PotomacWestTitle
Professional Real Estate Closings
Potomac West Title
9316-A Old Keene Mill Road
Burke, Virginia 22015-4285
703-584-7744
(F) 703-584-7746
lmartin@pwtitle.com

    Introduction

    This guide is designed to help buyers, sellers, brokers and agents, and persons refinancing residential real estate loans, understand
    the services provided by Potomac West Title and the expenses encountered in closing a residential real estate resale or loan
    refinancing transaction.  The Consumer Finance Protection Bureau, the Federal agency established under Title XIV of the Dodd-
    Frank Wall Street Reform and Consumer Protection Act, to oversee the real estate closing process, has also issued a Settlement
    Cost Booklet which you may find helpful in understanding the closing process.

    The real estate closing process begins on receipt of a contract for resale of a property or notice from an owner of intent to refinance.  
    Shortly after receipt of the contract or notice, we send letters to all parties (i.e., buyers/borrowers, sellers, brokers, agents, lenders)
    advising each of our duties and responsibilities, along with an estimate of the title/recording-related expenses of the closing.

    An information packet is sent to buyers and sellers in resale transactions, explaining specific aspects of each side of the closing.  A
    similar packet is sent to refinancing borrowers.

    Next, the title to the property involved is searched, abstracted and examined to assure buyers or borrowers that title is good and
    marketable and to insure any new lender of a valid priority lien on the property being purchased or refinanced.  

    We order and examine a house location survey (not required for a condominium) to determine that the property is free from
    encroachments or other boundary-line disputes, that the house location complies with local ordinances and applicable restrictive
    covenants and to determine the existence of any easements or other conditions affecting the property.

    On refinancing transactions, if a survey is required, where possible, we order a re-certification of the borrower's previous house
    location survey.  On most refinancing transactions, however, a survey is not required.  Occasionally, a lender may require an owner's
    affidavit stating that there have been no changes to the property since acquired.

    We contact existing lien holders and determine procedures necessary to release those liens.  These include lenders where notes are
    to be paid off and trusts released as part of the transaction and judgment creditors and governmental lienors, where applicable.

    If we find any defects in or clouds on the title or encroachments or boundary-line problems on the survey, they must be removed,
    resolved or reconciled to the satisfaction of all parties to the transaction before closing.  

    A title insurance commitment is secured and issued to the buyers/borrowers and new lenders informing them of the quality and
    marketability of the title, specifying the steps to be taken and conditions to be met to deliver marketable and insurable title and to give
    a valid priority lien to any new lender.

    Insurance and Inspections

    Lenders require buyers/borrowers, either as home purchasers or as refinancing parties, to provide assurances that the property will
    be adequately covered by fire, hazard and liability insurance.

    For individually-owned residences, an all-risks' policy in an amount not less than the replacement cost of all the improvements on the
    property must be secured.  The first year premium must usually be paid on this policy before settlement and a paid receipt, with an
    original policy, provided to all new lenders.  In condominium cases, a certificate of insurance must be obtained from the condominium
    association or its insurance carrier.  

    In any case, the insurance policy or certificate of insurance must contain a loss payee or additional insured clause insuring all lenders
    against loss.

    A certificate indicating the property is free from termites and other wood-boring insects and that there is no visible damage from
    infestation must be obtained before closing on resales.  If there is damage or infestation, repairs or treatment must usually be
    completed before closing.  Sellers are customarily responsible for securing this certificate on resale.  Often, however, where a real
    estate agent is involved, the agent will order the inspection for the responsible party.  

    Powers of Attorney

    When one of parties to a settlement will not be present at the closing, an attorney in fact must be appointed and a written special
    power of attorney obtained.  Many lenders have peculiar requirements concerning powers of attorney and most require advance
    notification of the intended use of a power of attorney.  Most also insist that, before closing, they have an opportunity to approve the
    form of power of attorney to be used.

    A power of attorney often must specifically cite the property involved in the transaction.  Sometimes it is necessary to include certain
    specific powers, such as the power to exercise a VA eligibility entitlement when securing a Veteran's guaranteed loan.

    Potomac West Title will arrange for a power of attorney for any party to a real estate transaction we are closing without charge
    (prepared by our affiliated law firm LLOYD MARTIN PLC).  If it is prepared by someone else, it is essential that we have a copy of it
    early to review it for legal sufficiency.  It will also be necessary for the original to be presented at closing.

    Finally, where it is necessary to record a power of attorney among the land records (e.g., where the attorney-in-fact executes the
    deed of conveyance), the format of the power of attorney must meet the Virginia statutory micro-graphic standards.  In short, contact
    us early where a power of attorney is to be used to avoid last-minute problems.

