I had a closing yesterday for a great upscale Lancaster City townhome. Everything went smooth even though the lender was coming out of California (no reflection on my home state). Our title guru, Jim, had arranged things so that the package was here with time to spare. The buyers had availed themselves of an incredible deal offered by the lender (nationally-known) - the lender paid all the closing fees and still had a competitive rate. Very nice! Our in-house mortgage rep reviewed it and couldn't match it. Hmm...where's the catch? Come on, there's got to be a catch? Aren't they making $$$ on the back end? Maybe so, but all the terms looked clean.
At the settlement table things got interesting. The seller was a single lady who was leaving the area. When her
agent arrived he questioned the payoff amount immediately, and asked the see the payoff letter. Oops! Turns out the seller had refinanced last summer and the new loan contained a huge prepayment penalty! She was livid. The agent was both embarrased and frustrated for her (or would that be "with her"?). The buyers and I looked on during all this commotion. The seller claimed that the Loan Officer had not told her this, and that she had told him she might sell soon. This mistake cost her almost $6,000 right off the top. Talk about a rude surprise!
Well, my buyers got their turn. Buried in the buyer loan docs was a single piece of paper regarding a "buyer protection plan" that went along with the loan. Whoa now! Jim (title rep) asked the buyers if they were aware of this and of course they were not...the bank was giving them the first year "free" and the monthly fee would be $37 for the life of the loan! That's almost $4,000! We were naturally concerned that the great deal on closing fees was predicated on the buyers signing this document.
Thankfully, after Jim got the lender on the phone they agreed to let the buyers waive this "protection plan". My immdiate thought was "how many bonehead title people just make the buyers sign this because they don't understand it" and "how many buyers don't actually read the stack of loan docs and would sign this?" My folks, happily, managed to avoid it and have a great home at a great price. The seller, on the other hand, did not do so well at the settlement table.
What's the moral of this story?
- If you're a buyer, ask your loan rep if there's any fine print - make sure nothing new is inserted at the settlement table.
- If you're a seller, ask your lender if you have a prepayment or other fee should you sell now.
- If you're a listing agent - ask your seller if they've asked the lender yet!
- If you're the buyers agent be ready for all eventualities, and communicate with the title rep.
Homefinders, Real Estate in MD & VA, Lenn Harley, Broker, New & Resale Homes
This is great, Lenn - the listing agent was on vacation in the Caribbean up until the day of closing! Apparently he didn't review the faxed Hud sheet the morning of. The difference in payoff would have been glaring, I'd have thought.
Jeff, I have annoyed more than one settlement agent on my own purchases by reading the fine print on all the papers put in front of me while everyone waited. Your story illustrates why you can't trust that there won't be little bombshells in the mice type.
Cute graphic, BTW.
Brian Schulman - Your Lancaster County, PA Real Estate Professional
You've got to at least skim through the docs looking for unusual forms, and grill the title agent as soon as they receive them. Things shouldn't explode right at the table unless nobody's doing their job.
Camarillo CA Real Estate Agent/ Mana Tulberg
Mana, great to hear from you. We all have to be diligent to check and doublecheck the closing docs...
We (Title ) explain as much as we can at the table... but Jeff, you seem to imply that it's the TITLE COMPANY'S responsibility to be the negotiator of the loan.
"My immdiate thought was "how many bonehead title people just make the buyers sign this because they don't understand it"
I'm not sure how they do it way out in Lancaster :^) .. but I can't imagine any Title Company MAKING a buyer or seller sign ANYTHING. The REALTOR and LOAN OFFICER have a duty to review these documents with their clients prior to close.
Would you suggest that the Title Company advise the clients that they should not sign because they could get a better Loan percentage than stated? Perhaps that they should negotiate the Realtor commission down? Etc.?
Title companies are not the blame here and I'm surprised that your 'immediate thought' was directed towards them.
Hi Gita - thanks for your comment. The fine print is especially important in the mortgage docs - we can get complacent thinking they're all the same.
Rob Robinson- Lehigh Valley PA
Touchy touchy! Read the post again, Rob...look at my 4-point moral. My thrust was towards the seller for not following through with the payoff issue, and the buyer's bank for being sneaky. The title agent was a hero, actually - his catching the extra fee was a big win for the buyers. Keep in mind, once the deal is at the table a lot falls on the title officer to ensure everything flows well. The title officer is the contact for the mortgage processor, who is the one ultimately controlling the sale via his/her "Clear to close". If you're an agent who has a thorough, knowledgeable title officer keep them!
Melina Tomson Salem Oregon Real Estate Consultant
Thanks for stopping by, Melina, and good for you in pushing for attention to detail. It's so easy to get lax over time...
Jeff....... Title Guys are like the Rodney Dangerfields of the Real Estate industry. Monday morning... geeze touchy is an understatement.
You nailed it with your 4 points... kudos.
I've been around a few closings where a consumer gets cold cocked... and we tend to take 'the hit' so as to protect the Realtors and LO's involved.... and get the deal closed if that's what the party's want. (We offer to be thrown under the bus... but it really doesn't feel good :^) )
I withdrawl my protest. I should stop reading the fine print and read the BIG MESSAGE. HA !
Jeff
Good information... I am lucky to have agreat title company I work with...
Rick
Rob Robinson- Lehigh Valley PA
I think title folks are a bit of an unsung hero.
Nestor & Katerina Gasset, Realtors® Wellington Florida Luxury Homes
Thanks for the resounding vote of support - you should give out their name so others can use them in FL.
Rick Kellow
Thanks for stopping by, Rick - keep sending them your business!
Margaret Woda, Maryland REALTOR
Oh, I think they need us alright, Margaret - it's just that they don't think they do (until things hit the fan).
I've seen this happen to two different sellers in the last year that were not aware of pre-payment penalties and were pretty upset at the closing table! You need to check that kind of stuff, especially when the buyer is planning to sell within the next two to three years.