians use ALTA owner’s, lender’s, and leasehold policies. Buyers pay closing costs and title insurance fees; buyers and sellers split the transfer taxes. Property tax payment dates differ across the state.

RHODE ISLAND

Attorneys usually conduct closings, but banks and title companies may also conduct them. Conveyance is by warranty or quitclaim deed. Mortgages are the usual security instruments. Foreclosures follow the power-of-sale provisions contained in mortgage agreements and take about 45 days. Power-of-sale foreclosures offer no redemption provisions, whereas any other foreclosure method carries a 3-year right of redemption. Rhode Islanders use ALTA policies and endorsements. Buyers pay title insurance premiums and closing costs; sellers pay documentary taxes. Property taxes are payable annually, semi-annually, or quarterly with the first payment due in July.

SOUTH CAROLINA

Attorneys customarily handle closings. Conveyance is by warranty deed. Mortgages are most often the security instruments. Foreclosures are judicial and take 3-5 months depending on court schedules. Foreclosure sales take place on the first Monday of every month following publication of notice once a week for 3 consecutive weeks. South Carolinians use owner’s and lender’s ALTA policies and endorsements. Buyers pay closing costs, title insurance premiums, and state mortgage taxes; sellers pay the transfer taxes. Property tax payment dates vary across the state from September 15 to December 31.

SOUTH DAKOTA

Title companies, lenders, real estate agents, and attorneys may handle closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may occur through judicial proceedings or through the power-of-sale provisions contained in certain mortgage agreements. Sheriff’s sales follow publication of notice by 30 days. The redemption period allowed after sale of parcels smaller than 40 acres and encumbered by mortgages containing power of sale is 180 days; in all other cases, it’s a year. There’s a unique statute which stipulates that all land must be platted in lots or described by sectional references rather than by metes and bounds unless it involves property described in documents recorded prior to 1945. There’s another unique statute called the Affidavit of Possession Statute. Certain exceptions aside, it provides that any person having an unbroken chain of title for 22 years thereafter has a marketable title free of any defects occurring prior to that 22-year period. South Dakotans use ALTA policies and endorsements. Sellers pay the transfer taxes and split the other closing costs, fees, and premiums with the buyers. Property taxes come due May 1st and November 1st.

TENNESSEE

A title company attorney, a party to the contract, a lender’s representative, or an outside attorney may conduct a closing. Conveyance is by warranty or quitclaim deed. Deeds of trust are the customary security instruments. Foreclosures, which are handled according to trustee sale provisions, are swift, that is, 22 days from the first publication of the notice until the public sale, and there is normally no right of redemption after that. Tennesseans use ALTA policies and endorsements. The payment of title insurance premiums, closing costs, mortgage taxes, and transfer taxes varies according to local practice. Property taxes are payable annually on the first Monday in October.

TEXAS

Title companies normally handle closings. Conveyance is by warranty deed. Deeds of trust are the most common security instruments. Following the posting of foreclosure sales at the local courthouse for at least 21 days, the sales themselves take place at the courthouse on the first Tuesday of the month. Texans use only Texas standard policy forms of title insurance. Buyers and sellers negotiate closing costs. There aren’t any documentary, transfer, or mortgage taxes. Property taxes notices are send around October 1st, but are not due until the end of the year. Texas is a community-property state.

UTAH

Lenders handle about 60% of the escrows and title companies handle the rest. Conveyance is by warranty deed. Mortgages and deeds of trust with private power of sale are the security instruments. Mortgage foreclosures require judicial proceedings which take about a year; deed-of-trust foreclosures take advantage of private power-of-sale provisions and take about 4 months. Utahans use ALTA owner’s and lender’s policies and endorsements. Buyers and sellers split escrow fees, and sellers pay the title insurance premiums. There are no documentary, transfer, or mortgage taxes. Property taxes are payable November 30th.

VERMONT

Attorneys take care of closings. Conveyance is by warranty or quitclaim deed. Mortgages are the customary security instruments, but large commercial transactions often employ deeds of trust . Mortgage foreclosures require judicial proceedings for „strict foreclosure‰; after sale, there is a redemption period of one year for mortgages dated prior to April 1, 1968, and 6 months for all others. Vermonters use ALTA owner’s and lender’s policies and endorsements. Buyers pay recording fees, title insurance premiums, and transfer taxes. Property tax payment dates vary across the state.

