We have many responsibilities. Our processors and attorneys review the sales contract; confirm property information and ownership; work with lenders to make sure all requirements are met; notify all parties and assist in resolving any title issues; coordinate with buyers, sellers, real estate agents, and lenders to ensure that the closing goes smoothly; record documents; disburse funds in accordance with the settlement statement; hold funds in escrow in accordance with buyer, seller and lender instructions; and issue title insurance policies.
We would need to review the sales contract to answer this question. Sales contracts typically allocate settlement charges between the parties.
Upon receipt of the signed sales contract, the first step is to perform a title search for the property. Our abstractors conduct a search of the land, tax, court and other official records of the jurisdiction in which the property is located, and generate a comprehensive report outlining what the search uncovers.
A title must be deemed “good and marketable” before the settlement process can continue. The results of the title search identify, among other things: the current record owner of the property; any liens on it; and any limits on how an owner can use the property. Our attorneys will examine and confirm the documents and information in the title search report to determine what—if anything—must be done in order to clear the title to the property so that the buyer can obtain marketable title.
A location drawing or survey is a physical drawing done by a surveyor hired to complete this task. Depending upon the type of survey required, it may show: legal boundaries; location and size of any buildings on the property; set-back lines; easements; and other restrictions and information. It is advisable to determine whether a prior survey exists. A re-certification of a prior survey is less costly than a new survey.
Whether or not you get a survey on your property depends on (1) whether you want to pay for a survey and (2) the type of property you are purchasing. If you are purchasing a condominium, a survey is not required. If you are purchasing a townhouse or single family home, some lenders will require a survey. Surveys are generally not required for refinances, although a survey affidavit may be. For transactions involving commercial property, an ALTA survey will often be required. These projects are costly. If a prior survey exists, this can cut your costs.
If a survey is required, you will have the option of a location drawing or “upgrading” to a boundary survey. A location drawing is sufficient for most residential lenders but it does not mark and cannot be relied upon to establish property boundaries or corners.
Most lenders require a location drawing of the property in order to ascertain that: others (such as adjoining property owners) have not encroached on the property being purchased; improvements on the property neither extend beyond the lot’s legal boundaries nor are placed over easements of record; and there are no violations of building restriction lines or other regulatory restrictions.
Our attorneys review the completed drawings and if any problems are found we work with all of the parties involved to try to find an acceptable solution that allows the closing to move forward.
For more information about surveys and to select the type of survey you would like ordered in connection with your purchase, visit this page.
Title insurance protects against a loss to the lender or the owner in the event that the title to the property is other than as insured. Title insurance is an essential part of virtually every transfer of ownership of residential or commercial real estate. It is purchased at settlement, and the title insurance policies are issued shortly thereafter. Although it can be one of the higher costs of closing, buyers should be aware that it protects them against potentially disastrous losses.
There are two (2) types of title insurance policies: lender’s and owner’s. Lender’s title insurance is required by lenders to protect their interest in the property from possible title defects. Buyers have the option of purchasing owner’s title insurance to protect the buyer’s investment, which often is greater than the loan on the property. While the lender’s policy expires when the loan is paid off, the owner’s policy coverage can continue as long as the owner has a vested interest in the property (and depending upon the type of owner’s coverage purchased, even longer). With both owner’s and lender’s title insurance, there are essentially two (2) levels of coverage, Basic and Enhanced. Some lenders require their coverage to be at the Enhanced level; others only require Basic coverage. Owners can elect whether to obtain Basic or Enhanced coverage, or none at all. Click here for a comparison of Basic and Enhanced owner’s coverages. This document is from First American Title Insurance Company. Enhanced coverage (“Eagle” on FATICO’s comparison) is approximately 20% more expensive than Basic (ALTA) but you will see that it covers significantly more risks.
It is important to know that title insurance premiums are paid only once, at the closing. Owners title insurance may be purchased after the closing, but only after another full title search is undertaken and any necessary affidavits are executed.
The concept of title insurance is generally misunderstood. Unlike most insurance which protects against the risk of future events, title insurance exists to eliminate losses due to defects in title which occur as a result of things that happened in the past.
Even the most careful title search will not reveal some situations or events that could cast doubt on your title to the property. Title insurance policies generally cover losses for mistakes made in researching, abstracting and examining the title as well as losses caused by items that cannot be discovered by examination of the public records, such as: mistakes in the public record; fraud or forged title instruments; undisclosed heirs; adverse possession and other undisclosed prescriptive rights, etc. A title insurance policy will financially protect the insured party by paying its legal defense fees and monetary claims, should unexpected items that are not of record arise.
After examining the title report, recorded plat, survey and other matters, Masters Title issues a title commitment, and the parties are provided a copy. The commitment contains vital information which may affect the willingness and the ability of the parties to close. The title commitment indicates the type of title insurance to be issued, and the exclusions and exceptions from coverage based on the type of title insurance. Exclusions and exceptions can include items such as: recorded mortgages/deeds of trust; easements; agreements; and covenants, conditions and restrictions. You should read the title commitment carefully for information about the property, such as: taxes, assessments, homeowners’ association fees, etc. You should also carefully review exceptions from coverage to ensure that the exceptions don’t interfere with the buyer’s future plans (e.g., an easement across the backyard could effect the buyer’s ability to add a swimming pool at a later date).