    Closing and After

    The "closing ceremony" occurs when all parties come together for final approval of their respective parts of the transaction.  A
    Settlement Statement is prepared for all parties to review.  In November 2013, the Consumer Financial Protection Bureau (CFPB)
    integrated the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations. Any
    transaction involving a consumer mortgage will use new CFPB disclosure forms. The new TRID rules and forms took effect on October
    3, 2015.

    The settlement statement, formerly most often the form HUD-1, for the borrower has been replaced the buyer's Closing Disclosure
    (CD), which combine the lender's good faith estimate of closing costs with the truth-in-lending form and the final purchaser/borrower's
    settlement costs.  In any event, the intent is to account for all the funds coming into and going out of the transaction, and serve as a
    vehicle for final and full disclosure to sellers and buyers or borrowers of all third-party charges associated with the transaction and
    serve as a document within which to compare the lender's costs estimate with the actual final closing expenses.
    The new CD covers only the borrower's side of the transaction, which is fine for refinancing.  For resale transactions, however, a
    separate disclosure documents is used for the seller's side of the closing.  In the case of sellers, no standardized closing documents
    has been developed by the CFPB, so Settlement Agents will be using a variety of forms, but whatever form is being used it will have
    he same purpose, the account for all funds coming into and going out of the transaction which affect the seller.

    In a resale transaction, after review and approval of the settlement statements by all parties, the sellers execute the deed of
    conveyance transferring title of the property to the buyers.  We review and explain, in detail, these important documents to both
    buyers and sellers.  Next the sellers execute various affidavits and certificates assuring the property is free of encumbrances, other
    than those found on record, and to comply with the assorted Virginia and Federal tax-reporting requirements.  Sellers, when finished
    with the transfer side of the closing, depart.  

    We then review and explain to the buyers or borrowers the legal meaning, purpose and effect of the various instruments involved to
    complete the loan transaction and give buyers or borrowers an explanation of title insurance and the opportunity to select the form of
    title insurance desired for the property.

    On resale transactions, not later than the morning of the first business day following settlement, documents are taken to the Clerk's
    Office of the Circuit Court in the City or County where the property is located for recording among the land records.  

    On refinancing transactions, Federal law often mandates a waiting period of three business days during which borrowers may cancel
    the loan without explanation.  On these transactions, documents are taken to the courthouse for recording the first business morning
    after the expiration of the three-day cancellation period.

    Before recording, a final "bring-down" title exam is conducted to assure clear title for the property up to the exact moment the Clerk of
    Court accepts the documents for recording.  We begin disbursing funds involved in the closing immediately upon receipt of verification
    of recording and favorable completion of the bring-down title exam.  

    Disbursements include payment of proceeds to the parties to the transaction, pay off of existing loans, satisfaction of creditor liens,
    payment of taxes, payment of brokers' fees and payment of other closing costs shown on the Settlement Statement.

    We usually complete disbursement within two business days of recording.  We send payoffs for existing loans by overnight service to
    assure reliable, on-time delivery of payoff checks and the earliest possible termination of interest on such loans.

    When paying off FHA loans, lenders are entitled to be paid interest to the end of the month in which the payoff is made, unless
    received on or before the first day of the month.  So, it is advantageous to settle on transactions involving FHA payoffs not later than
    the 25th day of the month - a few days earlier on refinancing transactions where the cancellation period will be interrupted by a
    weekend or holiday.

    On resale transactions, the deed to the property will be sent to the buyers about three to five weeks after settlement, after return to us
    from the courthouse. Title insurance policies are usually issued at the time of closing and sent to buyers with copies of final closing
    documents a few days after the settlement.

    When we pay off loans, we also prepare and send to the lenders being paid off release documents to be executed and returned
    evidencing satisfaction of the lien.  These release documents must be taken to the courthouse and recorded among the land records,
    releasing the lien from to property sold or refinanced.

    Title Insurance

    There are two kinds of title insurance policies.  The lender's or loan policy and the owner's policy.  Your mortgage lender will likely
    require that you purchase a mortgagee title insurance policy to protect the lender's investment in your property - the loan.  However,
    the lender's policy insures only the lender against title defects that might affect the security of the mortgage loan - it does not insure
    you against any loss!

    With lender's coverage only, if there is a claim against your title, the title insurance company will only defend the lender's interest in
    court and will only bear the cost of settling the claim for the benefit of the lender - any claim paid will be to the lender and not to you!  
    The lender's title insurance policy is generally issued only in the amount of the mortgage and the insurance amount decreases as the
    mortgage loan is paid down.

    You should consider owner's title insurance to protect your own ownership - for as long as you and your heirs own the property - even
    if you initially have only a small amount of equity in the property to be insured.  Your equity will increase as time goes by, plus if there
    is a claim made against your title, the amount of equity is irrelevant in determining whether a legal defense should be undertaken on
    your behalf.  If you don't have owner's coverage, the title company will not defend your interest and will not pay you for any loss you
    may suffer as a result of the claim.

