Helping You Examine Real Estate Closings
When you attend a real estate closing, either as the buyer or seller, there is typically a large pile of documents that one or both sides to the transaction must sign. Every closing is different, but the documents for a Florida closing with lender financing typically include:
- Warranty Deed: This document transfers title from the seller to the buyer. It contains the legal description of the property being sold. The closing agent records the warranty deed in the public records of the county where the property is located to ensure accurate public notice of ownership.
- Mortgage: This instrument secures the money you borrow from the bank. If you fail to make your mortgage payments, the lender has the right to foreclose the mortgage and take the real property described in the mortgage as collateral for the loan.
- Promissory Note: This shows the terms and conditions of the money you borrow, including the loan amount, monthly payments, interest rate, late fees, address where payments are to be sent, and date of the last payment.
- Survey: This is a document prepared by a licensed surveyor showing the property’s legal description, the boundary lines of the property, permanent improvements such as a house, pool, shed, and driveway, building set-backs, and easements.
- Appraisal: The lender will require an independent determination of value from a licensed Florida real estate appraiser. Depending upon the type of property being purchased, the lender will only loan a percentage of the purchase price, typically seventy to eighty percent. The difference between the purchase price and the loan amount is the equity the buyer will be required to fund the purchase.
- Environmental Site Assessment: Depending on the type of property being purchased, a lender will require a determination as to the environmental condition of the real estate. For example, are there previous leaks from on-site fuel tanks or has off-site contamination impacted the property to be purchased? Clean up can be very expensive, and the lender wants to minimize the risk of these potential clean up costs. These reports can range from a review of the public records, to drilling soil borings and monitoring wells.
- Title Insurance Policy: This is an insurance policy written by a title insurance company insuring that the buyer receives valid and marketable title to the property, and that the bank has a first lien or mortgage. A title policy is a vital part of the closing transaction, as it protects the buyer and lender against potential title defects including prior forged deeds, incorrect prior legal descriptions, or mortgages which still are outstanding of record but were actually previously paid off.
- Closing Statement or HUD-1: This is a reconciliation of the respective closing costs, debits and credits owed or to both seller and buyer. Typical closing costs paid by seller include the real estate commission, documentary stamps on the warranty deed, the owner’s title insurance policy, and any outstanding mortgages. The buyer typically pays the costs charged by the lender and related mortgage expenses. Property taxes and rents from existing tenants, if any, are pro-rated depending at closing. The statement shows how much the seller nets from the sale price, and how much buyer needs to bring to closing.
Every closing has its unique issues and challenges. We urge you to consult a qualified real estate attorney to prepare and/or review the closing documents on your behalf. These are major financial investments. You need the best legal information to explain what you are buying and the terms of the loan. An attorney can help ensure your rights are protected now and in the future. Contact us online, or call 866-583-9129.