What Does a Settlement Company Do in a Real Estate Transaction?

Congratulations! You’ve found your new home and signed a Contract with the Seller. You have made it through the inspection and loan process. Now what? 

It’s time to go to closing (also called settlement). But what exactly does this mean? Well, below we will briefly outline some of the major duties of the settlement company or escrow agent and the role they play in the final stage of the homebuying process.

Let’s say you decided to choose KVS Title (“KVS”) to handle the closing of your purchase. Your real estate agent will then typically email the Contract to KVS, and upon receipt, KVS will open a file and order a title search of the property. But what exactly is a “title search”? A title search is a close examination of the public records of the property you are buying. The search reveals who the current owner is, if any mortgages are recorded against the property, if the owner has any liens or judgments against them, if any real estate taxes are outstanding and if any other matters are recorded that may affect the ability of the Seller to transfer clear title to you, the Buyer. 

Once the title search is complete an attorney from KVS reviews the report and determines what needs to be done, if anything, to be ready for closing. Below, is a brief summary of how KVS makes certain your homebuying process is smooth and accurate: 

Contract Review. After the file is open, KVS reviews the Contract for accuracy and completeness. A processor then contacts the Buyer or Buyer’s agent to go over options for the delivery of the earnest money deposit (EMD). The processor assigned to your file can discuss which delivery option may be best for you. Once the EMD is received, it is deposited in an escrow account maintained by KVS.

Title search. A title search is conducted by KVS to determine who is the legal owner of the property, if the Seller has any loans that need to be paid off, if any liens/judgments are affecting the property, and if any other matters are properly recorded against the property that may affect the ability of the Seller to convey clear title.  With that said, sometimes issues arise after closing that did not show up in the title search or were not properly recorded.  This is why Buyers are strongly encouraged to purchase an Owner’s Title Insurance Policy at closing to protect their interest in the property. For a more in-depth discussion, a KVS attorney would be happy to explain title insurance in more detail with you.

Survey. If applicable, KVS will order a survey to make sure the property is not affected by any encroachments, easements or rights of way that are not ordinary or customary (i.e. right of way for electricity to the house would be an acceptable easement/right of way).  Note: The survey is done by a licensed surveyor and is usually a basic location drawing of the property. Surveys are not done when purchasing a Condo. 

Seller information. KVS contacts the Seller to obtain information including, but not limited to: 

1. 1. Monthly/quarterly cost
   2. Any current violations
   3. Accounting of paid and outstanding dues
   4. Transfer Fees / Move in Fees
   5. Mortgage loan(s), if applicable, and contact the lender(s) to obtain a final payoff statement. 
   6. Condominium or Homeowners Association information (if applicable).
   7. Social security number(s) for tax documents, phone number, email address.
   8. