VOL. 37 | NO. 44 | Friday, November 01, 2013
Top 5 things no one wants to hear at closing
Highly regarded real estate closing attorney Jerry Patterson of the venerable First Title and Escrow had agreed to speak to a group of Realtors and the muse had not visited in the days leading up to his speech.
As the day drew nearer he sought inspiration from that well of knowledge that flows through millions of households each night, that being The David Letterman Show with Mr. David Letterman.
The “Top Ten List” that Letterman featured that particular evening was “Top 10 Signs You May Be A Bad Pope.’’ Patterson regaled the group with the entire list that featured such traits as “You think Papal is an online payment website.” And “You pronounce the p in psalms.
What Patterson’s presentation lacked in conceptual creativity he overcame with wit and wisdom. His presentation was “The Top Five Things You Don’t Want to Hear from Your Closing Attorney or Your Client.’’ It should be kept in mind that he was speaking to a group of Realtors. Letterman could learn a lesson from Patterson as he would do better sticking with five (or six) most nights.
The list follows:
Number 5: Does that wedding ring mean that your client is married?
The attorney must know if the person is married even if both spouses are not on the loan.
An additional heads-up: If a person has been married and somehow that tidbit of information has not made its way to the current spouse, it may be a good idea to let the current Mr. or Mrs. or Ms. know about any previous nuptials prior to closing – especially if the newlyweds (or even not so newlyweds) are buying a home together.
The reason for this disclosure is that there is a name affidavit that lenders often have borrowers sign that lists all of the aliases of the borrowers. On more than one occasion, a spouse has had a former name from the distant past appear on the document. Why did Amelia Victoria Lucille Earhart Johnston once had the name of Amelia Victoria Lucille Earhart Smithson as her parents are the Earharts?
And, for all of you in the witness protection program beware of this document as there is the infamous case of the actual name of the person being “protected” by the government, yet it appeared on the form. The person excused himself, borrowed the phone, and the FBI blew in with all of their glory and wrote the appropriate checks and hustled the witness to another unknown place with a new name.
Number 4: What’s everyone doing in my lobby?
Oddly enough, there are times when one of the title companies has not been notified that it is closing the loan. Twenty years ago, the seller always chose the closing attorney for both the buyer and the seller as the seller traditionally pays the title insurance in this area. Since the title insurance is the most expensive closing cost for either side or the seller pays, the seller chose.
Now, each side- buyer and seller alike- chooses their own closing attorney, in most cases, so that both are represented. The TAR contract that most real estate firms have been intimidated into using has a space for each party to enter its closing attorney. Some agents have assumed the inclusion of a title company in that blank tabs the company as the closing agent and assumes that someone will inform the attorney to get to work, and that is not always the case.
Lesson for real estate client: Have your own closing attorney and ensure they know who you are and where you live or intend to live.
Number 3: Is my personal check for $78,000 OK?
All funds at closing must be certified, cashiers’ checks for collected funds. As of late, many title companies are accepting only wires as any check is subject to bouncing. Buyers should communicate with the title company in order to arrange for the proper receipt of funds.
Number 2: Is it a big deal if I take an extra day or two to move out?
Patterson informed the group that possession is often misunderstood and implored that the agents negotiate move-in/move-out dates on the front end. If last minute changes necessitate otherwise, there is a post occupancy agreement available.
The problem is that the former owner now has a new title- tenant, or lessee, and the buyer is now the lessor, or landlord. Insurance companies should be informed and most Fannie Mae (Federal National Mortgage Association) backed loans require the buyers sign a document stating that they intend to occupy the residence. While it’s all fun and games until someone loses an eye on the playground, the same is the case in real estate. As long as there is no fire, tornado, flood, or damage to the home, post closing possession works.
Patterson also addressed pre-closing possession, or the act of turning over a house to a person until that person can work out a few kinks. What if the kinks are permanent?
Number 1: We think Grandma has a will, but we can’t put our hands on it right now.
While Patterson did not say this is so many words, he sees dead people all the time. He did state that “property owned by dead people creates issues.’’
He stated that the heirs must have a “full probating of the will and an order from the Probate Court approving the sale” or there is an opportunity to do a short form probate for the purposes of establishing the title only which itself can take 30-60 days.
But the one thing that you really do not want to hear at the closing is:
“To Hell with ’em. We’re not closing.”
In this case, Patterson feels that it would be a good exercise to determine which party is in breach as well as who is entitled to the earnest money. Also, it should be determined as to whether or not either intends to sue, and if so, for what remedies? And what are the damages. Additionally, the question looms as to what should be done with the property in while it is in litigation?
Usually, they close.
Richard Courtney is a partner with Christianson, Patterson, Courtney and Associates and can be reached at email@example.com