Nearly every first time land buyer and/or seller asks us about the closing process. What does it entail…what is the timeline, what are the associated costs? And I do a pretty good job of working my way through the process, but I will be the first to admit that I am not an expert at the closing process. Why not? Simple. We have professionals that do that stuff for us…and our team is so good that we rarely hear from them until its time to close. So I thought this would be a perfect opportunity for a guest blog! Lori Fraboni is a closing agent at Hometown Title…we lean on them for around 75% of our business. They do great work, charge fair price, and most importantly for us…they do what they say, work quickly, and communicate incredibly. If an issue comes up at 3:30 on Thursday, we get an email or a call at 3:31.
So let me set the scene a little bit before I turn it over to her. The objective of this article is to fully explain the closing process of an average land transaction. It is the process from turning over possession of a property from one individual to another. It does not address the buyer obtaining financing. We will address land financing in a future post, but for the purposes of closing on a property, the method in which a buyer secures financing is not really of concern. When people refer to a closing, or a closing agent, they are referring to a Title Company…not a lawyer. That is one misconception. Often times they are under the same roof (Hometown Title for example is owned by Benckendorf and Benckendorf Law firm…who is also great), but they are separate entities. Lawyers review contracts, title work, etc… They protect an individual party. The closing process is handled by a title company…whose only objective is to transfer a clear title of the property from one party to another. Simple as that. So here is the process as explained by Lori! When I think I notes need to be added, I will add them in italics.
Written by Lori Farboni…
The object for a title insurance company is to issue a clear title policy for a buyer and or lender. A one-time premium is usually paid by the Seller for the Buyer, and the policy is in full force as long as the buyer owns the land.
Ok, second sentence in and I cant help but insert my thoughts. I think that means I’m either really thorough or I am a narcissist. Lets go with thorough. Fancy terms…premium and policy. Essentially what her last sentence means is that the buyer pays the title company a fee in exchange for them providing a document saying that the seller is buying exactly what the buyer promised. Sorry Lori!
What follows is actually a simplified sequence of events from title order through closing. Every title file is different, but this is a general guideline of what happens from beginning to end.
Me again! Most sellers and buyers are represented by an attorney. What typically happens before we get to Lori’s STEP ONE is that the buyer and seller enter into a sales contract, typically handled by the land broker and approved by each party’s attorney. So for example, someone wants to make an offer on a property, I fill in the blanks of our contract (which was written by an attorney) and write in any conditions. If the buyer has an attorney, we email that contract to their attorney for review. It is either approved or they suggest some changes. Once approved, the buyer signs the offer and is sent to the seller for consideration. If the terms are acceptable (or once the negotiations are finished), the contract is sent to the seller’s attorney for review…once they approve, the seller signs the contract and we have a fully executed contract. If the seller’s attorney would like to change something, they typically work with buyer’s attorney until they are both satisfied. Once there is an executed fully signed contract, we are off and running.
STEP ONE
The title company receives the title order form the Realtor/ Broker or attorney involved in the transaction. The title company usually also receives a copy of the contract. This is useful, not only in the search and examining stage but at closing.
STEP TWO
That information is then given to a title searcher. The title searcher gathers relevant information from the County Recorder of Deeds, County Treasurer, County Clerk and sometimes the Circuit Clerk to complete a full search of the land and the Seller and Buyer. The searcher is looking for encumbrances and liens against the property and parties and also to verify the actual ownership interests of the land being conveyed. An example of and encumbrance would be an easement to CILCO. Some examples of liens are: mortgages, taxes, special assessments, water liens and weed cutting liens. The searcher also looks for any judgments or tax liens filed against both the buyer and the seller.
STEP THREE
When the title searcher completes the search, the file is then given to a title examiner. The title examiner reviews the documents provided by the searcher. Some examples of documents examined by the title examiner are surveys, deeds, mortgages, leases and easements. The examiner checks for defects in title and discloses all documents of special interest on the title commitment usually as “exceptions” to title. An exception to title is something we cannot insure over. They limit the use of the land in some way. Examples of some exceptions to title would be: an easement to CILCO, a Lease to an Oil and Gas Company, Creeks, Lake and Rivers that may affect the land, Railroad that may cross the land, lack of legal or actual access to the land, mortgages, taxes, special assessments, municipal liens, surveys, deeds or documents with restrictive covenants requiring compliance of the landowner, Home Owner’s Associations, vacation of alleys or roadways. Because what we are insuring is the full use of the land, and these documents in some way restrict the use of the land, we cannot insure over them so we note them as ”Exceptions” to the policy. I compare “exceptions” to “pre-existing conditions” on a health insurance policy. The title commitment also discloses the Owner of record, the Buyer, the Lender, Loan amount, Legal description, sale price and our requirements to issue policy.
