In real estate parlance, a "wet" settlement is better than a "dry" settlement.
In the liquid kind of transaction, the home seller gets hir or her money right away - along with the seller's lender and anybody else with a claim. In Maryland, the District and most areas of Virginia, "wet" settlements are standard: money is put on the table and disbursements made then or very soon thereafter.
But in Northern Virginia, settlements have been getting "drier" as sales and settlements have increased and transactions take place without the on-the-spot lubrication of money.
Some 15,000 residential settlements were made in Northern Virginia last year, an average of 65 every working day.
Law and custom in most areas of the country have traditionally called for cash on the table when houses are sold. Virginia has no regulation to this effect, but elsewhere in the state, it is apparently the practice to have immediate or relatively quick disbursements by attorneys handling the settlements.
In Northern Virginia, on the other hand, this procedure often takes weeks, particularly where the market is exceptionally active. Many attorneys who handle settlements exclusively are reported to be overloaded with work.
In fact, the problem has become so chronic and embarrasing that the Northern Virginia Board of Realtors has lobbied, so far unsuccessfully, with both the Virginia Real Estate Commission and the Virginia legislature for some legal clout to speed up the complete settlement process. A recent syposium (sponsored by the board and Steed Mortgage Co). brought together lenders, realtors, title insurance company executives and settlements attorneys for a hard look at the problem of delayed disbursements ("dry" settlements).
Delays are so long now that realtors consider a three-day wait fairly short.
There sems to be no argument that the seller of a residence is hurt most by this situation and that much of the responsibility for delays lies with realtors, settlement attorneys and lenders.
"If all did their jobs perfectly and punctually, "wet" settlements would be routine," said Arthur Kogstad, executive vice president of the realtor board.
Real estate industry professionals point out that the seller of a house is penalized by having to continue to pay interest on the original mortgage during the delay period. Meanwhile, the buyer is also paying interest on the new loan.
Sellers apparently have not raised a big fuss about the delay because they are already committed to their transactions and have been warned by their agents and attorneys to expect delays.
Gary G. Peterson, a Northern Virginia lawyer who specializes in residential settlements, estimates that sellers are losing an average of $12 in interest for every day that settlement disbursement is delayed. "Naturally, they do not like it and they should not have to accept unreasonable delays of a week or more," he said. "But some of their possible complaints might be muted because most of them are making a considerable profit on the houses they are selling these days. However, in many cases, the sellers are committed to buying other houses here or elsewhere and really need the money."
Attorney Beau James Brincefield, who appeared on the "wet" settlement seminar panel, pointed out that disbursement delays also hurt real estate brokers, their agents and even the new lender. He said commissions are not normally paid to listing and selling agents until disbursement is made. "If there's a problem about the new loan, then the lender (often a mortgage banker) cannot sell the loan and recover the money to make more loans until the loan deficiencies are corrected."
John W. Underwood, vice president and division manager of Chicago Title and Insurance Co. in this area, said that Northern Virginia settlements, even though they are many and involve varied attorneys and jurisdictions, should be more punctual and in line with promptness experienced in Maryland, D.C. and New York. He said: "The settlement attorney should make certain that all requirements are met prior to settlement day and that the lender has his check ready to be put on the table if conditions are met for the loan. It seems that we need legislation in Virginia to require that the proceeds be brought to the table."
But, as attorneys Brincefield and Peterson agreed, the title - after the preliminary search before settlement - must be "brought down" (checked again to final date of settlement) by the attorney after the actual signing before being safely able to disburse proceeds. Some attorneys are said to be dilatory in going to the courthouse to make the final check on the title after settlement.
Attorneys and others involved in settlements pointed out that some Northern Virginia attorneys take pains to complete settlements and make disbursements while others procrastinate and find it inconvenient to get to the courthouse.
Meanwhile, all documents must be in order for the settlement. Common omissions are failing to get termite certification in proper form for FHA or VA closing, failure to produce a receipt for the homeowner's, insurance policy or lack of documentation of local government approval of a well or septic tank. As Brincefield pointed out, if any one procedure is missed by anyone involved, then the delay affects the total transaction.
Realtor Donald Childress, an officer of the NVBR, said lenders are reluctant to take the extra steps needed to make funds available for instant distribution. He said it was "our responsibility as realtors representing the sellers to put more pressure on the new lenders and make them feel competitive and thus obliged to give better service related to funds being available at settlement or soon thereafter."
As a spokesman for the lending side of the settlement, Howard E. Click, Virginia branch manager for Steed Mortgage Co., said: "We love to see money piled up on the (settlement) table. Our interest in getting the loan sold to a lender and getting the servicing fee on the mortgage over the years. Delays in disbursements cannot be laid at any one doorstep. It must be a matter of everyone working together - realtor, attorney, title insurance company and lender. It seems inevitable that legislation will be needed in Virginia to weed out those not doing their jobs effectively."
One summation of the recent symposium designed to highlight the need for quicker disbursements after settlements in Northern Virginia indicated that:
It is possible for "wet" settlements to become the custom rather than the exception.
Some attorneys and some real estate professionals are careless or inept in performing their duties.
Lenders often impose too many restrictions on settlement attorneys, causing delays in disbursements.
Voluntary efforts, including a suggested model settlement procedure distributed by the Northern Virginia Board of Realtors, failed to bring results.
As the result of the symposium and the increasing pressure among active Northern Virginia settlement attorneys, the awareness of scores of varied sources of mortgage funds and the resolve of organized realtors to quicken the settlement process by better preparation in the seller's behalf, Virginia legislation may proposed and possibly passed. Even if no formal action is taken in Richmond, the Northern Virginia Board of Realtors sees the possibility of a legislative focus on the problem of disbursement delays and "dry" settlements as likely to prod recalcitrant parties to more efficient performances of their obligations to expedite the transfer of title and funds involved in the sale of a residence from one persons or persons to another or others.