Close It!™ House of the Week: Modernized and move-in ready

This week we cross over the District border into Bethesda for this charming 4 bedroom, 3.5 bathroom cape colonial located on a corner lot less than a mile from the Red Line. 

The interiors are bright and clean. There's a finished basement. The spacious kitchen features stainless steel appliances with a gas stove as well as granite countertops. It's listed at $899,000.

Assuming a homebuyer puts down 20 percent on a conventional loan, her cash to close number will be approximately $204,574.23. The monthly payments would then be around $4,401.80 per month. For a complete picture of the cash to close, or for a run-down of the seller's side of the deal, plug the numbers into the Web version of Close It™ or download the free iOS app.

Close It!™ House of the Week: Colonial with an English garden

For the inaugural edition of Close It!™ House of the Week, we chose a property that's right in our own back yard.

This detached single family home is a brick colonial with a fenced-in English garden located on a tree-lined street in Friendship Heights, Washington, D.C. It has 3 bedrooms and 2.5 baths and is listed for $799,999.

Assuming a homebuyer puts down 20 percent on a conventional loan, her cash to close number will be approximately $183,510.61. The monthly payments would then be around $3,657.70 per month. For a complete picture of the cash to close, or for a run-down of the seller's side of the deal, plug the numbers into the Web version of Close It™ or download the free iOS app.

$3,000: personal check limit at closing

The Federal Title & Escrow Company team will make every effort to provide its clients with a precise Cash to Close amount, in advance of the closing date, so our clients can arrange for a wire transfer or obtain a cashier’s check for the exact amount.  

In some instances, due to last-minute changes in financing or sales contract revisions, the Cash to Close amount will change after the client has already wired her funds or obtained a cashier’s check.  

If the change results in an additional Cash to Close amount exceeding $3,000, the law prohibits the client from writing a personal check to Federal Title and the client will be required to wire or obtain a cashier’s check for the additional amount.

DC Code §31-5041.06(d)(3) states, in part, that a title insurance producer may accept a check in an amount not to exceed $3,000 that has not been finally paid before any disbursements.  

This means that Federal Title & Escrow Company is prohibited from accepting a personal check at the time of closing that exceeds $3,000.

Avoid the DC recapture tax 'surprise'

If you are an agent listing a property for a decedent’s estate/personal representative in DC, help your client and the prospective purchaser avoid a potential big surprise – the real property recapture tax.

DC Office of Tax and Revenue has recently been imposing a recapture tax against properties that were receiving senior citizen tax relief but ineligible due to the property owner’s death – i.e., a change in eligibility.

That is, upon the death of the owner, the personal representative for the estate would be responsible for notifying DC, within 30 days, that the property is no longer eligible for the benefit.

Since it’s unlikely the personal representative is aware of this requirement, the property continues to unjustly receive the benefit until such time as the property is sold.

Once the property is conveyed, DCOTR is notified by DCROD of the change in status and retroactively applies the proper tax status from the date of death through the date of conveyance. This often results in a hefty recapture tax amount then applied against the real property tax account.

As the settlement company, we are being proactive in our efforts to notify DC prior to closing and obtain the recapture tax amount such that it can be handled prior to or at the time of closing.

In some cases, due to timing, this is not possible and the purchasers are left with a recapture tax incurred by the decedent’s estate.

We advise all agents listing a property for a decedent’s estate to be aware of this issue, check the tax status to determine whether it is unjustly receiving the senior citizen tax relief benefit, and make the personal representative aware of the requirement to notify DC of the status change and be prepared to pay a recapture tax.

Split closings are (almost) never a good idea

The other day I handled a split closing – the buyer used Federal Title & Escrow Company and the seller used another title company – and things did not go so smoothly.

A closing already has many different parties involved: buyers, sellers, buyer’s agent, seller’s agent, loan officer.

But two title companies?

For a closing in the DC metro area, it just doesn’t make sense to complicate the transaction further by adding a superfluous second company.

Superfluous? Yes, that’s right, because the "seller’s title company" is going to perform the exact same tasks that the "buyer’s title company" would have performed, and almost certainly at a higher cost.

Since the "buyer’s title company" is responsible for sending out the payoff and issuing the title insurance, and consequently responsible for either releasing the mortgage lien on the property or following up to make sure it is released, most of the main functions will be handled by the buyer’s title company.

Really, all the seller’s title company will do is order a payoff (maybe), prepare the deed (maybe), and handle the closing for the seller, which is typically ten pages or less.

Despite having such a small role, the seller’s title company charges higher fees. They have to; they are handling virtually no major functions and are not issuing the title insurance and the only way to make it worth the title company’s time is to charge the seller a significant fee.

Here is a look at the closing fees from the last three closings in our office for which the seller chose to use another title company:

Closing Date Seller's Closing Fees if Seller Used FTE Seller's Closing Fees Since They Chose Another Title Company Additional Cost by Choosing to "Split" the Closing
March 2014 $435 $705 + $270
February 2014 $435 $675 + $240
January 2014 $435 $770 + $335

So if the seller is paying so much more, it must mean that the seller is being provided with better service, right? Wrong.

By adding a second title company you now have your classic "too many cooks in the kitchen" scenario.
Only one of the three closings above went smoothly, the other two had issues. Think about it, when has hiring more lawyers made for a smoother transaction?

So if it costs more to split the closing, and the service is not better (and often worse), why do people do it?

Well, most of the time, sellers don’t realize how much more it is costing them. That is why I strongly urge sellers to obtain quotes and make sure that it makes sense. 

We've posted a seller's fee schedule on our website. Unfortunately, since most title companies do not post their fees, you will have to call or email them – and shouldn’t the lack of transparency make you suspicious?

  • Ways to save at closing

    Title charges are the largest chunk of closing costs and can vary by hundreds of dollars.

    Learn more

  • What are closing costs?

    The real estate closing process involves loan steps, legal steps and title steps.

    Learn more

  • What's title insurance?

    Insure your legal ownership just like you'd insure the building, but for lots cheaper.

    Learn more

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