Selecting a Settlement Agent often comes down to a quick decision based on a recommendation from your Realtor.
A quick decision?
This is an interesting topic since home buyers, in Virginia, are given the option to select a Settlement Agent when they put together their offer to purchase. The idea is that they can compare fees and services, and ultimately can get the best price for title insurance.
But, you really need to know, there is much more to it.
I have seen Settlement Agents go far beyond expectations to make sure deals get done… like when the old mortgage from 1987 hadn’t been recorded as paid in full, or FedEx-ing the reclusive brother in Montana who needed to sign, or helping my blind client legally “sign” her name on the Deed.
Real estate transactions can deliver surprises, so, know it’s important to understand why there is a recommendation.
What is a Settlement Agent’s Job?
Each state handles real estate closings differently, and in Virginia the closing or Settlement happen at a designated Settlement Agent. The Deed are still written by attorneys, but Virginia allows non-attorneys to conduct the actual final paper signing.
The Settlement Agent has a complex role representing the real estate Sales Contract. They don’t represent either buyer nor seller, but play a critical role in helping both parties achieve the goal to complete the transaction.
The first step after a Sales Contract is Ratified is to deliver the Contract to the specified Settlement Agent. They may also be holding the Deposit funds in their Escrow Account so that check will be delivered with the contract.
They will collect contact information from the buyer, seller, buyer’s agent, seller’s agent, and specifics on the current loan and the future mortgage loan.
They are responsible for ordering a title search, also known as an abstract, to understand the chain-of-title and any recorded liens. If there are potential errors such as unreleased mortgages, or judgements against people with similar names then these issues will need to be resolved before a title binder can be issued.
An essential role is determining if the title is insurable. Mortgage lenders always require that title insurance is purchased to protect them against fraud in the land records, and buyers can add coverage for an extra premium.
Only structured workflow gets this job completed
They contact the current mortgage lender and request final payoff amount and instructions.
They will contact the Condominium or Home Owners Association, if necessary, to ensure the homeowner has properly paid their dues. And they will get instructions to collect any necessary dues required from the buyers on Settlement day.
They comply with requests from the new mortgage lender for specific legal information and jurisdictional transfer tax amount.
They will also double check on the transaction and if there have been any additional credits or adjustments made after a home inspection.
Communication between the new mortgage lender and the Settlement Agent is very important to ensure that documents, such as the Wood Destroying Insect (WDI) Report or Home Warranty, are accounted for on the Closing Document.
They will also make sure that the down payment funds and lender funds are in escrow prior to Settlement. Virginia requires sales to be fully funded and does not allow “wet settlements”.
After all documents have been signed or Notarized, the Settlement Agent is responsible for making sure the sale is recorded at the Courthouse.
Only after the Deed has been recorded at the Courthouse, then the Seller’s proceeds can be dispersed… typically by a wire transfer.
What I consider when recommending a Settlement Agent
Agents are often asked to recommend a Settlement Agent or two when they are putting together an offer.
I always consider the geographic location.
Because I have been a Realtor for a long time, I know Settlement Agents across Northern Virginia. I like to recommend a Settlement Agent who is near the property or at a location convenient for all parties, such as having a Vienna settlement agent for a Vienna real estate sale.
Although this sounds obvious, it isn’t always the case.
Communication style is very important because when issues arise all parties must be aware and everyone must take action.
Being available to talk on the phone to the processor or attorney, if necessary, is also important to me when there is an issue.
Although a Settlement Agent’s fee should also be important, buyers need to know that those fees are always competitively priced.
My company does not have an ownership interest in a Settlement Agency. They do not compensate me for referrals and do not incentivize business with free home warranty’s.
New Homes and Multiple Offer Situations
If you are buying a new home then selecting a Settlement Agent may not be an option for a home buyer.
Often the Settlement Agent has done considerable title work beginning when the builder bought the property.
When the market gets hot again and every home has multiple offers, I typically contact the listing agent to discuss the Seller’s situation to give my client any edge possible. If the Seller is planning to buy another property, then it may be beneficial to your offer to have the same Settlement Agent.
That’s just one of my strategies.
As I mentioned at the start, each state is different and Virginia has its own process to buy and sell real estate. Make sure that the Settlement Agent you select is reputable doing a Google search, and discussing with your Realtor the benefits of the recommended Settlement Agent.