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The Closing Process

Have Refi? Will Travel.

Everyone has heard of the real estate transaction that blows up at the closing table. The reasons vary widely, but in our office about 95% of all purchase transactions close.  With purchases, both the buyer and the seller are typically very motivated to see the sale through, so problems that arise are taken care of, so the deal can go through.

Refinances don’t have that high a close rate – in our office refinances close about 90% of the time. This might be surprising, since a refinance only happens when the homeowner initiates it, but little problems that arise on the way to closing can derail a refinance. The homeowner may decide keeping the current loan is less trouble than dealing with the requirements for the refinance.

A refinance is much easier for the homeowner if the closing attorney will go to them for closing. Origin Title is happy to travel to homeowners in Metro Atlanta. Homeowners who are thinking of refinancing should seek out a closing attorney who will come to them.

Who holds the earnest money in a For-Sale-By-Owner transaction?

When a buyer enters into an agreement to purchase a home, the sales contract specifies the amount of earnest money paid and who will hold said earnest money. Should the seller be the person designated to hold the earnest money? 

It is more prudent to have a real estate agent or closing attorney hold the earnest money, so that the buyer won’t have to fight to recover it if the contract falls through. If the seller holds the earnest money and decides to keep it, no matter the terms of the contract, the buyer may spend more than the earnest money trying to recover it.

Buyers considering a for-sale-by-owner property should choose an experienced closing attorney to draft or review the sales contract and hold the earnest money until the sale is complete.

Remember the movie Brazil?

The rogue handyman, Harry Tuttle, played by Robert DeNiro, didn’t follow the rules because he hated the paperwork.  The paperwork found him on the street one day and he eventually disappeared in the mass of papers. People selling their house without an agent can feel as if they are being buried by paperwork, but the biggest risk is overlooking necessary paperwork. Every situation is a little different, but Origin Title provides a basic checklist for sellers to make sure they have everything in order and don’t delay the closing.  

No matter which side of the For-Sale-by-Owner transaction an individual is on, having a qualified real estate attorney oversee the process will stop closing-day horror stories.  

FSBO Checklist for sellers in the Atlanta metro area:

  • Check to see how you have title to the house 
  • Make sure all water fixtures are low-flow. Or see if there is an exemption that applies.  
  • Complete the Lead paint disclosure if the house was built before 1978. 
  • Seller’s disclosure to indicate what appliances and fixtures are remaining with the property. 
  • Check to see if your house is in a flood zone (flood maps do change)
  • Check the zoning map to make sure nothing has changed (zoning can also change)
  • Locate your Owner’s Title Insurance Policy from when you purchase the house (if you have one). 

When there’s no real estate agent, how does a buyer begin the buying process?

Once the buyer has decided on the house of their dreams, they need to make an offer to the seller. An offer is simply a sales contract signed by the buyer and sent to the seller.   The contract will give the seller a set number of days to respond by agreeing to the contract, or making a counter offer.  

Origin Title does not negotiate the terms of the sale, but we can prepare the sales contract for the offer to make sure the contract matches the intent of the parties.  In early May, I closed a ‘for sale by owner’ purchase where the sales contract stated that all the costs were to be paid by the buyer.  The seller wired an extra $1,000 because he said HE was supposed to pay the closing costs. It’s rare that a buyer and seller both want to pay closing costs, but a properly prepared sales contract would have prevented this confusion. 

The modern buyer who conducts business on their mobile phone may feel constrained by the paperwork required for home purchase, but the value and clarity of a written contract is worth it. A qualified real estate attorney can make sure the buyer’s interests and intent are preserved.

WHAT IS AN IOLTA ACCOUNT?

Real estate attorneys have a separate IOLTA escrow account to receive and disburse all funds involved with a real estate closing.

IOLTA stands for Interest on Lawyers Trust Account and it means that the money in that account does not belong to the attorney.  Interest earned on the account also does not belong to the attorney.  The interest earned, minus bank fees, goes to fund legal aid programs in the state of Georgia.  The Tax ID number on the account is the Georgia Bar Association’s, not Origin Title’s.  I account for every penny in the account for each file on a daily basis.

