Common Closing Issues – Part III
In the final part of our series, we explore some of the remaining routine scenarios agents will face when closing real estate transactions.
In the first two editions of this series, we tackled several scenarios faced by agents during the real estate closing process. These issues run the gamut, illustrating how potential problems can arise even when the finish line for a transaction is in sight. In the final edition of this series, we will address the remaining issues that agents will likely deal with throughout their careers, including existing surveys, T-47 affidavits (in Texas) and lender-required conveyances.
Existing Surveys and T-47 Affidavits
During closings, agents may need to review an existing survey and determine if it is acceptable. In Texas, per paragraph 6.C of the TREC contract, the seller is required to provide both a survey and a fully executed T-47 affidavit, and if they fail to do so, the buyer can obtain a new survey at the seller’s expense. The T-47 affidavit must have all blanks filled in and be fully executed and notarized. If it is not filled in, it can cause problems. For example, what if the seller fills in the date with the purchase date and not the date of the survey? How would agents know that no changes were made before purchasing? A new survey may be required in this case.
Lender-Required Conveyances and Removal of a Spouse from a Contract
Sometimes lenders may require the removal of a spouse from a contract if they cannot qualify as a borrower. The spouse who agrees to this removal amendment must do so in writing. If the spouse does not join in the amendment, they may not realize their omission from the deed until later. It comes down to classification. “Non-purchasing” means they are not on the contract so they should not be on the deed. “Non-borrowing” implies they did not qualify on the note but should join in on the deed of trust to encumber both of their interests in the property.
During refinances, home equity and reverse mortgages, lenders may also require deeds moving between spouses. Customers need to know that this is not a title company requirement and they need to sign an acknowledgment. Instead, it is a lender requirement. If this difference is not discussed, it can cause issues, especially if it was a separate property and they end up getting divorced.
Closing the Gap
Lastly, agents need to address the “gap,” the difference between the date of title search (Issued Day on a Commitment) and the date records are certified as complete (Effective Date on a Commitment). A best practice is to request the title be “brought to date” when closing is scheduled and for the gap to be brought to 10 calendar days or less. After the initial commitment is issued, time passes and the gap between the Effective Date on a Commitment and the current date continues to grow.
When preparing new title work, the agent needs to review it and issue a new commitment with additional exceptions and requirements to both parties before closing. Agents should not hesitate to stop a closing if new matters come to light. Neither agents or underwriters should assume the risk for closing or insuring in the face of an unresolved issue.
After the transaction closes, the gap will continue to grow until the closing documents – including the deed for the owner’s policy and the deed of trust for the loan policy – are recorded, which ideally occurs the same day as funding. This is the gap insurers find most concerning. In a state like Texas, for instance, claims relating to documents recorded during this particular gap are covered by the title policies for which premiums were collected at closing.
At most, the recording should not take longer than 48 hours following funding, even if that means overnighting the documents to the recorder’s office. Agents should get confirmation on the recording of their documents and retain evidence.
As this blog series has shown, getting a transaction fully and successfully closed has become increasingly difficult. There is no shortage of complex issues. But by being meticulous and methodical in how they execute their responsibilities, agents can successfully rise to the challenge and ensure customer satisfaction.