Real estate closing procedure in the District of Columbia
The closing process in Washington, D.C. is usually performed at a title company office, by either an attorney or a settlement agent. Several steps are involved in the process.
First a title order is submitted, and then a file is processed. A title search is obtained, and a title examination is conducted. Finally documents are prepared and reviewed, and settlement occurs. In this article, I explain each step of the closing process in the District of Columbia.
Submission of title order
Once the sales contract has been signed by all the parties (ratified) and the homebuyers deposit the Earnest Money Deposit, usually with the title company or their agent, title is ready to be ordered.
Title is ordered from the title company of the homebuyers’ choice, by the homebuyers’ agent or directly by the buyers. This starts the process.
When title is ordered, the buyers’ agent sends a copy of the ratified contract with all addenda to the title company. Other information usually supplied to the title company is the name and contact information for the lender (if the buyers are getting a loan to purchase), contact information for the sellers’ real estate agent and/or the sellers’ contact information.
Some title companies like Federal Title also have pages on their websites where the buyer, buyer's lender or real estate agent can electronically complete and send in the request for title.
Processing the file
The processing stage of the transaction commences immediately after the title company receives the request for title. As there are many third parties who must be coordinated with in order to obtain all of the necessary information and documentation in time for the closing date, an experienced title company will commence the processing stage as soon as possible after the receipt of the request for title.
The file processing stage includes, 1) ordering tax information showing the status of the current and prior years taxes, 2) loan payoff statements, 3) surveys, 4) homeowner or condominium association information showing monthly fees and 5) any special assessments, termite inspection reports, and home warranty information, if applicable.
In addition, at this stage the title company orders the title search report from the title abstractor, and settlement date and time are scheduled with all parties involved in the transaction.
During the title search phase of the transaction, a thorough search is made of the public records in the District of Columbia land records, general liens and court records.
Specifically, the abstractor is looking for deeds, mortgages, lis pendens, judgments, easements, restrictive covenants, liens, divorce settlements, probate records and any other documents in the public records which affect title to the property.
After all of the documents which affect title to the property are located, the abstractor prepares an abstract of title, or title report, which includes all such documents. This information is then sent to the title company and/or the closing attorney.
After the closing attorney receives the title search report from the abstractor, the title examination phase commences.
The closing attorney will first issue a title commitment to the lender based upon the information contained in the title search report – buyers can also get a copy of the commitment, if requested.
Next the closing attorney will examine all of the documents found during the title search that affect the title to the property in order to determine the current status of title.
Specifically the closing attorney determines whether any title clouds exist, which need to be cleared prior to closing. The closing attorney also verifies the record legal owner of the property and makes note of any debts owed against the property.
After any and all title clouds have been cleared and the parties are ready to close the transaction, the closing attorney will prepare all of the documents in order to close the transaction.
These documents include, but are not limited to:
In connection with this, if the buyer is financing the purchase, the buyer's lender will submit to the closing attorney its closing instructions so that the closing attorney can include all of the lender's charges, fees and escrows on the settlement statement.
An experienced closing attorney will distribute drafts of all of the closing documents to all interested parties in advance of closing when possible, so the documents may be reviewed, commented on, revised, if necessary, and ultimately approved in advance of closing.
When the documents are not available in advance, some title companies will have sample closing documents on their websites the clients can read in advance.
Settlement: closing the transaction
At the closing, the closing attorney or title agent oversees all aspects of the closing of the purchase and sale transaction and answers any questions the parties may have relating to the transaction and/or the closing documents.
The seller signs the deed and the other seller documents; the buyer signs the buyer's documents and the loan documents (if the transaction is being financed). Both parties sign the HUD-1 settlement statement, termite report, supporting documentation for the deed, and any addenda to the contract not signed prior to settlement.
At the time of closing the buyer must bring the money for closing to the table in the form of a cashier’s check or, if arranged prior to closing, the buyer can wire funds to the title company.
The lender will also provide either a cashier’s check or wire for closing. After the closing has occurred, all monies and documents related to the transaction are disbursed, except any monies to be held in escrow by the title company.
In other words, the seller, real estate agents, title company and other parties to the transaction are paid, certain documents are sent to be recorded in the District of Columbia and the fully executed loan documents are sent to the lender, when a loan is involved in the transaction.
In most cases, settlements that follow the above process are smooth and seamless by the time settlement occurs.