Settlement Process & Title Insurance

Once a buyer has made an offer on a home and the seller has signed the paperwork accepting that offer, then the parties have what is called a ratified contract. This is where the settlement (also known as closing) process really begins. At this point, the buyer has the right to select the law firm or title company that will handle the settlement. It is very important that you choose a company where an attorney will handle all of the important aspects of your settlement. Consumers may not be aware of this, but unlike many states, Maryland does NOT require an attorney to be present or even involved in the closing of real property transactions. The purchase/sale of real property is one of the most important and complicated transactions you will ever be a part of, and it should not be managed by those who lack the proper legal training, expertise, and experience to get the job done right. At Salisbury, McLister & Foley, LLP our attorneys are involved every step of the way. From reviewing the contract, to examining the title, to finally conducting the closing itself, one of our lawyers will always be there to provide the representation and protection you need to successfully complete the settlement process.

So now that you know how important it is to choose the right people to guide you through the settlement process, what exactly IS the process? Below is a brief description of the some of the steps involved in taking you from contract to closing:

1. Title Abstract – Once we receive your contract, we will perform a search of the courthouse records and compile a title abstract, which is a detailed description of all recorded documents relating to the ownership and use of your property. Nearly all title companies have to outsource this important task to a third-party company. But at Salisbury, McLister & Foley, LLP, we have two full-time title abstractors on staff, each with years of experience in researching local court records. This helps to make our title abstracts the most accurate in town, and allows us to have a much faster turnaround time than anyone else.

2. Title Examination – When the title abstract is completed, our attorneys immediately get to work examining all of the documents. These documents will show us who owns the property now (hopefully the seller!) and who owned it in the past. We’ll also see any easements or other types of restrictions affecting the use of the property. Finally, we’ll discover any existing liens or lawsuits that would need to be satisfied in order for the property to be sold.

3. Title Curative – After examining the title documents, our attorneys will then take any steps necessary to fix, or cure, any defects to the property’s title. Possible defects include things such as an erroneous description of the property in the land records, the failure to record some important title document, an error in a past estate or divorce proceeding involving the property, the existence of a tax lien or an unreleased prior mortgage lien on the property, a faulty past conveyance of the property by a defunct company, or a hundred other potential issues.

4. Survey – Depending on the type of transaction involved, we will usually need to order a survey of the property on the buyer’s behalf. This will most likely be what is called a house location drawing. This type of survey is relatively inexpensive and will show the location of any improvements to the property, as well as any easements or encroachments affecting the property. Buyers may also wish to obtain a full boundary survey in which the surveyor actually “stakes out” the property boundaries. This type of survey is much more detailed, and therefore much more expensive. Regardless of what type of survey is done, our attorneys will review it upon receipt to ensure that there are no potential property boundary issues.

5. Title Insurance – Once all title information on the property has been reviewed, and any known defects have been cured, we will prepare the title insurance policies. Unfortunately, it is virtually impossible to eliminate all risks or hidden defects to a property’s title. These hidden problems might include such things as forgeries, fraud, unrecorded or improperly recorded documents, or missing heirs, to name just a few. Title insurance is designed to protect both the buyer and the buyer’s lender should such hidden issues arise down the road. The lender will always require that the buyer purchase a lender’s title insurance policy at closing. While the owner’s title insurance policy is optional, we highly recommend that the buyer pay the one-time premium to obtain this coverage. This is the only policy that protects you, and it will cover you as long as you own the property. Without owner’s title insurance coverage, a homeowner runs the risk of losing his or her entire investment in the property! One easy way to save money on the purchase of owner’s title insurance is to obtain a copy of the seller’s existing title insurance policy. If we receive a copy of that policy, the buyer will get what is called the “reissue rate” discount on the new policy, which could be as much as 40% off. If you’re having trouble obtaining a copy of the existing policy, please let us know and hopefully we can help! For a more detailed description of what types of issues are covered by the various title insurance policies, please follow this link.

6. Coordinate With All Parties – Throughout this process, we will coordinate with everyone involved to make sure everything runs smoothly. We’ll provide the buyer’s lender with all required title information on the property. We will also provide the lender with a preliminary version of the lender’s title insurance policy for review. We’ll make sure that buyers, sellers, and their real estate agents are continually updated regarding the overall status of the settlement process, and any specific title issues that may need to be resolved. We’ll obtain a copy of the buyer’s new homeowner’s insurance policy (required by the buyer’s lender), and any necessary payoff information for loans or liens the seller may have secured against the property. We’ll also communicate with the local treasurer and any applicable homeowners’ associations to ensure those accounts are current and that they are transferred into the buyer’s name at closing.

7. Deed Preparation – We will prepare the deed and any other legal documents necessary to transfer the ownership of the property from the seller to the buyer. Any title company without an attorney permanently on staff must outsource the deed drafting to an attorney who likely has no familiarity whatsoever with the transaction. Or worse, an administrative staff member may draft the deed and then have an attorney rubber stamp it for a small fee. At Salisbury, McLister & Foley, LLP our attorneys oversee the preparation of all legal documents.

8. Loan Document Review – As we near the final closing, the buyer’s lender will deliver the loan documents to our office. The attorney who will conduct the closing will meticulously review the documents for any potential issues.

9. Settlement Statement – Once we receive the necessary figures from the buyer’s lender, we will prepare the settlement statement and deliver a copy to all parties to review before the closing. This settlement statement will contain a list of all fees and other costs relating to the sale of the property, including taxes, real estate commissions, loan payoffs, title insurance, and lender fees. It will show the buyer how much money he or she will need to bring “to the table” to complete the closing. It will also show how much money the seller can expect to walk away with after the closing is complete.

10. Settlement or Closing – The culmination of the entire settlement process, this is when the buyer and seller will sit down with one of our attorneys to review and sign the settlement statement, deed, and loan documents necessary to finalize the property transfer. The real estate agents will also attend closing to assist their clients if necessary. The attorney will fully explain the loan documents to the buyer to make sure the final loan terms match what was initially discussed with the lender. The lender will send us the loan money prior to closing. The buyer will also need to wire the necessary funds to us ahead of time, or if the amount due is less than $5,000 bring a cashier’s check to closing. The buyer should also bring a personal check in case there is any small shortage. Conversely, if the buyer has brought too much, we will issue a refund check at closing. Once settlement is complete, we will pay off the seller’s loan(s) and disburse the proceeds of the sale to the seller. We’ll also pay any other settlement expenses, including Realtor commissions. If the seller’s lender is holding any money in escrow for taxes, they will send that refund directly to the seller a few weeks after closing.

11. Post-Closing – After settlement is complete, we will be responsible for recording the necessary documents at the courthouse, including the deed and the lender’s mortgage or deed of trust. We will also return all the signed loan documents to the lender. Additionally, we will work with the seller’s lender(s) to ensure that any liens against the property are promptly released. Finally, even though settlement is now complete, we will always be here to answer any questions you may have regarding your transaction or the property in general. Just give us a call!

If you’d like us to expertly handle your upcoming settlement, or if you have any questions about the process, call us at (301) 694-7235 today or send us a message below and we’ll contact you right away!

100 W. Church Street
Frederick, MD 21701
Office: 301.694.7235
Fax: 301.694.7393
info@fredericktitle.com