Here are five things you must know before your next real closing:
1. Anything that was promised to you in the purchase agreement no longer applies after the settlement is complete.
It’s not unusual for the purchase contract to contain all sorts of promises from the seller to the buyer. For example, the seller often agrees to leave the house in clean condition, or to have trash removed from the basement, or even to repair the roof where it leaks.
These promises are called “covenants,” and are enforceable so long as the contract remains in effect.
However, once the deed is prepared and delivered to the buyer by the seller, the contract is said to be “consummated” and ceases to exist. Under law, it “merges” with the terms of the warranty deed.
As a result, the seller has no obligation to do anything promised in the contract after the closing is finished. That is, unless the contract contains a survival clause.
Some do, some don’t. Make sure yours does.
2. You probably won’t see all the papers you will be asked to sign until you sit down at the table with the closing attorney.
Lenders today are so competitive that they often promise to obtain loan approval in a shorter period of time than competitors. As a result, if there have been any slowdowns along the way, it is likely that the “loan package” will be delivered only on the day of closing, and sometimes after your arrival.
My advice is to politely badger your lender on an almost daily basis. Tell the loan officer that you will refuse to close if you don’t have the completed documents at least 24 hours prior to closing.
Even so, that probably won’t work. The lender knows your heart is set on buying the house, and that the paperwork is not the goal of your endeavor. If that happens, insist that the closing attorney explain every document you are asked to sign.
Another alternative is to bring your own attorney to closing to represent you, but that can get expensive quickly.
3. If you are obtaining a loan in connection with your purchase, the closing attorney does not represent you. He represents the lender.
And the lender is primarily interested in protecting the lender, not you!
The good news is that you can hire a real estate attorney to review the sales contract before you sign it. Such a review is typically inexpensive, and serves to make sure your interests are protected as well.
I know many real estate salespeople will disagree with me on this one, but my opinion is that every buyer of real property should have the contract and closing documents reviewed by their own legal counsel.
Buying a house is a huge investment, perhaps the largest of your life, and having a lawyer on your side makes sense to me.
4. The closing attorney will not accept your personal check for payment at closing. Instead, you must bring certified funds, payable to yourself.
Unfortunately, that requires that the attorney be able to estimate the amount you will need ahead of time, which we have already said is probably not going to happen.
This is where your real estate agent can shine. A smart, experienced agent will be able to calculate, in advance, the cash you will need at the closing table, perhaps to within a hundred dollars or so. Add a couple hundred for unforeseen expenses, and you have an amount.
My advice is to get the certified check the day before closing, after you have performed your final walk-through inspection.
5. You truly should buy title insurance, which will be offered to you by the closing attorney.
Your lender is paying the closing attorney a sum of money to research the chain of ownership and certify that the seller actually does own the house you are buying.
However, the closing attorney works for the seller, not for you.
Other than the promise of the seller, you have no guarantee that the seller is actually the owner. That’s where title insurance comes into play.
The closing attorney will offer to sell you a title insurance policy under what is called a “simultaneous issue” discounted price. By paying for two policies at once, you can save substantially. And that payment protects you and your heirs for as long as you own the property.
Make sure you ask your closing attorney for details before you arrive at the closing table. Buying “owner’s title insurance” is always a smart move, and will cost you more if you wait until later.
Knowing these five facts before the day of closing will help insure that your settlement goes smoothly from start to finish. If you have any additional suggestions for the day of closing, please share them with me.