Once parties reach an agreement on purchasing a property, there are a few steps left before the transaction is final. First, there is the inspection. This ensures the property is in good shape. Then, both parties iron out the final details like whether the property has a clean title. This is perhaps one of the most important parts of the transaction itself.
When real estate lawyers handle title services and closings, they aim to ensure the transaction goes smoothly. They handle the title examination, navigate any issues they find, issue title insurance, and oversee the finalization of any paperwork.
What Is a Title Examination?
The first thing a real estate attorney does when managing title services is perform a title search, sometimes called a title examination. This requires them to search legal documents, databases, and other places to learn the property’s history and determine if there are any liens or other claims to it.
The purpose of a title search is to ensure the property’s title is clear. That is, there are no other claims to ownership beyond the party trying to sell it. When there is an encumbrance on a property, the attorney contacts the real estate agent or seller about their options for handling the issue.
Sometimes, this is a quick and straightforward process. In some cases, though, matters could get complicated, even voiding the entire sale.
Issues that could raise red flags during a title search include:
- Clerical errors on deeds
- Liens against the property for unpaid taxes
- Claims on the property because of other unpaid bills, such as HOA fees or unpaid repairs
- Incorrect or improper descriptions or other data
- Forgeries or misrepresentations on deeds or other documents
- A previous owner who passed away without a will
- False ownership claims from neighbors or other third parties
- Deeds or other documents signed by someone with a cognitive disability
- Questions of ownership unsettled in the legal system
- Other issues that affect the property’s ownership and clear title
The title search is the first of several steps the law firm performs when acting as a title company. A lawyer oversees this process and is available to answer legal questions and address concerns about the title. This is especially helpful for real estate agents, who cannot offer legal advice to their clients.
Why Is a Clear Title So Important?
You cannot schedule closing and purchase a home without a clear title. A marketable title is necessary to prove the current ownership and transfer that ownership in the sale. The law intends to protect the buyer, as well as others who have a claim to the property. The seller needs to prepare paperwork, go to court, or take other steps to clear any encumbrances on the title before finalizing the sale.
If there is another claim on a property and the purchase goes through, the buyer could lose their investment. Someone else could legally have a right to use the property, sell the property, or take other action. This could lead to losing your home and the money you spent to purchase it. No one wants to go through this.
Title companies often handle these searches, and it is, in fact, a primary function of their business. They ensure the title is clear, then manage the paperwork and oversee closing. There are additional benefits when a real estate law firm acts as a title company.
These could include:
- You have a legal professional reviewing your title documents.
- A lawyer manages your transaction.
- They offer legal advice about clearing encumbrances on a title.
- You get answers to legal questions about titles and title insurance.
- They issue title insurance.
- A lawyer will help prevent legal claims against you after a property transaction.
Ensuring a property has a clean title before a sale prevents a lot of stress, expenses, and legal trouble later. A relatively inexpensive, quick search to check for issues now could prevent spending hundreds of thousands of dollars or more later. Real estate attorneys generally require one with every sale they oversee, regardless of the circumstances.
What Is Title Insurance, and What Does It Do?
Title insurance is a policy that covers the seller’s investment if there is a third-party claim to the property that arises after the sale. The seller often provides this as required by the buyer’s contract stipulations. If you work with a real estate attorney, they can answer your questions, determine the necessary coverage, and sometimes issue this policy themselves.
Finding yourself in a situation where you don’t have coverage makes a bad situation much worse. This policy pays out when you spent money purchasing a property and later learn that it did not have a clear title. Here, someone else owns or co-owns your land, home, and anything else on the property.
This scenario—finding out you do not actually own the property you spent your money on—is a nightmare for many. Knowing you have the option to recover the money you spent is somewhat helpful. Without this type of policy or enough coverage, you could lose hundreds of thousands of dollars.
Some ways these cases resolve include:
- The buyer takes care of the issue, often with monetary help from a title insurance claim, and keeps the property.
- The buyer sues the seller to take care of the issue.
- There is no way to take care of the issue, so the buyer files a title insurance claim and vacates the property.
Title Insurance Protects Your Financial Investment
If you purchase property but plan to invest money to improve the value of that property, you must add more coverage. A buyer’s attorney can help you get enough coverage to protect the land and structures.
This is a concern if you have plans to:
- Build a home on empty property
- Build onto a current home
- Significantly renovate the current structure
- Add other structures
- Spend a lot of money on the land for another reason
Insurance is vital when safeguarding your financial investment. If someone else has a valid claim to the land, and you cannot find a way to keep the property, the other party rightfully takes ownership of the property and any structures you built or renovated. The coverage provided by sellers generally only includes the purchase price of the property. You will want to have other expenses and investments in your coverage, as well.
Does My Real Estate Agent Handle the Title Services and Closing?
