Dear Mr. Gisriel: My wife and I finally decided on buying a house. I've signed a purchase contract and have a mortgage lender. What else do I need to do to get ready for settlement?
Dear Mr. Daniels: The secret to a smooth real estate closing or settlement is preparation. In preparing for a settlement, there are routine items and possible problems. If you can anticipate potential problems, they can be dealt with before they become a problem at the settlement table.
The first thing you need to do is select a title company that will handle your real estate settlement and help you, the buyer, coordinate the items that need to be handled at settlement. These items include the deed; the title search; the mortgage; the lender's package; the adjustments or pro-rations; the title insurance; and the date, time and place of settlement. Your real estate agent or lender can usually recommend a title company in which they have confidence. Also, you might ask your family or friends for a recommendation.
Remember, we're talking about what for most people is their largest single purchase, so the same care should be used in selecting a title company as is used in selecting a doctor, lawyer or other professional.
Your title company can advise you on items that you'll need for settlement, but, typically, a buyer will need to obtain hazard or fire insurance for the property he or she is purchasing (the lender will require proof of this insurance to approve closing of the loan). Each buyer will also need to provide the lender a location survey (i.e., proof that the house being purchased is actually located on the lot or property being purchased without any material encroachments) and a termite certificate (i.e., proof that the property being purchased is not infested with or materially damaged by termites). It is best to get the termite certificate and location survey early so that, if they reveal problems, the problems can be dealt with before the settlement.
Too often these problems are not revealed until all the parties are situated around the settlement table, which can result in either a nasty situation or a postponed settlement.
Another potential problem that can be avoided, if advance notice is given, is powers of attorney. A power of attorney, if it is to be used at a real estate settlement, must be approved by the lender before settlement. All good title companies have attorneys on staff who can either prepare the power of attorney or review the power of attorney well in advance of the settlement.
It is best if you establish a good relationship with your title company. There is no substitute for communication. Feel free to ask a lot of questions if you are unsure about some aspect of the transaction. Remember, the title company is working for you and most title companies want referrals and repeat business.