Have you ever wondered what happens during a real estate closing in Kentucky?
Fortunately, we have been able to interview Mr. Harry Borders of Borders and Borders Attorneys, and he has provided excellent answers for you, the real estate consumer. These questions and answers should help anyone who has a pending closing on a piece of residential property in Kentucky.
Borders and Borders Attorneys has been a staple of the local real estate community since the mid-1970s. Mr. Borders has been involved with the family business for 17 years, and works primarily in residential real estate. He has presided over literally thousands of closings and draws from a vast storehouse of knowledge and experience to help you understand how real estate closings work.
What is a closing?
A closing is most easily defined as a final compliance with the terms of the Sales and Purchase Agreement (S&P). During the closing, all of the required loan documents will be explained and signed, and the new title to the property will also be signed.
Is an attorney required to conduct a closing in Kentucky?
Attorneys are not required to conduct a closing in Kentucky. The requirements for the person administering the closing are they must be a notary, and they must not be a felon. The reason using an attorney is beneficial to you during closing is they are able to provide legal interpretations of the documents being signed, though technically they remain a neutral party in the transaction.
What are the general steps involved in a real estate closing?
After a Sales and Purchase Agreement has been accepted on a property, the lender will coordinate with the closing attorney to ensure all of the required documents are available at closing, and to help generate the closing settlement statement (HUD-1). The lender will notify all parties when the transaction is “clear to close” and all parties involved will attempt to coordinate a specific date and time to conduct the closing. This will be guided by the S&P Agreement. In addition, the closing attorney will need at least one day to draft all of the documents.
On the day of closing, all parties will meet at the agreed upon location and the buyers and sellers will sign all of the required documents. Typically, both parties are present at the closing table, but it is possible to conduct the closing separately. In addition, if one party to the contract is unable to be present due to logistical reasons, a power of attorney can be prepared to allow a designated person to sign the paperwork and complete the closing.
What happens if I want to read all of the closing documents?
You absolutely have the right to fully read and completely understand every document you sign during closing. Because there is a large amount of paperwork associated with a real estate transfer, it is best to let the closing attorney know in advance you intend to read every document, and they will provide you with the paperwork prior to the closing for you to study. Keep in mind that the closing attorney is obligated to explain to you every document that you will be signing.
Does the closing attorney need to know your marital status and how you wish to hold the title?
Definitely. How you choose to hold the title affects the specific wording in the title, and even more importantly, what happens to the property in the event one of the parties should pass away. It is also a good idea to consult with an estate planner to best determine how you should hold title.
What is a HUD-1 / Settlement Statement?
It is a document required by the Real Estate Settlement Procedures Act (RESPA) that clearly defines all charges and credits to the buyer and seller related to the real estate transfer. It also includes such expenses as taxes, commissions, fees, and any monies due to or from the buyer and seller. No money can change hands between the buyer and seller that is not included on the Settlement Statement. The HUD-1 is required by law to be provided to the buyer and seller 24 hours prior to closing.
What is a title examination and how is it conducted?
The title examination is required by the lender to ensure that there are no outstanding claims against the property that could affect ownership rights. It is usually conducted by an experience title examiner who follows general practices to verify no valid claims exist against the title. The title examination is used to generate a title commitment that the lender uses to insure their interests in the property through a Lender’s Title Insurance policy. If there are any problems with the title, they will need to be resolved prior to closing per the S&P Agreement.
What is you opinion regarding Owner’s Title Insurance?
Simple, if you cannot afford Owner’s Title Insurance, you cannot afford the home. It is usually a very minimal expense, and provides a critical protection to you, the buyer, in the event a claim arises against the property. The Lender’s Title Policy will not cover you!
You will have the option to purchase an Owner’s Title Insurance policy at the original price offered at closing for up to 30 days after closing, but I suggest making the commitment at the closing table so you do not forget.
What documents must a buyer and seller ensure they bring to closing?
To verify their identity, buyers and sellers must bring a government-issued photo ID, whether it is a driver’s license, passport, military ID, etc. If a power of attorney (POA) is going to be used, the original document must be present at closing. In addition, the closing attorney will most likely want to review the POA prior to closing if they did not draft the document to ensure it a valid POA.
Any money that needs to be brought to closing must come in the form of a certified check. Each attorney will have a different policy regarding acceptable funds, so be sure to call ahead to get this information. You can use the HUD-1 statement to find out the correct amount of the check.
What happens to all of the paperwork after everyone leaves the closing table?
Once all of the documents are signed, everyone will receive copies of the documents they signed, and anything else required by law. The attorney will scan a copy of the documents for their records and forward the originals to the lender. All monies taken in by the attorney will be distributed to the appropriate parties, and the attorney will ensure all the necessary paperwork is recorded at the county clerk’s office.
The buyers should expect to receive the newly recorded title in the mail in a few weeks (and should store it in a very secure location), and will receive a copy of the Owner’s Title Insurance policy. The sellers should be on the lookout for any tax bills that might arrive in the mail. While all tax prorations are taken care of at the closing table, it is possible that the seller’s lender could double pay the taxes. The seller should be expecting a refund from their escrow account and ensure they receive all of their money back.
What is one good piece of advice you would give to anyone contemplating buying or selling a home?
Use a Realtor to help you with the transaction. Realtors act as your quarterback in the transaction and there is always a noticeable difference in organization, detail, and completeness between closings that involve a Realtor and ones that do not.
Mr. Harry Borders is a practicing real estate attorney with Borders and Borders Attorneys in Louisville, KY. You can contact him by calling (502) 894-9200.