Closing

"Surprise Party"

Your modern real estate closing

I remember having lunch about twenty years ago with a real estate developer to get feedback as to what he expected at the many real estate closings he referred to my company. He expected the closings to be uneventful, to begin promptly at the scheduled time and “…not ten minutes late.” I distinctly remember telling him that his expectations were realistic. And his closings thereafter always started on time. But that was then…

Today that would be an unrealistic expectation. The modern residential real estate closing has typically become a “surprise party” and it can be anybody’s guess as to even what day your closing will occur.

Ironically, in this day and age of technology you are even more likely to expect your closing to be on-time and to know in advance your financial bottom line – how much money the seller will net and how much the buyer will pay. Unfortunately that’s now the “exception” rather than the “rule.”

Why the expectation

The public is told that they can get “instant” loan approval. They expect documents to be transmitted electronically. They expect the closing process to be an expedient service, run more like Federal Express than the US Postal Service. They don’t like stress and certainly don’t want to hear, “...we have a problem.” They expect problems to be handled by cell phone. They expect that their demands will overpower all obstacles.

The realities

The mortgage loan process has in one sense become streamlined – conditional “approval” can indeed be given quickly but lenders often take a cookie-cutter approach and give their personnel and title agencies little or no authority to vary from their boiler-plate procedures. So even the slightest variation would require “underwriter” approval. In other words, virtually every letter and number on the closing documents must be scrutinized and approved by the lender before funding will be allowed and unless everything is perfect the lender’s personnel must stop and get permission of one of the few with authority. And like the “gossip” game we played as kids, as word is relayed from one to another the message has a tendency to change and some misunderstandings occur. And bizarre solutions often result…but that’s another story.

And the residential real estate industry has become very complicated with regulation and case law requiring numerous disclosures. The loan closing “package” can certainly be emailed from the lender to the title agency but a single lender’s package itself may take fifteen minutes to print and that package will often be revised once or twice such that closing files often use a ream of paper or more. The often revised purchase agreement forms used by Realtors have grown from single-page documents to forms with over 200 lines of fine print wrought with deadlines and loopholes and agents have to attend seminars given by attorneys to learn how to fill-in the many blanks. A recent federal Court case, for example, held that a sale of a house did not include items that could be “removed,” so a special “addendum” to every contract had to be developed to convey the doorknobs and toilet fixtures.

Moreover, insuring that a buyer gets valid legal title to real estate and that a lender’s security interest is enforceable is not a simple matter. Typically a licensed title insurance agent (often an attorney) physically reviews the title documents of each case and makes an “opinion” as to what is necessary to “cure” the title. Of course, some titles are “clear” but, often enough, even experienced title lawyers must consult their associates or title insurance underwriting counsel to decide how to proceed.

What will your closing costs be

The Catch 22 is that the law requires the settlement agent to collect certified funds from the buyer but the lender’s package typically arrives at the very last minute (often while the parties are waiting at the closing table) so you cannot be told in advance how much that will be. The problem is that the settlement statement cannot be finalized before receipt of the lender’s closing package and the settlement agency cannot guess at the closing costs until then. Buyers get a “good faith estimate” from their lender but an “estimate” may be inaccurate. RESPA (the Real Estate Procedures Settlement Act administered by HUD) gives borrowers opportunity to examine their HUD-1 Settlement Statement twenty-four hours before closing. If you request that, the lender’s closing package must arrive a day in advance.

Who dropped the ball

In short, completeness and accuracy are more important than speed to all parties. ALTA (the American Land Title Association at http://www.alta.org/) remarks on its website, “…it's comforting to know that skilled professionals are busy working behind the scenes to make sure your closing runs smoothly.” It certainly takes experienced professionals to minimize delay and skillfully handle the many things that could derail a closing.

But surprises and delays are not anyone’s fault – to the experienced, they are inevitable. We assure you that all of the parties want your closing to be done properly and as soon as possible.

And the point is…

So when you make plans to take off work, to schedule your trip or the babysitter or the moving van, to meet with your carpenters, to pay bills with your sales proceeds (or your real estate commission check), don’t be “surprised” – be “realistic” and be “flexible” and, do yourself a favor, trust your closing only to skilled professionals.

We wish we could guarantee you no surprises. Regretfully we cannot do that. But we do indeed pledge to give you the most professional title service available in this industry.

Bob Calongne
R. J. Calongne, Jr., A Professional Law Corporation