By Gary Bowers, Attorney
Whether buying a house or refinancing your existing mortgage, you the purchaser/borrower may ask what is the role of the closing attorney? There are five primary functions handled by the closing attorney during a real estate transaction:
- Title examination: The purchaser and lender will both want a clear title for the property. Upon receipt of a real estate purchase agreement or a request from a bank or mortgage broker, the closing attorney will begin to check the title to the property being sold. The title examination is for the purchaser and the lender to evaluate title to the real estate. The purchaser will need to know whether there are certain restrictions to use, easements, encroachments or whether the title is marketable and clear for the seller to transfer to purchaser. The closing attorney will identify any existing mortgages against the real estate that will need to be satisfied at closing in order to transfer good title. The lender will want to have an overview of what liens, judgments and mortgages, if any, exist that must be addressed prior to or at closing so it can secure a 1st lien position on the real estate. Also, the title examination provides the lender’s underwriters with opportunity to raise concern with the status of the title.
- Title insurance: Title insurance protects the purchaser and the lender in the event a future problem is found with the title. Once the title examination is completed, the closing attorney prepares an opinion on the title that is offered to a title company for the issuance of a title binder, which is preliminary to obtaining title insurance. Title insurance is an option of the purchaser in a real estate closing in which the purchaser does not have to get financing through the bank or mortgage broker, but is a requirement for most all lenders at the time or purchase or refinance of real estate. From the purchaser’s prospective, title insurance is highly recommended to insure the purchaser on the title, with regard to claims of interests, rights and liens against the subject property being purchased. It is reasonably affordable and worth the expense. From the lenders perspective, it is a requirement because the lender seeks every assurance that it has secured its first lien position on the property, and the policy is there to stand behind that lien position. This may be handy for the lender as well if it does not intend to service the loan, and plans to sell its note to another company to service that was not in the picture at the time of closing on the loan.
- Coordinator: The closing attorney creates lines of communication between many parties for the real estate closing. The closing attorney not only talks with lenders, buyers and seller, but may coordinate with real estate brokers, surveyors, merchants or parties that hold judgments that have attached to the real estate, the seller’s mortgage holder (payoff request), the purchaser’s prospective homeowner’s insurance company, the county tax department, adjoining property owners, home inspectors, contractors, homeowner associations and seller’s attorney. The closing attorney has to remain mindful of all the issues that must be addressed for the closing transaction to correctly reach its finality, but must also often times communicate with multiple parties to coordinate the timely close of the transaction. A great deal of the coordinating and communicating occurs throughout, but is most significant when the closing attorney starts preparation of the settlement statement for closing and must account with multiple parties on dates and dollar amounts for closing.
- Review of documents: On the day of closing the closing attorney is present to review the various instruments associated with the real estate and loan closing. The closing attorney is available to explain documents such as a deed, a note, a deed of trust, a settlement statement, disbursement at the end of the transaction and loan documentation required by the lender.
- Record and disburse: The closing attorney is literally responsible for closing on the transaction and distributing all monies. After review and execution of the necessary instruments of a real estate or loan closing, the closing attorney checks the local registry one last time to update the title, and records the deed and/or deed of trust. The closing attorney then issues a final opinion to the title company and pays the title company its premium. The closing attorney disburses any and all other fees and amounts associated with the transaction, to include any real estate brokerage fees, county taxes that are due and payable, payoff monies for existing loans, homeowner insurance premiums for the purchaser/borrower, pest inspection fees, homeowner association dues, home inspector fees, the bank or mortgage broker’s fees, seller’s proceeds from sale and the attorney fees for closing.
From the overview above, the closing attorney’s role is vital to the real estate transaction. Selecting a closing attorney may prove particularly vital, and it is advisable to seek a closing attorney that is organized, attentive to details and mindful of the importance of your transaction.