VIRGINIA

Attorneys and title companies conduct real estate closings. Conveyance is by bargain-and-sale deed. Deeds of trust are the customary security instruments. Foreclosure takes about 2 months. Virginians use ALTA policies and endorsements. Buyers pay the title insurance premiums and the various taxes. Property tax payment dates vary.

WASHINGTON

Title companies, independent escrow companies, lenders, and attorneys may handle escrows. An attorney must prepare real estate documents, but there is a limited practice rule which lets licensed non-attorneys prepare most of the commonly used real estate documents. Conveyance is by warranty deed. Both deeds of trust with private power of sale and mortgages are used as security instruments. Mortgages require judicial foreclosure. Deeds of trust require that a notice of default be sent first and 30 days later, a notice of sale. The notice of sale must be recorded, posted, and mailed at least 90 days before the sale, and the sale cannot take place any earlier than 190 days after the actual default. Sellers generally pay the title insurance premiums and the revenue tax; buyers and sellers split everything else. Property taxes are payable April 30th and October 31st. Washington is a community-property state.

WEST VIRGINIA

Attorneys conduct escrow closings, although lenders and real estate agents do them occasionally. Conveyance is by warranty deed, bargain-and-sale deed, or grant deed. Deeds of trust are the customary security instruments. Foreclosures are great for lenders; when uncontested, they take only a month. West Virginians use ALTA policies and endorsements. Buyers pay the title insurance premiums and sellers pay the documentary taxes; they divide the other closing costs. Property taxes may be paid in a lump sum after July 6th or in two installments on September 1st and March 1st.

WISCONSIN

Lenders and title companies conduct what are called “table closings” throughout the state, except in the Milwaukee area, where attorneys conduct the closings. Conveyance is by warranty deed, but installment land contracts are used extensively, too. Mortgages are the customary security instruments. Within limits, the actual mortgage wording determines foreclosure requirements; redemption varies from 2 months for abandoned property to a full year in some cases. Lenders generally waive their right to a deficiency judgment in order to reduce the redemption period to 6 months. Wisconsinites use ALTA policies and endorsements. Buyers generally pay closing costs and the lender’s policy fees; sellers pay the owner’s policy fees and the transfer taxes. In transactions involving homesteads, conveyances may be void if not joined into by the spouse. Property taxes may be paid in full on February 28th, or they may be paid half on January 31st and half on July 31st. Wisconsin is a quasi-community-property state.

WYOMING

Real estate agents generally conduct closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may follow judicial or power-of-sale proceedings. Residential foreclosures take around 120 days; agricultural foreclosures, around 13 months. Wyomingites use ALTA owner’s and lender’s policies and endorsements. Buyer and seller negotiate who’s going to pay the various closing costs and title insurance fees. There are no documentary, mortgage, or transfer taxes. Property taxes may be paid annually December 31st or semi-annually September 1st and March 1st.

How to Negotiate Closing Costs on a Newly Constructed House

By Sandy Gadow
Special to The Washington Post

Ever notice how enticing advertising for newly built houses can be?

More than one million new housing projects were started in 2014, and the prospect of being able to choose between several models — combined with the benefits of owning a new house — make buying from a developer an attractive option.

Today, many builders offer incentives to the buyer in the form of either upgrades to the house or credits given at settlement that help reduce the closing costs. Often, in order to qualify for these offers, the builder may require that you use its in-house or affiliated closing agent. It may also offer assistance with financing, help arrange pre-qualification for a mortgage and even secure reduced interest rates and loan-related costs. There is no problem with using the builder’s recommended or affiliated agents, but there are certain things you can do to insure that you will get the best deal possible — and pay the lowest fees.

These days, closing costs on a new house typically range from 2 to 4 percent of the sales price. A house that sells for $250,000, for example, could incur settlement fees from $5,000 to $10,000. Naturally included in those fees will be the costs associated with obtaining a mortgage and expenses payable to the closing agent (or title company) such as:

Title searches and lien clearance
Issuance of title insurance
Payment of applicable county and state transfer taxes
Recording fees

Although many builders might insist that it is customary for the buyer to pay all title insurance fees — depending on who issues the policy — this fee can be negotiated. When you use the builder’s in-house or affiliated agent, the builder is generally allowed greater leeway to offer you a discount or credit toward the settlement costs.

