Ever been to a real estate closing? The closing experience can be akin to a pleasant dream or, at times, one’s worst nightmare.
New York State is considered an attorney state, which makes the sale and purchase of real estate more complicated than in other jurisdictions. A typical real estate transaction involves much legal work consisting of negotiating, drafting and reviewing contracts of sale, interacting with lenders and the actual transferring of title which occurs at settlement. For first time home buyers or sellers, the settlement or “closing” is an experience that can be daunting, overwhelming and sometimes chaotic. Yet it usually results in a positive outcome.
Typically, there are many parties who attend the closing. One will find an attorney for the purchasers, the purchasers themselves, an attorney for the sellers themselves, the sellers, an attorney representing the bank, and a representative for the title company, along with the real estate brokers. Since New York is an attorney state, both the buyers and sellers must be represented by an attorney unless they are sophisticated (or brave) enough to represent themselves.
These attorneys oversee the entire transaction and would have been in touch and working with each other early on in the process when the contracts were drafted, negotiated and finally signed. The buyer’s deposit monies would have been put into the seller’s attorney’s escrow account for distribution at closing. Prior to closing, the two attorneys work together to clear title and to determine all of the so-called closing adjustments which include: credits for property taxes (paid or unpaid), property disclosure credit, repair credits and down payment monies in order to calculate the funds needed to close. Once the purchaser’s lender’s attorney is given the net proceeds amount from the purchasers (the amount of money available from the loan), then the various check amounts can be calculated and given to the purchaser prior to settlement. The more prepared the parties are prior to closing, the smoother the closing will go.
At the closing table, the buyer’s attorney will review and explain the entire loan, title and transfer documents to the buyer and have them sign accordingly. The buyer’s attorney will also make sure that the title company cleared the title and that the purchaser understands all of the closing figures and issues the proper checks.
The seller’s attorney must review all of the closing documents and adjustments with the seller and have the seller sign the transfer documents. The seller’s attorney must also disburse the funds in the escrow account for payments of seller expenses such as: realtor fees, title charges and water bills.
The bank’s lawyer, termed “bank attorney,” brings the loan papers or package to the closing and will also bring the mortgage money to the closing for disbursement. Usually the bank has already wired the mortgage funds to the bank attorney’s account prior to closing, but sometimes the wire has not been sent on time and all the parties must sit and wait for the wire to hit. Even if the bank attorney has the wire or money in their account, the bank usually requires a review of certain closing documents before the funding is approved and the bank attorney is given the authority to release the loan proceeds.
At times, this process can be frustrating for the parties because they are all forced to wait around for approval from the bank, which may be located in another state with representatives who are not mindful or respectful of the party’s situation. There have been times where these representatives go out to lunch or on some other hiatus without granting funding approval while we all sit around for hours making small talk. I have even had an experience where underwriters withhold releasing the funds at the closing while they reviewed more documents. In one unusual situation we waited (not so patiently!) for almost five hours at the closing table until the bank attorney was finally given permission to release the funds.
The title company representative attends the closing in order to issue a title policy to both the borrowers and to the borrower’s bank, assuring each that there are no title claims, and that the title company will protect them if any claims surface in the future. The title representative also collects the money from the appropriate party to pay real estate taxes, water bills, or homeowners fees. In addition, the title company also takes charge of paying off the seller’s mortgages and any judgement liens.
The realtors attend the closing in order to offer their clients moral support and to collect their commissions. I have also seen realtors act as a referee in situations where buyers or sellers are fighting about household possessions such as old drapes or an old washer/dryer in need of repair. Prior to closing, the realtors put many hours into showing the property, negotiating offers, meeting inspectors at the home, conducting a final walk-through and interacting with the parties throughout the process. I have seen many realtors bring congratulatory gifts to the buyer or seller with whom they have formed lasting bonds. I have even seen realtors embrace an excited first-time home buyer after the closing exuding tears of happiness.
The ultimate goal of the closing for the purchaser is to become a new homeowner with clear title for the agreed upon price. Of course, the seller’s goal is to collect the monies due, pay off any outstanding obligations and retain whatever funds remain. As long as the attorneys are well-prepared for the closing, the lender properly and timely funds the mortgage without delay to the bank, and the title closer issues their policies, the transaction should go smoothly.
Attending the closing will surely be a memorable experience and hopefully a win-win situation for all parties involved.
Rick S. Cowle is an attorney admitted to practice law in New York, Connecticut, the District of Columbia and the United States Supreme Court. He is president of The Law Office of Rick S. Cowle, P.C., a general practice law firm located at 18 Fair St., Carmel. He can be reached at 845-225-3026 or RCowleLaw@Comcast.net. For more information, visit RCowleLaw.com. This article is meant for informational purposes only, and is not intended to create an attorney-client relationship or to give legal advice.