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Flow Of Information During A Real Estate Closing

Ask the Real Estate Lawyer: Real Estate Law Q&A

REM #LAW 639

By Ilyce R. Glink and Samuel J. Tamkin

Summary: A reader has a terrible time at the closing of their first home. Ilyce and Sam talk about the role of the agent, title company, and buyer.

Q: I recently closed on a house and went to the city utility department to put the trash and electric utilities in our name.
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The city told me that the prior owners owed over $4,000 to the city. The prior owner had started to make payments to the city to tie the property into the city water and sewer lines, but neglected to mention any of this – or the fact that they still owed thousands of dollars to the city – when we made our offer to purchase. (After a perfectly awful day of fighting, the sellers have agreed to pay the city in full.)

I feel that my real estate agent, if she's as experienced as she says she is, should have known to look for this. This was our first home purchase, and I feel she did nothing to help us with the deal except complete the contract.

Shouldn't the title company have found this outstanding bill? Is this something the owner should have disclosed?

It was at the closing, that we found in the paperwork that the county had issued a variance for the septic system to be put in when the house was built. Again, here was no one there to interpret it for us.

In addition to this, we had no idea what to expect at the closing. I called the title agency the week before to set an appointment. It was told that they would call me to tell us when to come in. The closing took, with travel time, around five hours.

The title company called us at the last minute to come in and sign. They failed to tell us what to bring to the closing, including the bank check. The title company person closing our deal could barely explain the settlement charges to us let alone any of the paperwork or documents found on the house.

Shouldn't we have been allowed to review all the documents, information and settlement charges on the house before the day of the closing? Is it the title company's responsibility to interpret the information they've found on the house? Shouldn't our real estate agent have explained the closing process better?

We just received the deed to the house and the owner’s policy of title insurance in the mail last week. Does it usually take five months to receive these documents?

A: You certainly had a painful experience in buying a house. Luckily, your seller was honorable and paid the charges that were owed to the city.

Your question is basically a question about the flow of information during a real estate closing. You were first-time buyers and needed assistance in obtaining and processing information.

Let’s start at the top: It isn’t the real estate sales agent’s role to “represent” you in the real estate purchase. Many, if not most, real estate sales agents do provide some hand-holding and are able to provide useful information for their clients throughout the whole process. Yours, perhaps because she was new or busy with other deals, did not.

However, real estate sales agents are not attorneys and cannot replace an attorney in a real estate transaction.

In those parts of the country where real estate agents do not normally assist buyers and sellers in a closing, the buyers are left only with their real estate sales person as a guide during the whole process. Frankly, in this case, it’s buyer beware: It’s up to you to find out everything you need to know in the transaction.

You may think that the real estate agent should have known better about the city charge on your account with the city and should have told you about it. But that is not her role. If she had know about it and thought to tell you, I’m pretty sure she would have.

But as your real estate agent, her job is to assist you with finding the home -- not in making sure the home was in good condition, not in making sure title to the home was proper and not in obtaining financing for you.

You should have hired your own professional home inspector to make sure the property was in good physical condition. You should have interviewed several mortgage brokers or lenders to find a reputable, responsible person to help you with your financing.

The gap that is left is the legal review of the property. In many cases, nothing goes wrong. So real estate agents in some states have been successful in persuading consumers that they don’t need to hire their own attorney – or tell them that the mortgage company’s attorney is the “attorney” in the deal.

But that isn’t the case. If you haven’t hired your own real estate attorney, you are not legally represented in what will undoubtedly be the single largest purchase you will ever make. For the few hundred dollars it would cost to have a real estate attorney assist you, you’re betting that nothing will go wrong. That’s quite a risk.

Let’s talk about what the title company’s role should be, because here you seem confused as well. The title company’s role is to close the transaction on behalf of the lender or as an uninterested party on behalf of the buyer and the seller. It isn’t up to the title company to tell you what to bring to the closing. Your agent should have told you or your attorney, had you hired one, would have given you specific instructions.

Even if the title company knew of the amount owed to the city, if the amount was disclosed on the commitment for title insurance and you did not read or understand that document, that’s on you, not the title company.

If the title company’s commitment for title insurance does doesn’t exclude these types of debts, and they missed the amount, the title company may have had to be responsible for the amount owed to the city.

Unfortunately, you fell through the cracks of an imperfect system and did not have someone next to you for the whole home buying journey.

Whether the fault lies with your agent or your title company or yourself, it seems that you weren’t kept in the loop and informed throughout the entire transaction.

While people who use attorneys also have perfectly awful closings at times, at least if you had a real estate attorney you would have had one more layer of protection – and it would have been someone who had no vested interest in seeing the deal close.

While the home buying process was painful for you, fortunately you suffered no loss and can enjoy your new home.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com