    If you are refinancing, you may already have an owner's policy and there may be little benefit to purchasing a new policy.  If your are
    purchasing a property, even in instances where you may begin with little equity, an owner's title policy is always a wise investment.
    When you secure an owner's policy at the same time your lender orders its mortgagee policy, your policy premium will be substantially
    lower than if you were to purchase only owner's coverage for the property at a later date.

    Potomac West Title is an agent for First American Title Insurance Company and will secure a title commitment and policies from First
    American Title, a national leader in the title insurance industry, which is part of The First American Financial Corporation, a Fortune
    500 company, and is rated A” by Demotech, Inc., an independent rater of title insurance companies.  If you desire the policy to be
    placed with some other company, you must notify us in advance of closing.

    Settlement Charges

    Our usual closing fee charged to buyers or borrowers is $250.00 to $300.00 ($300.00 to $400.00 for refinancing) and $225.00 to
    $300.00 to sellers.  We charge a fee of $75.00 to secure the release of each deed of trust or judgment lien on the property, or refer
    the monitoring of each release to reQuire, a firm which specializes in tracking releases: reQuire's fee per release is $35.00.  Our
    affiliated law firm, LLOYD MARTIN PLC will prepare a deed for a seller for a fee of $150.00.  If you compare these prices to those of
    our competitors, be sure to compare all charges - not just the "closing fee."  Many of our competitors have hidden costs, such as
    mark-ups in courier fees.

    Also, we do not charge extra for preparation and filing of the IRS Form 1099-B or Virginia taxation forms for sellers and we will prepare
    powers of attorney for any party to a transaction we close without charge..

    Additional Expenses

    In any real estate loan or transfer closing, there are numerous additional expenses over which we have no control.  These include
    commission on any resale, inspection and inspection report fees, lender charges, recording fees and taxes, survey and hazard
    insurance expenses and courier charges, to name a few.

    Lender charges vary with each loan being placed and you should request the lender's good faith estimate of lender's closing costs.  
    Estimates of some of the most common additional expenses related directly to the closing are as follows:

  • Title Insurance Commitment:  $75.00 to $150.00.
  • Title Abstract:  $80.00 to $150.00.
  • Digital Archiving Services:  $45.00.
  • House Location Survey:  $250.00 to $1,500.00.
  • Title Insurance: $4.68 per $1,000 up to $250,000; $4.44 per $1,000 over $500,000; $4.08 per $1,000 up to $1,000,000, for
    owner's Eagle coverage, plus $150 simultaneous issue fee for concurrent lender's coverage.  On refinancing transactions, only
    lender's coverage is generally necessary.  Original issue loan policy rates start at $2.90 per $1,000 coverage.  Refinancing
    loan policy rates are 70% of the original issue loan policy rates.
  • Courier Charges:  In most transactions, a buyer or borrower must pay for two courier fees to pick up and deliver loan
    documents. Sellers pay overnight delivery fees (e.g., Federal Express) for payoff checks and release documents to lenders
    being paid off.  All courier fees, are charged to the party requiring the service.  We do not add on extra charges to courier fees
    and we do not charge to courier documents to the court house for recording.
  • Recordation Taxes:  Buyers pay a total of $3.33 per $1,000 of the purchase price for state and local taxes on the deed of
    conveyance.  Buyers or borrowers also pay $3.33 per $1,000 of the amount of mortgage loan or deed of trust note for local
    and state recordation taxes on any deed of trust to be recorded.  Sellers pay a Virginia Grantor's tax of $1.00 per $1,000 of the
    sales price. Where the assessed value of a property is higher than the purchase price, transfer taxes are paid on the higher
    amount.   In addition, in all Northern Virginia jurisdictions, except Stafford and Fauquier Counties,  Sellers also pay $1.50 per
    $1,000 of the sales price or tax-assessed value of the property, whichever is greatest, as a regional transportation tax.
  • Clerk's Fees:  The Clerk of Circuit Court of the jurisdiction in which documents are recorded receives a fee of $48.00 for each
    deed,  $47.00 or $61.00 for each deed of trust and $27.00 for each miscellaneous document (e.g., power of attorney,
    supporting affidavit) submitted for Recordation and a fee of $47.00 for each certificate of satisfaction recorded.

    Our Pledge of Quality Service

    We pride ourselves on the quality and excellence of our service to our customers and clients.  However, we are not perfect, so if we
    do not give you the service you expect, in both a timely and cost-effective manner, tell us.  We also believe that our competitive prices
    always give you value for your dollar.  Please tell us if you disagree!

    Potomac West Title
    9316-A Old Keene Mill Road
    Burke, Virginia 22015-4285
    703-584-7744  (F) 703-584-7746
    lmartin@pwtitle.com
Consumer's Guide to Real Estate Closings, Services and Expenses