Closings and Settlements
Important Information about Choosing an Independent Closing/Settlement Agent
We are Independent and ExperiencedThe closers employed at Passaic Valley Title are New Jersey Licensed Title Officers and among the most professional and experienced people in the industry. When purchasing real estate or refinancing a mortgage, you can rest assured that our staff will effectively coordinate the entire process.
Our independence means your interests are the only ones we consider.
Please read the information below to find out why the agent handling your Title or Settlement is of the utmost importance.
How Impartiality Benefits Your Closing/SettlementWhile Realtors are a big part of many real estate transactions and they often develop great relationships with their "home buyers" along the way, buyers should be cautious about offers of "one-stop shopping" for other services in connection with the purchase of their home. The main goal of a Realtor (and well it should be) is to sell you a home, get it to closing and collect their Commission. Mortgage Lenders participate in the process by lending you the money in the form of a mortgage. In addition to the interest to be paid on the mortgage loan they collect various fees, i.e. origination fees, points, escrows, etc. from the borrower at or prior to the closing of title.
That pretty much summed up the involvement of Realtors and Mortgage Lenders in the home-buying process, which by the way worked very smoothly for years. A Title Company's role is to search and determine ownership, disclose and satisfy any liens and encumbrances, all for the ultimate security and benefit of the buyer as well as insuring the Mortgagee's "first lien" priority.
Since the Great Depression it was widely held that the joining of these three separate interests together financially in a transaction could pose conflicts of interest and other problems. However, since the enactment of the "Gramm-Leach-Bliley Act" a/k/a the Financial Services Modernization Act of 1999, so-called "affiliated business arrangements" between many Realtors, Mortgage Lenders and Title Companies have arisen throughout the years. Their only purpose is to limit competition (from other small businesses) and steer more profit in one direction from each closing. Some may claim that "one-stop shopping" benefits the consumer …but think about it. Your goal as a home buyer should be to make the best possible investment you can. Let your Realtor get you the best deal on the purchase price, locate a Mortgage Lender with the best interest rate and most reasonable fees. Just as importantly, let an Independent Settlement Agent/Title Company conduct the Closing and insure your ownership (title) to the land.
Educating yourself prior to becoming a Home Buyer or Refinancing a Mortgage and then utilizing an Independent Title Agency/ Settlement Service like Passaic Valley Title can be of significant advantage and add to the security of your investment!
Highlights of the Closing/Settlement ProcessA Settlement Agent and Title Insurer must remain completely impartial throughout the entire settlement process (sometimes referred to as "escrow"). In addition to insuring the title (ownership of the land), the Settlement Agent must receive and disburse the required funds on behalf of all of the parties. The Settlement Agent must be licensed, properly qualified, vetted and approved in order to handle other people's money.
Typically, the Settlement Agent receives the deposit (earnest money) from the buyer and deposits it into escrow until the closing of title.* After all of the required searches are obtained and closing requirements are met, the Settlement Agent will contact the buyers, buyers attorney, mortgage lender, sellers and sellers attorney and logistically arrange for the closing or settlement.
There are often other scenarios where the Realtor holds a portion of the original deposit and/or the funds are deposited into the Seller's Attorney's "Trust Account".
As the date of closing approaches the following usually occurs: The Sellers or Sellers' Attorney will provide the proposed conveyance documents, i.e.: the Deed and Affidavit(s) for title company review. If acceptable, the Title Company (as Settlement Agent) will contact the mortgage lender and ask if the loan is now "clear to close". If the mortgage is clear to close the Settlement Agent will contact all parties and arrange for a mutual agreed upon date for the closing (or settlement).
At the request of the Settlement Agent, the mortgage lender will provide its final instructions and closing costs; i.e., the origination fee, appraisal, escrows, etc. The Settlement Agent will then complete and submit the HUD-1 Closing Statement (soon to be replaced by the "Mortgage Disclosure Form" *) for all of the parties to review and approve.
Learn More: Consumer Financial Protection Bureau
On the day of closing, the mortgage lender will provide the mortgage proceeds to the Settlement Agent's "Escrow Account" either by Wire Transfer or a Cashier's Check. These are considered "good funds" [as good as cash so that the disbursements can be made in good faith].
The Buyer often has to provide additional funds to cover closing costs and adjustments* which also must be in the form of "good funds" and deposited into the Settlement Agent's Escrow Account.
Adjustments are made at the closing for items, which may have been paid in advance (or not paid) by the Seller for real estate taxes, water/sewer fees and rents, etc.
Now the Attorney, the Buyer/Borrowers and Settlement Agent review and sign of all of the documents required by the Mortgage Lender, often referred to as the "Closing Package" or "Loan Documents". The most of important of which are the "Note", which is a Promise by the Borrower to pay back the money borrowed in accordance with the terms contained therein and the "Mortgage", which secures the lien against the property in favor of the Mortgage Lender. The Settlement Agent/Title Company then reviews the "Loan Documents" in order to determine that they have all been properly signed.
Usually, for the sake of expedience, the Seller and Seller's Attorney will arrive at the closing as the execution of the "Loan Documents" is being completed and deliver the original Deed, etc. to the Title Company on behalf of the Buyer. That Deed conveys "title" to the Buyer.
If all is satisfactory, the Settlement Agent will then disburse all of the funds to the appropriate parties. Examples of such disbursements would be current real estate taxes due and owing, paying off the balance of an existing mortgage (other liens, if any) and distributing the remaining proceeds to the Seller.
Congratulations, the Buyers have now completed the purchase of their home!
Immediately afterwards, the Settlement Agent/Title Company will send both the Deed and Mortgage to be recorded in the County Clerk/Register's Office. As important as it may seem to the Buyer to hold the original Deed "in hand" it is much more important to see to it that the Deed has been properly "recorded". An original Deed that has not been properly recorded affords no protection to you "title".
Once the Settlement Agent/Title Company sees to it that the documents have, in fact, been properly recorded and that any and all mortgages/liens are "satisfied" (removed from the record), the Policy of Title Insurance will be issued to the Buyer along with the original "recorded" Deed. Copies of both will also be provided to the Buyer's Attorney for his or her records.
Read More: Why Title Insurance?