Residential & Commercial Real Estate Closings
What’s Title Insurance and What Are Its Benefits?
Title Insurance is unlike other insurance. It is risk elimination insurance. Title Insurance is designed to protect against any unforeseen “surprises” and is the only insurance issued against occurrences that have already taken place. The premium is paid one time only.
Title Insurance Guarantees Protection
The first step in guaranteeing your protection is a title search. By investigating all records on the subject property, a title search can verify the sellers’ right to transfer ownership, locate possible claims against the subject property, delinquent assessments, errors or miscellaneous defects in the title to the property and virtually eliminate the risk factor for the buyer.
The following are a few examples of defects we look for and cure prior to closing:
- Incorrect legal descriptions
- Inconsistencies in document dates and notary acknowledgements
- Correct names
- No gaps in the chain of title
- Existence of unsatisfied liens, judgements, assessments
- Invalid transfers
Title Insurance is a safeguard for you. It can save you trouble, time, money and most importantly, your home. It acts as a shield against any claim brought against your property.
Just What Am I Signing, Anyway?
Closing Statement, Warranty Deed, Owner’s Affidavit, etc…
In any title closing, you will be signing documents. Unless you have had at least one prior closing, these documents will likely be unfamiliar to you. The following information is designed to explain the highlights of the most common documents and to summarize for you the other types of documents you may be asked to sign.
HUD Closing Settlement Statement
One of the most important documents at your closing, and probably one of the first you will encounter, will be your settlement sheet or closing statement. The official name of this form is the HUD-I Settlement Statement. This form itemizes your closing figure, including all of the amounts you are being charged. The form also shows the total amount owed to close (for the buyer) and the total proceeds of the sale (for the seller). This form will be covered thoroughly during the closing, and you will have the opportunity to ask questions you may have concerning any of the figures.
Another important document at your closing is the Warranty Deed. This will be signed by the sellers, and is the document representing the transfer of ownership rights from the sellers to the buyers. This document contains the full names of all parties, the “legal” description of the property, a list of the restrictions and easements affecting the use of the property, and two important warranties: the warranty of good title and the right to quiet possession. These two represent the guarantee by the sellers that they are entitled to transfer a complete interest in their property.
Promissory Note and Deed of Trust
If financing is being obtained on the property in conjunction with the closing, the buyers will be asked to sign a Promissory Note and Deed of Trust.
The Promissory Note is the document in which loan finds are extended to the buyers in exchange for a promise from them to pay the money back the the lender over a set period of time. The note will contain many of the terms of the loan, including the loan amount, the monthly principal and interest amount, the loan term, and the first and last payment dates.
To enforce the repayment of the loan according to the agreed upon terms, the buyers will also sign a Deed of Trust. This multi-page document puts the real estate up as collateral for the new loan. It restates certain of the loan terms including the loan amount and final payment due date. Further, it reminds the buyers to keep the property in good repair, to include escrow deposits along with their monthly payments of principal and interest, and sets out acceptable procedures for enforcing the terms of the trust created by the deed in the event that the buyers fail to pay as promised.
The sellers will usually be asked to sign an Owner’s Affidavit following their execution of the Warranty Deed. In this affidavit, the sellers will be asked to make certain statements regarding their property and their status, I.e. that there are no outstanding loans or other liens affecting the property, that there are no pending judgements or bankruptcies against the sellers or the property, and that they are legal age and are competent to contract.
Additional Closing Documents
In addition to the documents discussed above, each loan type has documents unique to that particular loan program which must be signed at closing. Both FHA and VA loans have specific forms which must be submitted to the FHA and VA in order to be able to obtain the loan funds guaranty. Conventional loans have standard guidelines.
Lenders often have in-house loan documents which must be executed before the loan closing is completed. These forms address a variety of lenders’ needs. Among the most common are forms which show a breakdown of the monthly payment; state that all parties agree to complete any documents or make necessary corrections to existing ones; inform the lender that the buyers intend to use the house as their principal residence; verify that buyers’ credit and employment have not changed materially since the time of loan application; reflect insurance coverage information for the lender’s records; and provide the lender with the buyers’ accurate mailing address in the event that it is different from the address of the property.
