The following is a summary of the steps involved in processing and closing a typical residential purchase transaction by the attorney's office overseeing and coordinating the closing transaction.
1. RECEIPT OF CONTRACT/TITLE SEARCH ORDER: Once a fully ratified contract is received from the buyer's agent (contracts can be received either via fax 757-622-2088 or email mike@hamarlaw.com or mary@hamarlaw.com), a physical file is created and a title examination is ordered per a title order request form which results in a title commitment being generated by the title insurance company after an examination of title has been conducted. The title commitment reflects among other things (1) the name(s) of the record title owner(s) of the property, (2) the full legal description of the property per the records in the Clerk's Office of the applicable Circuit Court, (3) all liens and encumbrances against the property, including mortgage liens, any judgment liens, child support liens, etc., (4) any wills by which title has been devised, (5) real estate tax account and payment status information, and (6) the materials required for submission to the title company in order that a final title policy can be issued.
2. MORTGAGE PAY OFF REQUEST(S): The closing attorney will order pay off statements from the Seller's existing lenders, if any. To do so, the closing attorney needs (1) an authorization signed by the Sellers, (2) contact information for the seller's lender(s), (3) the loan account number for each mortgage, and (4) generally, the Sellers' social security numbers. When received, the pay off letters will set forth the amount required to pay off the existing mortgages in full and result in the lender's return a release to be recorded in the local land records. The turn around time for pay off statements varies from 24 hours to up to 10 days, so the best practice is to order pay off statements at the outset.
3. SURVEY ORDER: Unless waived by the Buyer, a survey of the property is ordered. The physical survey discloses any easements affecting the property as well as any encroachment or boundary set back issues which then become a title defect to be resolved by the Seller. If the problem is significant and cannot be resolved, then the Buyer will be in a position to terminate the purchase contract and receive a refund of the earnest money deposit. The cost of a typical residential lot survey is between $250 and $300.
4. RECEIPT OF LENDER INSTRUCTION: The lender will send the closing attorney's office preliminary instructions that specify (1) the name of the borrower(s), (2) amount of the new loan(s), (3) the manner in which the lender is to be named on the mortgagee title policy, (3) any endorsements to the mortgagee title policy (4) materials to be included in the preliminary package to be submitted to the mortgage lender for review, and (5) amounts to be collected on a preliminary HUD-1 settlement statement.
5. HOME OWNER'S INSURANCE; TERMITE/MOISTURE INSPECTION: The closing attorney's office coordinates with the Buyer or the Buyer's agent to order the hazard and/or flood insurance coverage required by the mortgage lender. Buyers are free to select whatever insurance company they prefer for the required coverage, provided the carrier is licensed in the Commonwealth of Virginia.
6. REVIEW TITLE COMMITMENT: Upon receipt, the closing attorney's office reviews the title insurance commitment (1) for the requirements to correct irregularities in title enumerated in Schedule B-1 of the commitment, (2) to insure the new mortgage lender is correctly named, the new loan amount(s) is/are correct, and that the lender-required endorsements are included, (3) for unreleased deeds of trusts, other than those for which pay offs have been ordered, (4) other liens, judgments or other title problems that prevent title from being marketable. No closing should be scheduled until ALL curative materials have been submitted to and approved by the title insurance company's underwriters. NOTE: Mortgage lenders ALWAYS require a title insurance policy on their loans, and Buyers are well advised to purchase an owners title insurance policy.
7. PREPARATION OF THE PRELIMINARY PACKAGE: Once the title commitment, hazard and/or flood insurance certificates, termite and moisture reports and any other specific lender-required materials are received, the closing attorney's office will prepare a preliminary HUD-1 settlement statement and submit the same to the Buyers' mortgage lender for review. These materials are delivered either via fax or e-mail, depending upon the lender involved.
8. REVIEW OF PROPOSED SELLER DOCUMENTS: The closing attorney will require drafts of or the information required to prepare the proposed deed, affidavits to the title insurance company, an IRS 1099, and R-5E, and certain other closing certifications. Once these documents are approved by the closing attorney arrangements will be made for their delivery to the closing attorney's office if the Sellers are not going to attend closing.
9. FINAL LENDER INSTRUCTIONS AND LOAN PACKAGE: The lender will deliver final closing instructions to the closing attorney's office which will contain final lender's fees and other costs to be collected on the final settlement statement. NOTE: often these instructions may set limits on the amount of Seller closing cost assistance to the Buyer, depending upon the loan program, etc., being utilized by the Buyer. In addition, the lender will provide a closing package of documents to the closing attorney's office. Once the loan package is received, a final HUD-1 is prepared and submitted to the lender for approval. After the HUD-1 is "APPROVED," the closing attorney will send copies to realtors and sellers' representative and confirm closing time and advise the Buyer how much money to bring to closing. Remember - by Virginia statute certified funds are required (i.e. money order, cashier's check or wire).
10. CLOSING: At the closing, the Buyers must provide valid picture IDs, and the closing attorney will review and explain the HUD-1 settlement statement and all of the loan documents being executed by the Buyers, as well as certain standard certifications. NOTE: by Virginia statute, no funds can be disbursed until (1) the closing attorney is in receipt of all required funds from the Buyer and the lender, (2) title to the property has been updated from the date of the title insurance commitment, and (3) the deed and deed of trust(s) have been filed for record - usually the morning following the closing.
11, POST CLOSING After closing, a copy of the signed HUD-1 and other required documents are faxed to the lender advising that closing occurred. The closing attorney's office will coordinate with the title insurance company to have the documents picked up and title updated to the time of filing. Upon receipt of notice from title company personnel that the documents are "in line" at the Court house, disbursement is made of all payments set forth on the HUD-1, including pay offs to the Sellers' mortgage lenders. The closing attorney should give the paid off lenders notice pursuant to Section 55-66.3, Code of Virginia of 1950, as amended, so that if the Sellers' mortgage lender fails to release the old deed of trust within 90 days, the closing attorney as settlement agent that made the payoff can file a certificate of release.
Once recorded documents are returned from the Court house, the original deed is forwarded to the Buyer and the recorded deed(s) of trust are delivered to the Buyers' mortgage lender. Copies of all such documents are sent to the title insurance company so that the final title insurance policies can be issued and delivered to the Buyer and mortgage lender. The turn around time on receiving documents back from the applicable Clerk's Office varies from city to city, with some offices returning recorded documents within a week to five or six months, in the case of the City of Chesapeake.
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