After months in the making, I am very pleased to announce the roll-out of TitleHub Closing Services, LLC, a cutting-edge closing settlement service that uniquely provides a full platform of legal and technology-based services. TitleHub’s mission is to transform the convoluted real estate closing process into an easy, customer-focused and technologically enhanced experience. In collaboration with my colleague Marc Canner, Esq., we have created a company that we believe will serve as the model for the next generation of residential real estate title and closing services.
Buyers, sellers, realtor and lenders will “stay informed” and “stay connected” to their transactions through:
Our innovative, content-packed website (www.titlehub.com) which serves as a great informational resource.
Our “E-Closings” system. This is a secure on-line document management system that allows borrowers and real estate professionals unlimited real-time access to obtain status updates of their deals and the ability to upload and download key transactional documents (recorded condominium documents, executed Purchase and Sale Agreement, Good Faith Estimate, HUD-1 Settlement Statement, etc). Click here for more information.
Seminar Series; We offer topical seminars to realtors and lenders to help them stay current with the complicated real estate legal landscape as well as seminars to learn new marketing, blogging, and social media techniques.
Paperless Solutions. We do have the ability to electronically record deeds and mortgages at registry of deeds which offer the service. In the future, we hope to be at the forefront of true e-closing paperless transactions, once there is broader lender and regulatory acceptance.
If you are a realtor or mortgage professional interested in TitleHub’s platform, please contact us at [email protected], and we’ll give you a demonstration.
Many buyers and sellers often wonder what a real estate closing attorney does other than conduct the closing. Well, quite a bit of work actually.
The closing attorney acts as the “quarterback” of the closing process, performing many time consuming tasks preparing a transaction from intake to closing. Important note: many borrowers don’t realize that they may request to select their own closing attorney instead of the bank attorney. The new RESPA rules which went into effect on January 1 encourage lenders to allow borrowers to select from a list of attorneys or their own personal attorney. This will most often save you several hundred dollars because you won’t have to hire a separate attorney to review/negotiate the purchase and sale agreement.
Intake/Title Examination
When the title order arrives from the lender, the closing attorney first orders a municipal lien certificate, which verifies the real estate taxes and other municipal charges on the property. Insurance binders and payoffs of mortgages are also ordered.
The closing attorney is responsible for examining the title to the property. For purchases, the title is researched going back 50 years. The closing attorney carefully reviews the title examination to ensure there are no title defects; if there are any issues, the attorney will work with all parties to resolve them. Some title defects are extremely difficult to resolve. (By law, the closing attorney must provide new home buyers with a certification of title).
Title Insurance
The closing attorney also coordinates the issuance of title insurance to the lender and the new home buyer. I always recommend that buyers obtain their own title insurance policies because even with the most accurate title examination, there can be hidden title defects that could derail a later sale or refinance. Look no further than the Land Court Ibanez foreclosure mess for what can happen when you don’t get an owner’s title policy.
The Closing
As the closing day approaches, the closing attorney will coordinate with the lender for the preparation and delivery of numerous documents to be signed at closing, including the mortgage, promissory note, truth in lender disclosures, and most importantly, the HUD-1 Settlement Statement. The closing attorney will also coordinate with the seller to receive the deed to the property, final utility bills, smoke detector/CO2 certificates and condominium 6(d) certificates. As outlined in the Settlement Statement, the closing attorney is responsible for handling a number of issues at closing:
Payoff and discharge of mortgages
Payment and allocation of real estate taxes and utilities (water, oil, etc.)
Payment of realtor commissions
Disclosure and payment of lender fees and closing costs
Funding of mortgage escrow account
Payment of transfer taxes and recording fees
Payment of pre-paid interest
Distribution of sale proceeds
Title V septic certification and condominium 6(d) certification
The closing attorney then conducts the closing. He will explain the numerous loan and closing documents signed by buyer and seller, collect and distribute all funds, and otherwise ensure that the closing is properly conducted.
Post Closing
After the closing, the attorney processes the loan funding, performs a title rundown to ensure there are no changes in the title, then records the deed, mortgage and other recordable instruments. The attorney will also ensure that all paid off mortgages and liens are discharged. Title insurance policies are issues several weeks after the closing.
