Description of Services

The function of the closing attorney consists of several steps. Many of them are listed below. There are activities which take place before the closing, activities of the closing itself, and activities which take place after the closing but which must be properly completed for the closing to be final.
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Activities Before the Closing

Before the closing, the attorney should be notified of the closing, the address of the property being sold, the name(s) of the seller(s), the name(s) of the buyer(s), the real estate agent(s) involved, the name of the lender and the prospective closing date. Much of this information is contained on the contract agreed to by the buyers and the sellers, therefore, the attorney needs a copy of the contract.

Title Search

The attorney must next set up a title search or examination of the property being purchased. A title search involves checking many different types of physical records at the court house.

The attorney then evaluates and analyzes the data from the title search in order to determine what actions must be taken to provide the purchaser with clear title. If there are any liens, unpaid or uncancelled mortgages or back taxes due, then all these must be satisfied. Many times this will involve obtaining payoffs of liens or taxes and cancellations of paid mortgages to allow the closing to take place. The attorney next analyzes any exceptions to the title. These may be utility easements, prior mineral reservations or subdivision covenants and/or building restrictions that are permanent restrictions on the property title. He then determines, after advising the interested parties, if the purchaser and/or his lender will be able to live with these exceptions.

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Title Binder

A Title Binder shows who owns the property; what defects of title, if any, exist as shown by the title search and how these defects will be addressed before or at closing. The attorney must obtain a title insurance binder or commitment because most lenders require either the buyer or the seller to the transaction to obtain lender’s title insurance for the lender. The committment states that upon certain steps being taken (and lists exactly what those steps are), a title insurance company will insure the lender’s interest subject only to those exclusions on the sales contract or subject to those permanent restrictions on the title, such as prior minerals, easements and covenants.

The owners may also protect their investment if they buy owner’s title insurance.

Hazard Insurance Policies and flood certificates

In many cases, the attorney must work with the buyer and the hazard insurance agent to make sure the insureds’ names, the lender’s names and the property address are correct. The attorney verifies that the insurance coverage is sufficient to meet the lender’s requirements and to fulfill the borrower’s needs. Many times, the attorney must evaluate a flood certificate, ordered by the lender, to determine if the property is in a flood zone and thereby requires flood insurance. In such cases, he must take the same steps that he does with the hazard insurance.

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If the contract or lender requires a survey of the property, the attorney obtains it and then examines it to determine if the property

  1. has access to a public road or has a chain of easements running to a public road.
  2. has improvements such as a house, barn, or other structures on the land described
  3. has a valid legal description and closes, i. e., forms a concise, specific tract with definite corners
  4. has no improvements located in any easements of record
  5. has no setback line, protective covenant or building restriction violations.

Termite Inspection

If the contract or the lender requires a termite inspection, a termite certificate from a licensed termite company is ordered. The attorney must evaluate the certificate to determine if the report discloses the presence of

  1. any current or past termite activity
  2. any current or past termite treatments
  3. any conditions conducive to termites
  4. whether any treatments or other corrective means are to be taken. If so, the attorney then works with the termite company, the sellers and/or realtors to make sure treatments and/or repairs are done. The word “termite” in this paragraph is a generic word that also includes other wood destroying insects, e.g., carpenter ants and the conditions which encourage infestations, like wood decay or rot.

Setting the closing date

The attorney must make contact with the proposed lender and all parties including the realtors to work toward a projected closing date and to take all steps necessary on the attorney’s end to meet the projected closing date. Sometimes this will involve working with attorneys hired by a buyer or seller who is not paying the closing attorney’s fee.

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The Loan Package

At this point the attorney must

  1. obtain a loan closing package from the lender. This package in many cases will exceed sixty (60) pages and will include the lender’s required documents and the instructions.
  2. review the package,
  3. be certain he can comply with all lender’s instructions
  4. be certain he can likewise comply with all provisions and stipulations in the sales contract
  5. review all of the closing forms and know that he can explain to the parties the meaning, significance and importance of the various documents.

The attorney should determine if there exist other documents that the attorney needs to fulfill the closing, such as

  1. warranty deeds,
  2. mortgage exhibits,
  3. title insurance affidavits
  4. hold harmless agreements
  5. the closing statement or HUD1.

The attorney, then, must prepare these documents.

The Closing Statement or HUD1 and lender forms

The attorney should prepare a settlement or closing statement, sometimes called a HUD1 form. In preparing this multipage document he should verify that all mortgage lender fees, lien payoffs, realtor fees and other closing costs accurately appear on this form and are properly allocated between the buyer and the seller. The attorney should make sure that all items on the HUD1 comply both with the lender’s instructions and the sales contract.

Then the attorney should be certain all lender forms are properly, correctly and completely filled out.

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The Closing

The attorney, with the assistance of and usually in the presence of, the buyer, seller, real-estate agents and other interested parties, will close the transaction. He will make sure that all documents are properly signed and notarized. Sometimes the attorney must act as a referee between the parties and try to resolve any disputes that might arise. In doing this, the attorney must be certain he is complying with the loan closing instructions, the sales contract and his duties to his client. In a loan closing, as in other matters, the attorney’s client is the one paying the attorney’s fees as specified by the contract and as shown on the HUD1. The attorney should remind the buyer, if applicable, to file for homestead exemption and outline the process for so doing. The attorney will makes certain that all parties at the table receive copies of the documents that they have signed or to which they have a vested interest.

Title Insurance, lender’s and owner’s

The attorney should explain to the prospective purchaser the purpose of owner’s title insurance and provide the coverage if the purchaser desires. The attorney, also, should explain the difference between owner’s title insurance and lender’s title insurance.

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After Closing

Disbursing the closing proceeds (the money)

Upon completion of the closing, the attorney disburses all funds in accordance with the sales contract, the closing statement and the lender’s instructions. Many of these funds must be mailed by the attorney, e. g., payoff of prior liens, insurance premiums, survey fees, termite fees and all fees or charges in which the payee is not present at the closing table. He may use the United States Postal Service (USPS) or some other carrier to distribute the funds for those payments to a payee who is not present at the closing table.

Disposition of the records

The attorney then divides the remainder of the file into three parts:

  1. those documents that get recorded at the court house
  2. those documents that he retains so he will have copies of everything and
  3. those documents that are to be returned to the lender. The attorney then mails by USPS or some other carrier (usually overnight), the lender’s documents to the lender and sends or takes the documents that must be recorded at the court house to the court house. When the attorney records the documents at the court house he then sets up a final title examination to verify that the title status has not changed since the preliminary title examination.

The attorney, once the documents have been returned to him from recording (usually by mail),

  1. makes copies of the recorded documents for his file,
  2. writes any required or desired lender’s or owner’s title insurance policies,
  3. transmits the lender’s documents and/or lender’s title insurance to the lender,
  4. transmits the buyer’s documents and/or owner’s title insurance policy to the buyer,
  5. forwards copies of any title insurance policies, along with the insurer’s fees, to the title insurer.

When the buyer’s documents are transmitted, the attorney should remind the buyer, again, in the document transmittal letter, to file for homestead exemption and to outline the process for so doing.

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Depending on the rules of the federal government, the State of Mississippi, and the lending institution involved, there may be other requirements to the ones shown above.

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