Every day I’m Settling!
The long (or maybe short, in this market) house hunt is over and you’ve found your perfect home, the Contract is ratified, financing is in place, you’re all set…until your Agent or Lender asks if you prefer a certain title company or attorney to conduct your settlement. You’ve probably heard of “settlement” or “closing”, but what is a title company’s actual role? Do I need an attorney? Is settlement day something to be nervous about? Just when you thought you were done with the home buying process, a new set of questions arises!
What does a title company/title attorney do?
I went to law school for three years, took several real estate courses, and was all set to begin my career at a small real estate firm after graduation, but I really did not know exactly what a title attorney does every day. After nearly a decade in the industry, I’ve come to realize almost no one, even those in the real estate industry, has an understanding of what we do other than having you sign a stack of documents on settlement day (you may want to start strengthening your wrist now; the stack of papers is pretty daunting!). The simple reason for that is almost everything we do is behind the scenes and, if all goes well, you’ll barely know we exist.
Our most important role in the buying process is to insure that a clear and marketable title to the property is being conveyed to the buyer at settlement and is unencumbered by any liens or other title defects. That’s the fancy of way of saying that we make sure the property you are purchasing is 100% yours.
To accomplish this, our first step is to order title work for the property. A title abstractor proceeds with searching the county land records through basically the beginning of time and provides us with a title abstract. The title abstract provides all of the back title and a summary page of the current owner, any mortgages currently on the property, judgments entered in a court of law against the Seller (or previous owners) that may attach and run with the property, state and federal tax liens against the Seller (or previous owners), and any easements, rights of ways, driveway agreements, or restrictive covenants that encumber the property.
After I review the title abstract, the fun work begins. If there is a current mortgage on the property, a pay-off needs to be ordered. If there is a title defect, which happens much more often than you would expect, we have to ensure these are removed prior to settlement (sometimes this is down to the wire on a quick settlement!). This often requires tracking down a previous Lender, which most of the time seems to be a bank that no longer exists or an uncle of an owner 30 years ago that lent them $10,000 to buy the property and recorded a mortgage and never thought to release it. We basically become detectives trying to track down the individual who can sign a release. If there are unpaid judgments or tax liens attached to the property, we’ll work with the IRS, Comptroller of Maryland or the judgment creditor to receive a payoff figure prior to settlement.
At the same time this is happening, we will be working hand in hand with the buyer and seller, both real estate agents and the lender to produce a settlement statement. The settlement statement (now called either the Closing Disclosure or ALTA Settlement Statement) provides a detailed illustration of the entire transaction, including the purchase price, any pro-rated fees (Property Taxes, HOA/Condo Fees) and all “Closing Costs” (Lender Fees, Transfer/Recordation Taxes, Recording Fees, Settlement Fees, etc…). Somehow or another all of this comes together in time for SETTLEMENT DAY!