Seller Attorney Responsibilities
Customarily, a seller’s attorney in Massachusetts has the following responsibilities:
Generate the first draft of the purchase and sale agreement
Order mortgage payoff statements
Assistance with any title clearing efforts such as obtaining old mortgage discharges, death certificates
Draft the quitclaim deed and power of attorney
Prepare trustee’s certificate
Obtain condominium 6d certificate, smoke detector certification, final water/sewer readings (Realtor typically will obtain these as well)
Representation of seller at closing
We are experienced Massachusetts real estate closing attorneys. Please contact us if you need legal assistance with your purchase, sale or refinance transaction.
The first step in purchasing or selling Massachusetts residential real estate is the presentation and acceptance of an Offer To Purchase. Most often, the buyers’ real estate broker prepares the offer to purchase on a pre-printed Greater Boston Real Estate Board standard form and presents it to the seller for review, modification, and acceptance. Attorneys are often not involved in the offer stage. However, in light of the legal significance of a signed offer and recent litigation over offers, buyers (and their brokers) and sellers may be wise to consult an attorney to review the offer.
An Accepted & Signed Offer Is A Binding Contract
Many sellers (and their brokers) are under the misconception that the offer to purchase is merely a formality, and that a binding contract is formed only when the parties sign the more extensive purchase and sale agreement. This is not true. Under established Massachusetts case law, a signed standard form offer to purchase is a binding and enforceable contract to sell real estate even if the offer is subject to the signing of a more comprehensive purchase and sale agreement. So if a seller signs and accepts an offer and later gets a better deal, I wouldn’t advise the seller to attempt to walk away from the original deal. Armed with a signed offer, buyers can sue for specific performance, and record a “lis pendens,” or notice of claim, in the registry of deeds against the property which will effectively prevent its sale until the litigation is resolved. I’ve handled many of these types of cases, and buyers definitely have the upper hand given the current state of the law.
There have also been recent court rulings holding that both email and text may constitute an enforceable contract even where no formal offer has been signed by both parties.
In some cases, the seller may not desire to be contractually bound by the acceptance of an offer to purchase while their property is taken off the market. In that case, safe harbor language can be drafted to specify the limited nature of the obligations created by the accepted offer. This is rather unusual, however, in residential transactions.
Home Inspection & Mortgage Contingencies
With the offer to purchase, I always advise buyers and their brokers to use a standard form addendum to address such contingencies as mortgage financing, home inspection, radon, lead paint, and pests. The home inspection and related tests are typically completed before the purchase and sale agreement is signed and any inspection issues are dealt with in the purchase and sale agreement. If they are not, there is an inspection contingency added to the P&S. See my post on purchase and sales agreements for that discussion.
The mortgage contingency is likewise critical. With mortgage loans harder to underwrite and approve, we are seeing loan commitment deadlines extended out for at least 30-45 days from the signing of the purchase and sale agreement. Always consult your mortgage lender before making an offer to see how much time they will need to process and approval your loan. The loan commitment deadline is one, if not the most, important deadlines in the contract documents.
In order to help finance the acquisition of said premises, the BUYER shall apply for a conventional bank or other institutional mortgage loan of $[proposed loan amount] at prevailing rates, terms and conditions. If despite the BUYER’S diligent efforts, a commitment for such a loan cannot be obtained on or before [30-45 days from signing of purchase-sale agreement], the BUYER may terminate this agreement by written notice to the SELLER in accordance with the term of the rider, prior to the expiration of such time, whereupon any payments made under this agreement shall be forthwith refunded and all other obligations of the parties hereto shall cease and this agreements shall be void without recourse to the parties hereto. In no event will the BUYER be deemed to have used diligent efforts to obtain such commitment unless the BUYER submits a complete mortgage loan application conforming to the foregoing provisions on or before [2-5 business days from signing of purchase and sale agreement].
Any time the parties agree to an extension of any deadline in the offer (and the purchase and sale agreement for that matter) make sure it’s in writing.
In my opinion, title insurance is an absolute necessity in every real estate conveyance transaction. Even though I’m an experienced real estate attorney, when I purchased my own house, I obtained owner’s title insurance. With the instances of title and bank paperwork problems on the rise, I prefer not having to worry about hidden title defects which could affect my ability to refinance and sell my house down the road.
