Visualize this: It’s closing day, there’s excitement in the air, and messages start coming in. You see them all roll in one after the other – buyer-approved, seller-approved, lender-approved, escrow-approved. The funds are being dispersed and the transaction is closed. There’s a rush of feeling that can only be described as “success.” That’s the closing day everyone chases.
However, once it’s time to close, there are a lot of moving pieces to deal with at once. Before you get to that feeling of relief and excitement at the end, it might seem more like you’re a duck in water. Swimming seems to be effortless, but your feet are just turning at a million miles per hour beneath the surface. You’ll sometimes find yourself at the mercy of things either outside of your control or difficult to fix at the last minute, like the timeliness of FedEx or UPS deliveries, signatures being in the right places, notary stamps, and so on.
Fortunately, there’s a fix for pretty much everything that will allow you to get back on track and finish the closing. If something works now and can be fixed later, it doesn’t have to hold up the entire process. All those little things that can go wrong or might not line up perfectly on closing day are why it pays to work with someone who has the experience, expertise, and knowledge. They’ve dealt with those issues, so even if you don’t get a peaceful, calm closing day every time, you’ll still be able to complete the process.
With that said, what else do you need to know about all these final processes? How do they differ from state to state and what are the nuances to be aware of? Those answers are coming up below to tie up the last loose ends of closing the deal.
Understanding the different policy options and writers can seem complicated. It’s important to tease it apart, though, and gain some understanding of the different policy options and procedures. What you’ll find in Texas differs from the other states, for instance.
Other states use an ALTA policy, which stands for American Land Title Association. ALTA is a governing association that gives you model endorsements, title insurance, policies, and procedures that states can adopt or not adopt. Texas chose to have its own title association – the Texas Land Title Association. They have a completely different set of policies and procedures. In Texas, you have just your owners and loan policy, and it’s a TLTA policy.
In the states following ALTA policy, you have what’s called the auto policy. That means there’s an auto standard policy, which is your standard run-on-the-mill policy with the general standard exclusions, and an extended policy that eliminates some of those. You pay a bit more with the extended policy but get rid of some exclusions by doing so.
Think of it like your homeowner’s insurance. You get a standard homeowner’s insurance policy with a deductible. You pay a little bit more if you want wind and hail coverage and another increase if you want to add water and damage coverage. That’s the difference between a standard and an extended policy for title insurance in those other states.
ALTA in Every State
Every five to ten years, there’s a new standard form adopted. States have the option of using the older form or the newer one. They’re typically very similar. You can figure out what they cover by going to ALTA’s website, and the coverage and exclusions listed there are what will be included when someone says they’re issuing an “auto policy” in an ALTA state. In Texas, an auto policy isn’t available. You’ll have a TLTA policy instead.
Additionally, California uses its own form as well. It’s called the CLTA, or California Land Title Association, but that state does offer an auto policy on top of CLTA. CLTA policy and ALTA policy are very similar and mirror each other in many ways.
Closing in Different States
Since policy can differ between states, are there differences when it comes to closing, too? Fortunately, the general closing process is the same nationwide. However, there are different procedures for recording in each state, and some recording aspects may take a little bit longer.
Many East Coast states, some Midwest states, and several West Coast states like California have different recording procedures. Some states have the county and attorney look at your document. Even though you’ve submitted it, it may be recorded for a few weeks before you know that. Part of closing with the title company and escrow company is recording that gap that occurs between the time you signed the deed and insuring the transaction. Your deck gap period is insured in your title policy.
Deed of Trust and Mortgage
If someone says they have a deed of trust or mortgage, they’re referring to the same thing. It all boils down to the foreclosure process. Whether you would call it a “deed of trust”, or a “mortgage” depends on what the laws are and how the laws are written in that state.
In certain foreclosure states, you must have a trustee and independent third party to whom you give rights for them to close. In Texas, “trustee” is more a name to put on a document, and then they have all the authority. You can always substitute those trustees, so in the end, it doesn’t mean anything.
The mortgage and deed of trust are the same. The terminology just depends on what the state law is and how you name that document, but it does the same thing and is insured in the same way.
When it comes to the commercial side of document production, who prepares the documents depends on a few different things.
Sometimes the attorneys on each side would prefer certain forms be used, so they’ll either provide those forms or prepare the forms themselves. Some closers aren’t licensed attorneys and don’t feel comfortable prepping the documents, so they might choose to rely on the different parties (buyer, seller) to provide them. In other cases, it might be necessary to get formed documents from the local title office. There is no one solid answer about who is responsible for document preparation. It will be based on who is most suitable, who is willing, and what needs to be done.
Costs With Document Preparation
If there’s nothing particularly crazy going on, the least expensive option for document preparation could be to let the escrow company handle it. Some firms make the process long, complicated, and time intensive, causing a headache for everyone. At that point, even a fixed-fee rate might be increased to compensate for the extra time.
The important thing is to pay attention to who your attorney is. You want someone who isn’t just concerned with wrapping it up as much as possible. On the other hand, you also want to avoid attorneys who may try to convince you that they’re the best people ever and that you should trust them to do all sorts of things. That will make it significantly more expensive on all sides. Many attorneys are cost-conscious for their clients, but some are not and like to argue about everything instead.
Overall, it’s important to rely on someone with experience and expertise. The person preparing your documents should be able to say whether something will work in a particular state, what language needs to be used, whether a particular notary is required, and so on. At that point, they’ll be able to produce things quickly and cost-effectively, which will help get the transaction done smoothly.
There are a lot of different moving pieces and components to get for closing day. Make the effort to iron out the specifics and get information together for your state and its requirements. Policy options aren’t the same across the board, especially if you’re in Texas or California, and even language might vary based on small differences.
The most important takeaway here is that you need to keep a team of people who know what they’re doing, rather than just haggling with details. Do that and you’ll find yourself in the golden glow of success that comes with closing the deal.