The last of three parts.
Dealing with the myriad legal details at the closing can be one of the most difficult parts of selling your home without a real estate agent.
In previous columns, we’ve outlined the advantages of a for-sale-by-owner transaction — mainly, saving tens of thousands of dollars in brokerage commissions — and examined how to get started with the presale fix-up, required disclosures and contract negotiation.
Here’s what you need to know to navigate the settlement process when you’re trying to go it alone:
●What is a settlement? The settlement is essentially the point in time when all the buyer’s and lender’s money is in the settlement attorney’s escrow account; when the deed and related documents are signed by sellers; when lender’s documents are signed and all financial adjustments among the parties are calculated and disclosed on the HUD-1 settlement sheet.
●What is a HUD-1? The HUD-1 form was created by the U.S. Department of Housing and Urban Development and is used nationwide to uniformly disclose all of the financial aspects of a residential real estate transaction. This three-page — and virtually incomprehensible — disclosure document is prepared by the settlement attorney. The parties are entitled to receive a copy of the HUD-1, upon request, one day before the settlement. Unfortunately, since lenders often fail to provide their figures until immediately before settlement, it is practically impossible for the settlement attorney to provide a complete HUD-1 much before the settlement.
●Who selects the settlement attorney? By law, the buyers have the legal right to select their settlement attorney. But not all settlement attorneys are alike. Some are completely independent. Other settlement attorneys work for title companies that are co-owned by the real estate broker or lender. In such cases, the law requires you to receive an affiliated business disclosure form to warn you of this affiliation. You may be surprised to learn that you do not need to be a lawyer to conduct settlements or hold the escrow funds. There are many experienced, non-lawyer settlement agents who do a fine job.
●Does the settlement attorney work for me? Unlike a typical attorney-client relationship, in which the attorney has an exclusive, fiduciary duty to his client, the settlement attorney represents “the transaction.” Representing the transaction means that settlement attorneys do not represent any one party’s interests exclusively. Rather, they represent all of the parties on a non-exclusive basis. They make sure that the buyers’ and sellers’ interests, as expressed in the contract, are implemented.
They represent sellers’ interests to the extent that they properly pay off the sellers’ existing mortgages and prepare and record the deed. Settlement attorneys represent buyers’ interests to the extent that they ensure that the buyers are purchasing a property with clear title. They will offer buyers optional title insurance (lenders insist on obtaining title insurance at buyers’ expense) to protect the buyers’ investment and will coordinate the signing of all the lender documents.
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