The problem is that most home buyers don’t know what title insurance is or what it covers, and only see it for the first time on the closing settlement statement. Closing attorneys and title insurance companies need to do a better job explaining the excellent benefits and value of title insurance, so consumers don’t have the perception that it is just another junk fee.
What Is Title Insurance?
Title insurance is policy of insurance (technically an indemnification policy) protecting homeowners and lenders from actual financial loss in the event that certain covered problems develop regarding the rights to ownership of property. While Massachusetts closing attorneys search and certify each title to real estate before a closing, there are often hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.
There are two types of title insurance, lender’s and owner’s policies. Lender’s policies are required by most every public mortgage lender in the U.S., and are typically paid as part of closing costs. Owner’s policies are optional and paid for by home buyers. I will discuss owner’s policies in this post.
Title Defects: What Does An Owner’s Policy Of Title Insurance Cover?
The recent foreclosure paperwork mess and the Massachusetts high court ruling in U.S. Bank v. Ibanez are perfect examples of the importance of title insurance. Thousands titles in Massachusetts coming out of faulty foreclosures were rendered defective because of the Ibanez ruling. Those without owner’s title insurance were left to fix the title problems on their own at great expense. Those with title insurance, by contrast, were able to sell their property with the title insurer issuing “clean” policies over the defects.
Here are some other real world examples of how title insurance protects you. I recently represented a condominium seller who was shocked to learn a day before the closing that there were several un-discharged mortgages and liens on her unit left over from the original developer. Fortunately, she had an owner’s title insurance policy which allowed her closing to go forward as scheduled. I represented a young family who was dismayed to learn that the property they were about to buy was subject to the claim of a long-lost heir of a prior owner. The title insurance company agreed to file litigation against the “missing” heir, and clear the title. If title insurance was not available in these transactions, the deals would have been canceled altogether, or the closings would have been delayed by months if not years until the issues were resolved, if at all.
In addition to undischarged mortgages and the sudden appearance of unknown or missing heirs claiming an interest in the property, an owner’s policy of title insurance also covers a myriad of other types of title defects, including:
Faulty foreclosures
Forged deeds or impersonations
Incorrect legal or boundary descriptions
Recording errors
There is also a new extended or enhanced coverage policy available from all major title insurance companies which covers:
Building permit violations
Adverse possession or prescriptive easements
Building encroachments
Incorrect surveys
Pre-existing violations of subdivision, zoning laws, restrictive covenants.
For a full list of just about every conceivable situation covered by title insurance, please read my article: 50 Ways To Lose Your Home.
How Much Does Title Insurance Cost?
Title insurance is a one-time premium paid at closing and is calculated based on the purchase price of your home. The cost is for standard coverage is $3.65 per $1,000 in home value. Enhanced coverage policies run $4.00/thousand, and provide better coverages (i.e., for boundary disputes) and inflationary protection. These days, we are always recommending enhanced coverage as it’s a better value. When you purchase both lender’s coverage (always required by mortgage lenders) and owner’s coverage at the same time, there is a substantial discount.
Title insurance is a good deal because you pay once and it continues to provide complete coverage for as long as you or your heirs own the property. Those who decline title insurance rationalize that the risk of a title defect is minimal and not worth the premium. That is false. As a former claims counsel for a national title company, I could write a treatise on the different types of title problems I have seen derail closings and drag on for years.
The Role Of The Closing Attorney
The closing attorney ensures that the title examination is done on the property, certifies that the title is “marketable,” and issues the title insurance policy. While all U.S. public lenders require lender’s policies of title insurance, closings attorneys should always recommend owner’s policies for buyers. Attorneys do share in the title premiums generated. However, as I said before, even the most careful title search cannot reveal a hidden title defect that can wreck havoc on any subsequent sale or refinancing of the property.
To borrow from Nike’s old slogan, Title Insurance: Just Get It.
Please contact me at [email protected] if you have any further questions about title insurance.
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With over 25 years in practice, he is a four time winner of the "Top Lawyer" award by Boston Magazine, a "Super Lawyer" designation from Thompson/West, and "Best of Metrowest." For Rich's professional biography, click here. If you are interested in hiring Rich or have a legal question, email or call him at [email protected] or 508-620-5352.
