Your Job at Settlement
Settlement (or “closing” if you so choose) is the finish line, the end. And as the Agreement of Sale says, settlement is when the risk of loss passes to buyer. If the house burns down one minute after settlement, it is the buyer’s problem. Unlike fires, most potential problems can be eliminated at the settlement table, if not before.
Some potential problems will be eliminated by the title company. The Agreement of Sale says the title is to be “marketable.” The title company is engaged to determine that is so and also to guarantee that the lender has a priority lien. Do not expect, however, the title agent to determine whether a seller’s promises of repair have been properly performed or completed. Expect that the title company will be unaware of any provisions other than standard pre-printed ones. It is up to parties’ agents to determine that their client’s rights and obligations have been satisfied. If the Agreement obligates the seller to produce an approved septic permit at settlement, someone needs to make sure this condition is satisfied. I was involved in litigation once where an agent was
handed such a “septic” permit by the seller. She diligently tucked the permit in the stack of papers at settlement. When ultimately reviewed, the permit made clear the approval for a holding tank and not a septic tank! The problem should not have been discovered after closing.
I, too, believe that it is the obligation of the agents to review the deed being conveyed. I have seen deeds with conveyances to tenants by the entireties (restricted to married couples) when the buyers were mother and son! Yes, that is a problem.
While you are not required to be an expert on deeds, a summary review is not that hard. If the buyer believes she is acquiring three acres but the deed says one, that is a problem. If the deed says that the seller is reserving regress and egress over the property, there may be a problem, depending on what was promised. Your job is to read the deed and ask questions if there is anything that strikes you as odd.
When I ask agents what their job at settlement is, the typical answers I get are: making sure that the parties bring their driver’s licenses, have wired funds appropriately and carefully, accompanying buyers to their pre-settlement walk-through, etc. Indeed these are the typical things you do, but, you should also be on the lookout for the atypical so they are caught before settlement concludes.
It’s amazing what can go wrong. I once was hired by a seller, days after sale, who could not understand why his settlement proceeds were about $10,000 lower than what was estimated. I reviewed the settlement statement that he had signed and noted a sale price $10k lower than the agreed price! Can you believe no one caught that at settlement!
Settlement should be a happy time. It is also the last time you get to catch a problem.