Our attorneys have conducted hundreds of real estate settlements and know this area of the law inside out! The term ‘Settlement”, in the context of a business or real estate transaction refers to the ritual of full execution of the contract under which parties have bound themselves. It is the time when all documents are executed and all funds are received and distributed by a third-party to such transaction, usually a title or settlement company. This can be any transaction involving more than one party, such as the purchase and sale of a business, real property, intellectual property or any asset of value.
Real Property Settlements.
In the management of the settlement, or ‘closing’, an independent third party, such as a title company, will orchestrate the execution of the documents, disbursements of funds, and handle the recording of the deeds and mortgages.
Title or settlement companies that handle a settlement perform several tasks. For the seller’s side of the transaction, they gather information about the history of ownership for the property, called a title abstract (“Abstract”). The Abstract will contain all of the county tax information, status of the tax payments, copies of all the outstanding mortgages, copies of the deeds of all former owners, going back sixty years, liens on the property, judgments against the current or former owners and a summary of the information as well. If title is clear, meaning there are no associated lawsuits, outstanding mortgages and no tax liens, the Title company will be able to issue title policies to the owner and the owner’s lender.
Clear Title and Due Diligence.
The title abstract analysis is crucial to a settlement, as without determining that the title is clear, a title policy will not be issued to the purchaser. If there is purchaser is taking a loan “purchase money mortgage” to buy the property, a title insurance policy will be required of the lender. Consequently, without a title policy there is no loan and most likely no purchaser. If the seller has outstanding mortgages, the Title Company contacts them directly and obtains payoff amounts that will be paid from the proceeds of the sale. If there are outstanding unreleased mortgages from prior purchasers, a title company must locate the entity that holds the note and find out why the mortgage is not released (this can be time consuming and very expensive) If the seller purchased title insurance when the property was bought, then that seller’s title insurer can issue a letter of indemnity for the buyer which allows the Title Company to issue an owners and lenders title policy so that the deal may go through. The Title Company also works with the buyer’s lenders to create the documents required for closing, including the mortgage that will be executed, the financial summaries of the transaction showing all costs being paid by both the buyer and seller called the closing disclosures as required by federal law.
A deed will also be prepared by the Title Company’s attorney for the seller to execute. Tax documents for reporting the sale are prepared for the seller and will also do a ‘bankruptcy” search to make sure that the seller is not currently in bankruptcy (in which case the Bankruptcy Court would be required to approve of the sale).
Contact our office today at 703-652-5506 to discuss your settlement requirements.