Closings for beginners

What is the next step after successfully negotiating a sale on your home? We sat down with Miami closing attorney Mila Lopata to discuss:

What is a closing?

A closing is the ‘finish line’ in the long process of finalizing a real estate transaction. This is when all the legal documents for the transaction and any loan documents are signed,  funds are transferred, and the buyer gets the keys to their new home. The proceedings are controlled by closing agents, who can be members of title-closing companies or attorneys. They are independent and impartial third parties to the transaction who manage the closing process.

Who is involved in the closing?

Numerous parties can be involved in the closing including a lender, loan officer, title insurance company, escrow company, closing agent, attorneys for each side and the buyer and seller themselves.

Closing companies and attorneys are both qualified to act as a closing agent and provide title services by completing the same course. However closing attorneys like Mila Lopata are able to combine title insurance, escrow and attorney services. She says it makes sense to use an attorney who is qualified as a closing agent over a title-closing company.

Mila told us “Whereas a title company needs to carry a bond of $50,000 to open their business, an attorney has their license at risk if anything goes wrong so they have more to lose if they fail in their professional duties.”

Using an attorney also has the benefit of you being able to hire them to advise on the terms of the transaction, and they can assist if the closing goes awry, for example if one party defaults. Depending on the value of the home, the cost of a closing agent will vary from around $750 to $850. In Miami-Dade and Broward this fee is customarily paid by the Buyer. Elsewhere in Florida, the Seller would normally pay. As a general rule of thumb, the party that pays is that party that chooses the closing agent.

What do closing attorneys do?

Closing attorneys verify that all legal documents relating to the transaction are correct, that title to the property is legitimate, they issue title insurance policies and they manage the closing process.  They ensure the necessary documents are filed at the county records office to register your interest in the property. You can’t buy a house without a closing agent.

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Do I need title insurance?

Every buyer must have title insurance to protect them and any mortgage lender against defects and disputes concerning the title, providing damages to rectify such deficiency. Even if your lender has their title insurance policy, a buyer will need their own, and it’s much more cost effective to obtain policies for the buyer and lender at the same time. Every closing agent works with a specific title insurance company. It is still sensible to check the company is well-known and has a good track record. Ideally, they will be in business over the term of your home ownership so that they can pay-out should an issue relating to title arise. The title insurance fee is specified by Florida statute. It is based on the sales price of the home and is uniform throughout all title insurance companies.

What are title searches?

Title searches are a necessary part of verifying that the home sale is legitimate. They will reveal and verify (i) the legal owner/s of the property, (ii) whether there is a mortgage, liens, unpaid taxes or other debts affecting the title to the home and (iii) if there are any leases or other restrictions affecting the property. All of these will need to be cleared prior to the closing.  

Does a seller need their own attorney in addition to a closing attorney?

Certain states require an attorney to be present at a closing; Florida does not require attorneys to be present. However, a seller’s attorney can be useful in preparing sellers documents such as disclosures, the warranty deed, Bill Of Sale, closing affidavit and possibly more, depending on the circumstance. It would certainly be advisable to hire an attorney if you had concerns about the terms of the transaction, or if the transaction involved a short-sale or foreclosure as you will want to protect your financial position.

How much are closing costs?

A Settlement statement will set out the closing costs associated with the sale. Below is a guide to closing costs on a $500,000 home and an indication of which party is responsible.

How long does it take to close on a home?

  • Overall Closing Time can be as short as one (1) month from the date of signing the contract, or if you want to apply for financing, give it  forty-five (45) days. In that time-frame the following will happen:
  • DEPOSITS:
    • Within one (1) to three (3) days of signing the contract, the first deposit of approximately $1000-$5000 will become due. A buyer would engage a closing agent to process the deposit following wire instructions from the seller. This first deposit will be held in escrow by the closing agent. Once deposited, an escrow letter will be sent to the seller confirming the deposit.
    • Within about ten (10) days of signing the contract, any further deposit will be due.
  • INSPECTION:
    • The default inspection period is fifteen (15) days, but this is negotiable.  An inspector will always find something at issue to validate their value, even on a brand new property. If a property is a knock-down, then an inspection may not be necessary.  Inspections are voluntary, cost around $300.00 and would be payable by the buyer (not included in the table above)
  • LOAN:
    • If a mortgage is needed, a loan commitment will be due within thirty (30) days of signing the contract. If the buyer does not apply, then they will be in breach and forfeit the contract and deposit.
  • TITLE VERIFICATION:
    • While the above is going on, it takes approximately one (1) week to get back a title insurance commitment and lien searches will take about one (1) to two (2) weeks. Meanwhile, a house survey will be ordered to measure zoning issues,  easements, property boundaries, etc.

Mila’s top tips when selling/buying a home

  1. When executing the sale and purchase contract, after your name add “or assigns” when buying an investment property. This way if the identity of the purchaser changes to a different person or entity, this will save making multiple changes to the contract.
  2. If you are buying a property and don’t need to homestead it, or are buying with a group of people, then consider buying it in a company name. This protects your other assets in case you are sued for something which occurred on the property and visa versa. This can also provide tax benefits (e.g. setting off maintenance expenses against rental income).
  3. If the buyer signed a contract with a financing contingency, meaning that the purchase is contingent on the buyer obtaining a mortgage, he may legally cancel the contract if he/she is not able to obtain the anticipated financing.
  4. If you the buyer is purchasing a home which was purchased by the seller within three (3) years, the buyer may receive a discount on their new title insurance policy.
  5. If you are selling a house across two folio numbers, the lien search can be double the anticipated costs as there are separate fees per folio number.
  6. Even experienced real estate agents make constant mistakes on sales and purchase agreements and have to ask attorneys for help. Why not engage an attorney before you execute a contract to verify what you are agreeing to and to seek advice?

Mila Lopata is a Closing Attorney with over ten years experience. She can be contacted at 400 Sunny Isles Blvd CU-1, Sunny Isles Beach, FL 33160-5080, on 786-999-6494 or by email at mila@milalaw.com