We hope this information will be of use to you. If you have questions or need further information please feel free to call or email your concerns.
What Should I Expect At My Closing?
- Closings typically take about half an hour.
- All parties should bring (2) valid forms of government issued ID.
- Advise your closing attorney if you want your funds wired or a check at the end.
- Closing typically takes about an hour.
- All parties should bring (2) valid forms of government issued ID.
- Down payment must be in the form of certified funds, per the Tennessee Good Funds Law. Acceptable forms of certified funds include cashier’s checks, bank-issued official check, or a wire transfer. Contact us directly to discuss wiring options before the closing.
Contracts and Deeds
What is a Contract for Deed?
A contract for the purchase of real property (real estate) in which the seller retains the deed (title) to the property until the buyer makes payments in installments equal to the agreed upon purchase price. The purchaser has an immediate right to possession of the property, but the vendor defers delivery of the deed (transfer of title) until they have secured all or part of the purchase price.
A Contract for Deed is useful when a buyer is unable to obtain financing other than seller financing.
What does the term “Deed” mean?
The term “Deed” refers to a legal document that transfers title of real property (land and buildings or easements) from one individual to another.
What does the term “real property” mean?
The term “real property” refers to land and things attached to land, such as buildings, fences and trees.
What are additional clauses?
While the Contract for Deed we provide is very comprehensive and provides sound protection, this option is available to allow you to tailor the contract to your specific circumstances.
How do I write the additional clauses?
Please see “Drafting Tips” under the Help menu. If you are still unsure of how to properly word any of your additional clauses, it is recommended that you consult us for assistance in writing your additional clauses.
What is the difference between a living will and a last will?
The basic difference is that a last will is used to dispose of assets after death. A living will can be used to provide health care instructions in advance, such as whether or not life support is desired.
What happens after someone who has a last will passes away?
The probate court disposes of the assets in accordance with the last will and the law.
What are the main benefits of a living trust vs a last will?
A last will’s main benefit is its simplicity. Anyone can write a last will. The drawback is that your family members may have to wait months or even years until your property goes through the courts and is distributed.
A living trust, on the other hand, can be used to transfer property and assets to beneficiaries without going through the probate process. This can save years of time and thousands in fees. Also, it keeps your estate private, whereas a last will, once probated, will become public record.
People often use a last will and a living trust together. A last will can be used in conjunction with a living trust to name guardians for minors and express final wishes not otherwise captured in a living trust.
Small Business Formation
Do I need a business lawyer/attorney?
There are legal things you can do yourself when you own your own business, but handling your own legal matters involves a significant investment in time and need to be handled in compliance with State law. We believe it is a good idea to employ the guidance of an attorney to help you navigate the many laws of owning a business.
When do I need contracts written or reviewed by a legal professional?
It is highly recommended that contracts be drafted and/or reviewed, at a minimum, by your attorney to guarantee that your intentions are clearly written in legal language and that you and your business have the right protections.
How can I protect my personal and business assets?
Being properly insured is one way to protect yourself and your employees from liability, but you should also consider forming an LLC, or Limited Liability Company. Contracts, employee handbooks, and confidentiality (non-disclosure agreements) can also assist.
What is a limited liability company (LLC)?
A LLC legally and clearly defines the difference between your business and your personal assets. So long as you follow corporate formalities, your personal assets, as a general rule, should be safe. From a non-technical standpoint, LLC’s also tend to make a business look more “serious,” taking it from a hobby or side-business to a legitimate looking company.
Why should I hire a lawyer to help me trademark or copyright something?
As the laws that govern intellectual property are highly specialized, it is a good idea to talk to an attorney who specializes in this area of law.
What are factors to consider when buying or selling a business?
- Value of the business – What am I buying and what is it worth?
- Assess the condition and title of the business assets.
- Review ownership and corporate books.
- Review financials and tax returns, bank statements, balance sheets, profit and loss, etc.
- Talk to an Accountant to make sure you can structure the deal with little to no negative tax ramifications.
- Review Company’s Contracts with employees and/or Independent Contractors. Make sure contracts can transfer, especially if restrictive covenants are included.
- Assess competition – locations and market share.