With wire fraud cases and check forgery on the rise, real estate agents want to know a real estate closing attorney who has stringent safeguards in place to protect the funds held in escrow for closing.

GEORGIA DEPARTMENT OF REVENUE LIENS

In 2017, the Georgia legislature passed a law changing how we searched liens filed by the Georgia Department of Revenue. The law initially required a ‘clearance letter’ from the Georgia Department of Revenue before any deed could be filed.  Thankfully this was repealed and replaced in 2018. The GSCCCA is an on-line statewide searchable database for lien and deed records. The new law  (HB661) that was recently signed into law includes the following changes:

  • State Tax Liens (“DOR liens”) have a ten year duration and DOR liens may not be renewed.
  • DOR liens filed prior to 1/1/2018 became invalid on 1/1/2018.
  • DOR liens are not state-wide liens.  Before a DOR lien can attach to real property, an execution must be filed with the clerk of the county where the land is located.
  • DOR liens are filed with the county clerk by electronic transmission to the GSCCCA.  The GSCCCA must then further electronically transmit the lien to the county clerk.
  • The DOR lien is deemed to be filed and perfected upon its receipt by the GSCCCA.
  • When the DOR files a lien it must also provide that information for inclusion in the pending lien database maintained by the GSCCCA.
  • A DOR lien does not attach to the interest of a subsequent bona fide purchaser or lender whose deed or security deed is recorded before the tax lien has been filed.

LIENS NOT RECORDED AT THE COURTHOUSE

We perform a title search for every refinance or purchase closing. There was a time when someone searching titles could get all the needed information at the courthouse.  That time has passed.  Deeds, mortgages, and most liens are still recorded in the real estate records at the courthouse, but several other items also need to be checked before closing.  Everyone knows to check property taxes, but what about other property charges?

Many municipalities in Georgia have ordinances that create liens on the property for unpaid water bills.  There is no public index or record of water bills to search.  Each county or city providing water service has its own process for getting the water bill.  The City of Atlanta charges $10 per property to provide a water bill and accepts requests on-line.  Dekalb County does not charge anything and accepts requests through e-mail.

OCGA § 36-60-17 was amended in 2016 to allow water-provider to charge up to $10 to provide water bill information. The same Code states that water-providers have 10 business days to provide a bill and payoff amount.  Most providers provide the statement much quicker.  The payoff amount is good for thirty days and once paid, extinguishes any lien rights.  In order for a water bill to be a lien on residential property, the water charges must be incurred by the property owner.

Georgia Department of Revenue liens are another lien that is not recorded at the courthouse anymore.  Effective January 1, 2018, the Georgia Department of Revenue has a separate statewide index for its liens that is only available on-line.  The lien index can be accessed through the GSCCCA at: http://search.gsccca.org/LienSearch/StateTaxLienSearch.aspx
or through the Department of Revenue’s web site at:  https://gtc.dor.ga.gov/_/#2

It was less time consuming and easier to check everything at the courthouse, but those days are over.  After searching the courthouse records, we must get property taxes, request water bills, and search for Georgia Department of Revenue liens on-line.

PROTECT YOUR MONEY FROM WIRE FRAUD SCHEMES DURING CLOSING

Sending an e-mail is like mailing a post card. Unless it is encrypted, there are ways other people can read the message and see what is in it. Even though e-mail is easy, it also has its dangers. Anyone in the world can try to read it, and even change what was written.

Criminals who specialize in fraud have taken notice. Fraudsters can mimic an e-mail address or domain trying to trick people into wiring funds to the wrong account. An unsuspecting buyer can get an e-mail that looks like it is from an attorney or real estate agent with instructions on sending their funds to the closing attorney. Can you tell the difference between ‘lawfirm.com’ and ‘lawfirrn.com’? These are two different domains. One is ‘L A W F I R M . C O M’ and the other is ‘L A W F I R R N . C O M’. People read e-mails fast and it is impossible to catch subtle differences in the spelling like this.

Technology has made it simple to create professional looking documents. The drawback is that it also makes it easy for the fraudsters to create similar looking documents and instructions. Even a fax or encrypted e-mail may be dangerous because criminals can also fax and send encrypted e-mails. ALTA has created a short video to show how this scam works.

 

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