This post deals with Insured Closings from the seller's side. Earlier this month I posted about Insured Closings from a buyer's perspective; what is and is not actually insured.
To quickly recap, an Insured Closing is when the title insurance underwriter (not the local agent, but the actual insurance company) issues a Closing Protection Letter (CPL) to the Buyer's Lender. Lenders require a CPL before they will send the closing agent any documents or funds.
The CPL provides no protection directly to the Seller. The Seller has no direct right of action against the title insurance underwriter as the Buyer and Lender do. Where the Seller's interests are aligned with the Lender, the Seller will enjoy a measure of indirect protection.
In our market, the Seller pays for the owner's title policy. This sometimes leads to a misunderstanding about the occasional post closing matter that requires the seller's cooperation. Most often it will be a payoff that is short or a payment that needs to be made that we were unaware of. A Seller might say to me "It's not my problem. It was an Insured Closing, wasn't it?" My answer is that "Yes, it was an insured closing. We insured the Buyer that you owned the property when you sold it to them. We didn't insure you that your lender gave us the correct payoff information."
As a Seller, how can you protect yourself? First, carefully review the closing statement. Particular attention should be paid to payoff amounts, credits to the Buyer, prorations, and other payments that you agreed to in the Purchase Agreement. Once you sign the closing statement, you are accepting it as correct.
Secondly, do not "dry " close (sign everything, leave it and hope the Buyer's Lender sends funds) unless there is a written agreement including you, the Buyer, and the Closing Agent providing a mechanism for you to get your deed back if the transaction is not funded within a specified period of time. In the current environment of dynamic loan approvals, this couldn't be more important.
Finally, consider the reputation and local expertise of the title company that you select for the transaction. When you select John Bethell Title Company, Inc., your sale will be handled by knowledgeable people that care about you and your community. We will do everything we can to ensure that your transaction happens on time and with minimum anxiety. When we run into you at the Kroger, we won't be embarrassed. We won't duck behind the bread rack. We will look you in the eye and smile.
If you have any questions about closings or title insurance, please leave me a comment or email me directly.
Thank you for the suggestion, I do use reputable title companies and am confident that they have my clients best interest at heart!
great advice especially in this crazy market - It's a pain when the buyer signs and then is not there when the seller signs and they forgot to sign one place and it doesn't fund!
John,
Great points! Glad to hear another title expert sharing knowledge on what may seem like everyday procedures to us.... but that can adversely affect a situation for a realtor. Thank you for sharing!
Wow what a post I had no idea. It is so interesting to be a part o fthis networkas you learn about practises in other states
Caren: The best companies always manage to keep everyone's interest at heart - buyer, seller, lender, realtors.
Richard: Yes, that's always a potential problem with split closings. Particularly when the lender has a document for the seller to sign that wasn't available when the seller signed everything else.
Melissa: As an industry, we need to do a better job letting folks know what we do. I am just trying to that in my own small way.
Charlie: I've learned so much in just two months here. It really is amazing.
Thanks everyone for your comments.
Hi, John!
In Utah, the Real Estate Purchase Contract shows that settlement, funding and recording shall occur within 4 calendar days after settlement. I take it that Indiana doesn't make it as easy on you guys? Very good pointers!