Whether you use the builder’s agent or a closing company of your choosing, be sure to ask for a “reissue” rate for the title policy. A reissue rate is available to a home buyer when the seller has owned the property for a stipulated amount of time — generally two to 10 years. Each state sets its own requirement as to the length of time the seller must have owned the house and also determines the reissue rate.

In Florida, for example, the seller must have owned the house for less than three years to qualify for the discount, whereas in Maryland the seller can own the property for 10 years or less for the buyer to be entitled to the reduced rate. According to Federal Title and Escrow Company in the District, 65 percent of all transactions qualify for the reissue rate, and in some in some cases, the discount can be as high as 40 percent.

In new construction, the builder will have already purchased title insurance on the land, probably within the last year. So the buyer would qualify for a discounted rate that would be applied to the amount paid for the policy on the land, and then pay the standard rate for the balance. For example, if the builder purchased a title policy for $200,000 and the sales price of the new house is $400,000, the buyer would receive a discounted rate on the first $200,000 of coverage, and only pay the full cost on the remaining $200,000 balance.

On all home sales there is a state-levied transfer or “documentary transfer tax,” and in some areas individual counties add their own transfer tax. The tax rate is determined by the state (and counties), and who will pay the tax is determined by local custom. You can find a chart of the tax for your state at: www.ncsl.org/research/fiscal-policy/real-estate-transfer-taxes.aspx.

In some states, such as California, the seller always pays the tax. But in other states, such as Maryland, the fee is shared between the buyer and seller and an exemption is given to first-time home buyers. Although the tax is not negotiable, who pays the tax can be. This is especially the case if you are using the builder’s agent, as the builder will be able to negotiate with you regarding who will pay this closing cost. An independent title company may not have that option. Similarly, if you use the builder’s finance company or preferred lender, you may be able to receive further discounts (ones that might not otherwise be available to you), on loan fees.

To be sure you are getting the best value on closing costs, check with a local title company, and ask if it will run a comparison for you between your builder’s closing cost estimate and the title company’s breakdown of fees. Many companies will do this for you at no charge, and it generally takes only minutes. You may find that the builder’s estimates for title and escrow fees are much lower, and choose to take that option.

To avoid any misunderstandings, complete your closing cost negotiations with the builder before you sign the sales agreement.

How Closings Are Handled State by State

Real estate closings may be handled by escrow companies, title companies, lawyers, or a combination of one or more of those. Some lenders may have their own closing department. A revised explanation of how a real estate closing will be handled in your state can be found in the new up-dated 2nd edition of The Complete Guide to Your Real Estate Closing, now available at www.amazon.com or www.sandygadow.com/order.html. You will find a complete listing of how an escrow closing is handled in every state, which will include where to make a complaint, an estimate of the fees you will have to pay, and who will do what in the closing.

Here is a Sample:

Alabama
Attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks, county by county. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who’s going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1.

Consumer Complaints:

Banking Department

401 Adams Avenue, Suite 680 Montgomery, AL 36130-1201 334-242-3452
Fax: 334-242-3500
Web: www.bank.state.al.us
David Parsons, Acting Commissioner Alabama Department of Insurance 201 Monroe Street, Suite 1700
P.O. Box 303351 Montgomery, AL 36104 334-269-3550
Fax: 334-241-4192
E-mail: insdept@insurance.state.al.us Web: www.aldoi.org

Alabama Real Estate Commission 1201 Carmichael Way Montgomery, AL 36106-4350 334-242-5544, TTY: 334-396-0064 Fax: 334-270-9118
E-mail: arec@arec.state.al.us Web: www.arec.state.al.us

Rate filing statute: File and use Customary title fee splits: Owner’s policy: Negotiable Lender’s policy: Buyer
Title search: Negotiable Transfer taxes: Buyer
Transfer Tax based on appraised value not on sale price.
Closing fees: Negotiable Recording fees: Buyer
Real estate transfer disclosure required? No Agency relationship disclosure required: Required by time of purchase offer.

Can Mediation Save Our Deal?