Specific premium costs for a policy are easily calculated upon request. Title insurance rates vary by jurisdiction and type. Click here for a quote.
The HUD-1 was the standard “settlement statement” used in connection with real estate transactions until 2015. Federal law required the HUD-1 to be used as the real estate settlement form in all transactions in the U.S. involving federally related mortgage loans. The form itemized all charges imposed on a borrower and seller in connection with the transaction, adjusted between them any pre-paid, unpaid or agreed items, and provided each party with a detailed picture of what happens with their incoming and outgoing funds. The HUD-1 has been replaced by the Closing Disclosure for most transactions involving a loan.
A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).
The Closing Disclosure is a new form. For most kinds of mortgages, borrowers who apply for a loan on or after October 3, 2015 will receive a Closing Disclosure. Your lender has to give you the Closing Disclosure at least three business days before you close on the mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from that same lender. The three days also gives you time to ask your lender any questions before you go to the closing table.
At the settlement, our settlement officer “closes” the transaction by explaining (as permitted under local law) each of the closing documents and ensuring that the buyer and seller sign each where required. The settlement officer also reviews with the parties the Closing Disclosure (or occasionally, a settlement statement) which shows how all of the settlement funds are to be handled.
The parties’ respective shares of the closing costs are typically outlined in the sales contract. Closing costs may include state and local government transfer and recordation taxes and fees, lender and broker fees, real estate commissions, municipal charges, bills for pest inspections and surveys, homeowner insurance premiums, lenders’ and owners’ title insurance premiums, title company charges, real property taxes, homeowners’ or condominium association dues or assessments, and any other invoices or items to be paid or adjusted at closing. Funds are often held in escrow by Masters Title to respond to various items or circumstances agreed to in advance by the parties.
Whenever possible, parties to the transaction are provided a draft copy of the Closing Disclosure (or, in some cases, an ALTA Settlement Statement, which is very much like the old HUD-1) well in advance of closing for their review. Once the parties approve the figures, the settlement officer collects all necessary funds and then disburses them in accordance with the settlement statement.
All parties must bring an unexpired government issued photo identification such as a driver’s license or passport to the closing, since Masters is required to verify the identity of all parties. Social Security cards are also required by certain lenders.
Buyers must bring sufficient good funds to consummate the transaction. Personal Checks, Official Checks, Certified Checks, Cashier’s Checks and/or ACH are not good funds… we have a “WIRE ONLY” policy. If the buyer sends more than the amount required to close, Masters will issue a check or wire for the excess.
Buyers should have already provided Masters a completed Choice of Tenancy Form. This form is provided to all buyers named in the sales contract shortly after we obtain a copy of the contract. It instructs us how title will be held and thus how the deed should be prepared. In the event there is a change in plans, we will need another Choice of Tenancy Form signed by all buyers named in the sales contract.
Homeowners who are refinancing and taking cash out and wish to have the funds wired should bring wiring instructions, a voided check or a deposit slip to closing. We recommend you confirm in advance that the bank routing information is correct.
If you are a seller and a non-resident alien (i.e., a Foreign Person as that term is used under the IRS regulations), please immediately alert us to this fact and also expect to have a portion of the sales proceeds withheld at closing. If you are subject to withholding and you fail to so alert us, this will delay the closing.
The State of Maryland requires us to withhold a portion of the sales proceeds from sellers of Maryland real estate who are not Maryland residents (certain exceptions apply). Please click here for a disclosure concerning the withholding. The rates were recently increased yet again.
Except for any items the sales contract obligates you to provide at settlement, such as keys to the property, nothing else is required unless you choose to have your proceeds wired into your bank account—in which case you will need to bring specific wiring instructions for the account to which the funds will be transmitted. If you would like to provide this information to us prior to closing, please ask for an Authorization to Disburse Proceeds form. Alternatively, you may bring a voided check or deposit slip to closing, but you should confirm in advance with your bank that you have the proper ABA# (routing number) for wire transfers. Homeowners who are refinancing and taking cash out and wish to have the funds wired should similarly bring wiring instructions, a voided check or deposit slip to closing.
Unless otherwise agreed, all buyers, sellers, and their respective real estate agents will attend the closing which is conducted by the settlement officer. Lender representatives occasionally attend.
A refinance closing takes approximately 30 minutes and the settlement of a sale / purchase lasts approximately one hour if there is a lender involved. If any complications arise or if there are several buyers or sellers, it could take longer.
If a buyer cannot attend the closing, a Power of Attorney might be permitted. This entails formally appointing someone such as a spouse or other relative or friend to sign all the documents on your behalf. This person would need to attend the closing in your place and bring proper identification with him or her. However, the use of a Power of Attorney must first be approved by us as well as any lender involved. If a Power of Attorney is permitted, you will need to let Masters know right away who will be attending settlement and signing on your behalf so that an appropriate Power of Attorney can be prepared and/or reviewed prior to the closing.
If a seller cannot attend the closing, please notify us as soon as possible so that a Power of Attorney can be prepared that appoints someone to sign all the documents on your behalf. This person will need to attend the closing in your place and bring proper identification with him or her.
The original Power of Attorney will need to be recorded among the Land Records.
Note: an interested party such as your real estate agent cannot serve as your attorney-in-fact.
What if I have other questions?Our team is in contact with our office network (voice and email) around the clock.