To: Prospective purchasers of real estate and those refinancing loans
From: Robert K. Serra, Attorney
RE: Real Estate Closings
My firm is pleased to provide you with the following information concerning your prospective real estate purchase or loan refinance. All title searches and closings are conducted by the attorney. To give you a greater understanding of what the attorney does, please read the following frequently asked questions and answers.
Q03: What is a closing?
We look forward to working with you. Please call with any additional questions.
A01: The buyer/borrower’s attorney in North Carolina typically (1) conducts a title search (full or limited) of the property which is summarized in a written title opinion letter, and (2) conducts the real estate closing. Many attorneys delegate the public record search to a paralegal or independent (non employee) paralegal, however, the attorney is required to closely supervise that work. Only a licensed attorney may sign a title opinion letter in North Carolina because it is considered the practice of law. In the title opinion letter, the attorney is giving you a full report on the status of the owner’s title and concluding that title is “marketable”, meaning free from reasonable doubt and will not expose you to litigation. Non-attorneys may conduct real estate closings, however, they are not allowed to give you any legal advice or explain legal documents during the closing process.
A02: A full title search includes a diligent search of the county’s records located in the offices of the Clerk of Court, Register of Deeds, and Tax Office, relative to the chain of title to the property for a minimum period of thirty (30) years. A title searcher takes the title back thirty (30) years, examining the documents linking one owner with the prior owner, and then comes forward through the thirty (30) years to determine if the current seller has marketable title to the property, and what encumbrances, liens, mortgages, judgments or taxes have attached to the property. Any title defects need to be corrected before closing and liens, etc. are satisfied at closing by the payment of funds from the owner’s proceeds.
A limited title search is a much shorter search period back to the date of a previously issued title insurance policy. A limited title search usually costs you less money than a full search because the attorney is doing less work and has less liability risk. An attorney is only liable for failing to find matters of public record within the period of time searched. No matter what period of time an attorney searches, the attorney should disclose to you in writing the duration of the search and all matters found during that period relevant to the title. After closing, the attorney updates the title opinion through the date your deed or deed of trust is recorded, documenting your ownership interest and deleting those defects that were satisfied during the closing process. Therefore, you have the attorney’s written opinion through the date of recording that you own the property and those matters of record that affect your title. If you are refinancing a loan and you previously obtained an owners title insurance policy, you only need a limited title search if a new lender policy is being obtained.
A03: Closing is the process of completing the real estate transaction. In advance of closing, the attorney reviews the contract and the documents in the chain of title, prepares the preliminary title opinion and reviews the lender’s instructions. Also, the attorney reviews the insurance binders, plat, survey (if one is obtained), loan documents, and prepares a settlement statement. The closing usually takes place at the attorneys office where the title opinion is reviewed with you, the loan documents are explained and signed, and the settlement statement is executed. The settlement statement is an accounting statement showing all debits, credits, deposits and disbursements of all funds brought to the closing. You and your lender will bring “collected” funds to closing in the form of a bank wire which is deposited in the attorney’s trust account and disbursed immediately after your deed or deed of trust is recorded in the Register of Deeds office. We strongly discourage the use of personal, cashier’s and official bank checks because of the possibility of fraud.
Closing should have no surprises and be a pleasant experience. After closing, you receive a copy of the documents you signed and the preliminary title opinion letter. Approximately two (2) weeks later, you receive the final title opinion, title insurance policy, and your recorded deed (if a purchase). Closing sometimes is done by mail, however, it is preferable to appear in person and physically inspect the property before closing. After closing, the attorney also obtains any necessary cancellations of record for seller’s deeds of trust, judgments, taxes or other encumbrances that were paid to clear the seller’s title. Frankly, many closing agents and attorneys do not follow up with these post closing matters as well as they should. Often times the buyer does not learn that these loose ends were not resolved until the next time the title is searched.
A04: Title insurance is a form of insurance that insures you against claims which occur in the future but arise from some event before you took title to the property. Claims include matters of public record (such as un-cancelled deeds of trust or delinquent taxes) that the attorney should find, and matters not of record (such as forgery or missing heirs) that no attorney would find during a diligent title search.
Title insurance is optional if you are paying cash, but is usually required if you are borrowing money from a lender. An attorney in North Carolina is not permitted to be an agent or an employee of a title insurance company and receives no compensation whatsoever from the title insurance premium you pay. The attorney submits the title opinion to the title insurance company which issues owner and lender policies with certain exceptions to coverage as noted on Schedule B of the policy. The title company may “insure over” a listed title defect or simply not show the matter as an exception to coverage. The company is required to defend you in legal actions based on alleged title defects or other insured matters but can clear the title by other means. If the defect cannot be corrected, your damage recovery is usually limited to the difference in the fair market value of the property with and without the title defect, but the amount will not exceed the amount of insurance you purchased. Title insurance does not cover you for loss of use.
A05: A title insurance company that previously issued a title insurance policy for a property will, upon request, issue new policies for a new owner or lender if the attorney updates the title search from the date the previous policy was issued to the present date. The new policies cover matters prior to the search period, however, your attorney is not responsible for matters arising outside the period of time he or she searched. Title companies allow this because they continue to have recourse against the attorney who signed the earlier title opinion for matters relevant to that search period. You, as a buyer, however, have no recourse against the other attorney. You are relying on your title insurance policy to resolve problems that may arise in the future which you and your attorney had no knowledge of when you purchased the property.
A06: I am a licensed attorney in the State of North Carolina since 1984. I have practiced my entire career in Brunswick County and have personally conducted more than 7,000 title searches and closings. I enjoy real estate law and explaining documents to buyers, especially first time buyers. I could not have accomplished this without the support of an excellent staff. Cathy Skipper and Brenda Caudill have been with me for many years. They do the office work before and after the closing to insure that things go smoothly. Many people have told us they have never been to a more efficient and informative closing than the one they attend in our office. I believe this is because we take great care to get the job done right and to take the time to explain things to you. You leave our office feeling confident and with more real estate knowledge than when you arrived.
We look forward to working with you. Please call with any additional questions.