Jack and Eliza searched Fayette county in Virginia for the right house. Not only must it be in good condition, have a nice yard, be in a good school district, but it had to also be a show place for entertaining. Both Jack and Eliza loved to have week-end dinner parties. They thrived on inviting the most educated and interesting guests. A four bedroom colonial home situated on an acre and a half of land became available and Jack made an offer which was accepted. A 30-day closing was agreed upon and the inspection period began. Everything seemed to check out. There were no major repairs needed and nothing looked out of the ordinary. One day prior to closing, Jack was reading through the settlement documents and came across an affidavit which he was asked to sign. It was a document from the seller, drawn on what looked liked legal letterhead, and it stated that the sale could only take place on condition that a chestnut horse, owned by the current owner, could continue to live in the small barn located in the back of the property. The new owner was moving to an apartment in the city and it would be impossible for him to take the horse with him.

Jack protested and the owner stayed firm. No horse, no deal. Nothing had been mentioned about the horse up to this point, and the realtor, the closing agent, and the buyers all scratched their head. No one could explain why the owner had remained silent about this non-negotiable issue until the day before closing. It seemed like the deal had reached an impasse. The owner offered to return the buyer’s deposit, he crossed his arms, and squared his jaw. He wouldn’t budge.

By now, Jack and Eliza had already moved into the house in their minds. They had arranged their furniture, picked out a new color of paint for the rooms, selected new appliances for the kitchen, and hired an artist to paint a scenic mural in the dining room. They had ordered the outdoor lighting for the patio and had the invitations prepared for their first party. Jack turned to his realtor and asked what he could do. Could he force the seller to sell? Did he have any legal rights?

Within the Purchase Agreement was a clause, which is common place in most real estate purchase agreements which stated

16. DISPUTE RESOLUTION: Unresolved controversies, claims and other matters in question between Buyer and Seller arising out of, or relating to, this Contract or its breach, enforcement or interpretation (“Dispute”) will be settled as follows:

Buyer and Seller will have 10 days after the date conflicting demands for the Deposit are made to attempt to resolve such Dispute, failing which, Buyer and Seller shall submit such Dispute to mediation under Paragraph 16(b). Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to (state) Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the “Mediation Rules”). The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter. This Paragraph 16 shall survive Closing or termination of this Contract.

17. ATTORNEY’S FEES – COSTS: The parties will split equally any mediation fee incurred in any mediation permitted by this Contract, and each party will pay their own costs, expenses and fees, including attorney’s fees, incurred in conducting the mediation. In any litigation permitted by this Contract, the prevailing party shall be entitled to recover from the non-prevailing party costs and fees, including reasonable attorney’s fees, incurred in conducting the litigation.

Successful Mediation — a Guide

Steps to a Cakewalk Closing

New York Times April 27, 2012

There’s no lack of information on the Internet about real estate closings. But according to Sandy Gadow, the author of “The Complete Guide to Your Real Estate Closing” and a Sotheby’s broker who has taken part in thousands of closings, both buyers and sellers should know certain basic things to make a closing go well.

Most important, do your homework. There’s no such thing as being too well prepared. Even if there’s a fleet of lawyers present, buyers and sellers should educate themselves as fully as possible about what will take place. For example, you do know what an Aztec recognition agreement is, don’t you? (It’s a document that describes what will happen in the event of a lien against the buyer.)

Hire the right people. You wouldn’t ask a heart surgeon to perform a lung transplant, right? Make sure you choose a lawyer who is familiar with the laws in your geographical area and who has had experience with similar proceedings. If you’re buying a big-ticket co-op in the heart of Manhattan, don’t choose a lawyer whose biggest deal was a lean-to in the boonies.

Before the closing, write down all the questions you intend to ask, so you won’t forget them. Making a checklist sounds like grade school, but do it anyway.

Bring a valid form of identification. (A library card won’t cut it.) You have no idea how many people forget something so simple. And your signature can’t be acknowledged by a notary public unless you show official proof of your identity.

Show up on time. Closings can take long enough as it is. Don’t make matters worse by straggling in three hours late.

And since closings can take hours, don’t schedule yours late in the day, especially if you plan to move in right away. You don’t want a moving van loaded with all your worldly possessions double-parked outside the office till the wee hours.

