Buying And Selling a House: The Closing
September 15, 2015
Closing is the time when title to the real estate changes. Seller is no longer owner of the property, and buyer becomes the owner. A deed is signed by seller transferring title to buyer, and upon recording in the Office of the Recorder of Deeds, that new deed is considered evidence to the world of the change in title to that property. It is very important, therefore, that the deed is correct and accomplishes what you want.
The deed should properly identify the property, with a legal description. This may be a “metes and bounds” description (e.g., N 23° 14′ 16″, a distance of 250 feet) or the description may reference a filed public document (e.g., Lot No. 3 in the Smith Plan of Lots Phase II as recorded in the Office of the Recorder of Deeds of Allegheny County in Plan Book 123, Page 23). If the description is wrong, the seller may continue to own his or her property, and the buyer may own nothing, since the property described in the deed did not belong to the seller, thus the seller could not sell it.
The typical way of assuring that the buyer is obtaining title to the property he or she wants to own and has agreed to buy is for the buyer to purchase title insurance. If you are borrowing money to purchase the property, the lender will likely insist that title insurance is purchased – for the benefit of the lender. The lender typically wants to have a mortgage on the property it is financing, and wants to be sure that, if the buyer fails to make the payments required, that it can sell the property and recover its money. The bank, therefore, wants to make sure the deed accurately described the property being purchased, and that same description will be included in the mortgage the buyer gives to the lender.
The title company will also do a search to be sure that title to the property being sold is clear (legally stated as “free and clear of all liens and encumbrances”). The title company wants to be sure that if the seller still has a mortgage on the property, that that mortgage gets paid off at the closing. The title company also wants to be sure that all taxes on the property and all water and tax bills for service to the property have been paid. It wants to be sure that the seller does not have any judgments against him or her that could be a lien against the property. The title company wants to be sure that if any work has been done on the property, full payment has been made for that work and all supplies used in the work, so that no mechanics lien is filed against the property. If the property is sold with a prior mortgage still unreleased, or with taxes or water or sewer bills unpaid, or with a judgment for money damages entered against the seller not satisfied, or with the potential that a mechanics lien could be filed, then the property will not have been sold free and clear of liens and encumbrances, and the priority of the bank’s mortgage will be at risk.
As noted above, the title company is typically engaged by the lender and provides the insurance to the lender. You, as the buyer, may want to consider buying an owner’s policy, either because no lender is involved, or because, once the mortgage to the bank has been paid off, title problems could still surface. The title search will look not only to liens and encumbrances, but will also search the title to the property to be sure that the seller is the true owner of the property, and that there are no easements or other problems with the property that could interfere with your use of it. For example, a title search should identify a gas line easement across your property that could interfere with your ability to add to your home, or move the detached garage or add new landscaping. In one case I handled the title company paid for plumbing repairs when, years after the mortgage had been paid off, the new owner had sewer problems, and discovered its sewers were not tapped into the community sewer line. Without an owner’s policy, the owner would have had to pay for those repairs himself.
Author: Bernadette L. Puzzuole
Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm’s attorneys.
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