STEP FOUR
When the interested parties receive and review the title commitment and the Lender is ready to close, a closing is set at the title company by the relator/broker, lender or attorney.
STEP FIVE
When the closing is set, the closer will contact all parties to ensure that all fees that need to be paid are put on the settlement statement. This may include taxes and tax pro-rations, credit for leases, rents and deposits, inspections, repairs, surveys, attorney fees commissions, payoffs of liens and so on. When the closing statement is complete, the closer usually will email the statement to all interested including lenders, realtors, attorneys, buyer and seller for review and approval. Any disagreements with the settlement statement or additional information to be added to the settlement statement should be disclosed to the closer at this time in order for corrections to be made prior to closing. When the closing statement is approved by all parties, the closing will take place. In most cases the Buyer and Seller attend the closing at the title company, however, in some cases the closing will take place with the use of email, overnight services and wire transfers. The documents to be signed are typically explained by the closer to the parties, although often a lender or an attorney will also offer explanation as well.
STEP SIX
When the documents are all signed, the money has been received into the title company escrow account, and the lender, if any, approves, the closer will disburse the funds and the closing is complete. While there may be discussion between buyer and seller as to items pertinent to the buyer interest, the transaction is closed. The closer will distribute checks and wire funds out if needed, and provide the documents to a title company employee for recording.
STEP SEVEN
After the documents are recorded, which is typically directly after closing, our policy department will issue the policy and mail the original deed with the policy to the buyer. This policy issuance usually takes place 2-3 months after closing, sometimes sooner.
ASSOCIATED COSTS…
Customarily in the State of Illinois the Seller pays for the following fees:
Owner’s Policy premium based on sale price
The Owners Policy premium is based on a sliding scale rate sheet so for example sale price of $10,000.00 property the premium would be $100.00 but as your sale price increases, so does the premium. We offer discounts for prior title evidence and sometimes offer a special rate per thousand if the amount of insurance is $1 mil and up or if the property is part of an entire subdivision that we are issuing title on.
State of Illinois Policy Fee $3.00 Owners Policy
Search and Exam fee $100.00 per parcel
Closing Protection letter fee $50.00
Deed preparation $75.00
State and County transfer stamps (based on sale price at $1.00/1000)
County transfer stamps (based on sale price at $.50/1000)
City transfer stamps if applicable (most cities do not charge a fee)
Unpaid taxes
Pro-rations (Taxes, Rents, deposits, propane etc) (usually a credit to buyer but may be a credit back to seller)
Payoffs of existing mortgages and liens
Recording of Releases of Mortgage(s) and any other liens as may be necessary
Repairs/treatment which may necessary as disclosed by an inspection
Overnight and wire fees if necessary
Commission based on sale price
Home Warranty, if negotiated
Attorney fees if necessary
Survey fees (typically split between buyer and seller)
Any other fees which may arise during the search and closing process
Customarily in the State of Illinois the Buyer pays for the following fees:
Loan Policy (if a lender is involved) simultaneous issue with Owner’s Policy is $80.00
Lender required endorsements to the Loan policy a minimum of $75.00 for standard 3
State of IL Policy Fee for Loan Policy $3.00
Lender and Borrower Closing Protection letter fee $50.00
Closing fee $225.00 for standard lenders and up to $300.00 for internet lenders $300.00 for what is considered
Commercial farm property
Anti-predatory Lending Certificate (Peoria County only) $25.00
Recording of the Deed and Mortgage, and any other lender documents as may be necessary, Survey
All lender/loan associated fees
Overnight and wire fees if necessary
Inspection fees (termite, well, radon, mold etc.)
Survey fees if necessary (typically split between buyer and seller)
Attorney fees if necessary
Any other fees which may arise during the search and closing process
There it is! The basics of a land closing! If you are looking to buy or sell land, please look us up! We hope this article was educational. Please be sure to check out all of our articles at www.landco.com/blog.
Thanks again Lori! If you are in need of title work or have any related questions, please get in touch with Lori at lfraboni@hometowntitleinc.com (https://www.benckendorf.com/)[/vc_column_text][/vc_column][/vc_row]