Published: April 27, 2012 NY Times

What Your Closing Agent Does for You

Although you may not feel you need to speak with your closing agent until you are well into the purchase process or possibly not until the day of closing, it is a good idea to contact the closing agent early on, introduce yourself, and be sure the agent has all your contact details, phone numbers, e-mail and mailing address. The closing agent usually works for a title or escrow company, or, in many Eastern states, it may be an attorney.

While you are taking care of property inspections and securing financing, the agent will be working behind the scenes to search the title, determine pro-rata expenses such as property taxes, work with the seller’s lender, with your new lender, and following up on any special instructions which may be spelled out in the purchase agreement. The agent will hold your deposits in a separate escrow account, prepare closing statements, and obtain title insurance. The closing agent works for you, so don’t hesitate to ask questions along the way. The closing agent is an impartial party to the transaction and is there to provide information and facilitate the transfer of the property from the seller to buyer. You may also have your own attorney working for you advising you on your personal circumstances or issues… Your attorney will liaise with the designated closing agent and have your best interests in mind.

Below is a check list of what your agent will be doing for you and what you in turn should do to be sure everything runs smoothly and you close on time.

Who Does What?

What Agent will do	What You will do
Obtain a title report and arrange for Issuance of policy of title insurance.	Read and understand the title report. Question any easements, liens, rights of way, or other issues in the report. Check the plat map for correct boundary lines. Sign off on agent’s report.
Prorate costs such as property taxes, Insurance, loan interest, and rents, if applicable.	Check the proportioned expenses. Do the math. Mistakes do occur.
Collect and coordinate paperwork, Including financing and required disclosures.	Arrange for cash, in the form of Cashier’s check or bank transfer for your portion of the closings costs which you agreed to pay.* Pay attention to any increase in your deposit which may be required after initial purchase agreement was signed and date funds are due.
Transfer and record deed.	Check the spelling of your name, the manner in which you will hold title, and the description of the property.
Transfer your payment to the seller.	Speak directly with other parties, such as the inspector, real estate agent, mortgage broker or your attorney to be sure everything is in order before you hand over your final payment. Check and cross check before the day of closing.

Who Are The Other Parties to the Closing and What Will They Do?

In addition to the closing agent, title company, attorney, and real estate agent, there will probably be a lender involved in your closing. The lender will provide the financing for the property and work with your closing agent to be certain that all the conditions required to fund your loan will take place prior to closing. There will be an appraiser involved, who will examine the property and issue an appraisal report. There may be a surveyor, who will issue a survey, which may be required by your lender.

There may be a pest inspection company and a building inspection company involved in your closing. These inspectors will be responsible for performing a detailed inspection of our house and issuing a report as to their findings. There will be an insurance agent involved, as a new insurance policy will need to be issued on the property.

How You Will Pay the Closing Agent

A single escrow closing fee, determined by the amount of money involved in the transaction, will cover all of the usual escrow closing services except for the title insurance fees.

Local custom unique to a particular geographical area generally dictates who will pay which fees. In some areas, the buyer pays the title and escrow fees, whereas in other areas, the seller pays half of the fees and the buyer pays half.

TIP
Although dictated by local custom, many closing costs may be negotiated. Be sure to discuss this before signing the purchase and sale agreement. Clearly spell out the costs the seller will pay, and those which will be the buyer’s responsibility.

Get The Best Closing Agent

One of the many extra services a closing agent offers is information. Your closing agent will be available to answer your questions about the closing process in general, and your individual transaction in particular. Your closing agent will know the status of your closing at any given time. Don’t be afraid to ask, even if you may feel your question has been asked before. It is better to be clear before signing any document, especially since they may well be legally binding for many years to come.

To make sure you are choosing the best closing agent, get referrals from not only your agent, attorney or mortgage broker, but from trusted family members, friends, neighbors, or colleagues. Make sure your referral source had a good experience with the closing agent and found the agent to be efficient, accurate, and able to handle the closing according to schedule.

TIP
Choose a closing agent who is conveniently located. You will probably have to drive there at least once, for the closing, and perhaps several other times. For example, you may need, you to sign a power of attorney, deliver an old divorce decree or provide a copy of a trust agreement.

Sandy Gadow

Making Real Estate and Closing Easy

Category Archives: Closing/Settlement