Many real estate agents work with lawyers, title companies, and others to coordinate the title search and schedule closing. In this way, they know what must be done and guide the process. However, real estate agents do not generally handle these services themselves. Instead, trained professionals who are familiar with each step manage that particular process.
Your agent will act as your representative in the transaction, especially regarding the contract. They will ensure the title company or law office has a copy of the contract, including all amendments and addendums. This is essential to closing since the purchase agreement must include the same information and finalizes the sale of the property. Contracts frequently change between the initial signing and the closing date.
The reasons for this could include:
- Issues during the home inspection
- Problems during the title search
- Changes due to the mortgage or financing
- Contingencies
An Attorney Aims to Make Matters as Straightforward as Possible
The title examination is one reason the real estate agent does not handle this process. They know about buying and selling real estate and the applicable laws, but identifying and navigating issues with titles requires specialized training and skill. Title company representatives and attorneys who handle this have the necessary experience, knowledge, and resources.
Some situations can make it more complex to complete the sale.
This could occur if:
- The buyer or seller requires a power of attorney.
- The property is part of an estate.
- The property was part of a divorce.
Having an attorney overseeing these transactions allows them to spot any legal issues and navigate any problems arising from the circumstances.
What Happens When We Meet for Closing?
The closing finalizes the transaction when buying and selling property. You likely have a contract and worked out all the details. However, the sale is not official until the paperwork gets signed and the documents filed.
The closing meeting has different goals for the buyer and seller:
- The buyer becomes the owner of the property. They received the keys and could move in.
- The seller receives the proceeds from the transaction and turns over the keys to the new owner.
The closing itself is generally an in-person meeting, which could include:
- The buyer
- The seller
- The real estate agents representing both parties
- A closing agent or title company representative
- A closing attorney, if a law firm is not handling the process
The Involved Parties Sign the Necessary Paperwork
Both the buyer and seller must sign paperwork during this meeting. These legal documents must be correctly executed to ensure the sale goes through and the title remains marketable for future sales. This is why attorneys often handle the closing meeting, even if they are not representing either party.
The closing is primarily about the buyer. They will need to review and sign many documents. This is often dozens of pages.
These documents focus on:
- The mortgage or loan
- The agreement between the buyer and seller
- The legal transfer of the property
The paperwork will likely include:
- Your loan estimate and details
- The closing disclosure from the mortgage company
- The initial escrow statement
- Your mortgage agreement
- The purchase agreement, which finalizes the sale
With an attorney handling the closing, you have someone available to review each document with you. They can answer your questions, explain the purpose of the paperwork, double-check everything, and ensure you complete it.
Many Closing Happen Virtually
In some areas, it is possible to handle a real property purchase and closing virtually. The parties no longer have to meet face-to-face, sit around a table, and sign a stack of papers. Instead, they e-sign or receive the documents through email, fax, or mail. Law firms use video conferencing abilities to answer questions and simulate the around-the-table meeting virtually.
Virtual closings became more common during the early days of the pandemic and continue to provide an alternative option for those who cannot meet in person. For example, this is a good option for buyers or sellers who live far from the property. Most closings still occur in person, though. The attorney schedules these, often in a conference room in their offer or another convenient, private location.
A Real Estate Attorney Helps With Title Services and Closing
It’s vital that you understand the importance of a thorough title search and ensure the title is clear. At the same time, you want someone knowledgeable about real estate law and experienced with similar circumstances if they do find something in this search. Working with an attorney offers both of these benefits.
In addition, a real estate attorney handling issuing title insurance ensures the involved parties understand what this is and why they need it. Lawyers answer legal questions about titles, insurance, and transactions that even the most knowledgeable real estate agent cannot. While agents know a lot about the local market and how to manage offers and sales, they cannot offer legal advice like a lawyer can.
The Benefits of Working With an Attorney on a Property’s Closing
During the closing, having an attorney handling the process provides significant benefits for all involved.
Consider:
- A closing lawyer serves as a coordinator between all involved parties.
- The attorney can explain each document clearly and answer questions that arise.
- You can trust the documents are correct.
- The lawyer can make changes as necessary if there is an issue.
- The attorney serves as a witness to the signatures.
- They execute the transaction itself, ensuring all money changes hands as it should.
- Their team ensures all paperwork goes to the correct office for filing.
Some closing attorneys could offer alternatives to traditional closing meetings when the circumstances call for it. This could include closing title services by mail or virtual closings.
Getting More Information About Title Services and Closing on Property
The goal of title services is to ensure a free and clear title on the property. The real estate law firm or title company looks for any issues with the property deed that could invalidate a sale. When possible, these representatives clear any problems before issuing title insurance and scheduling the closing of the sale.
If you have questions about this process, want to hire a lawyer for a related issue, or are a real estate agent who needs help with a title search, you can contact a real estate Law Firm in Vero Beach, FL about your next steps.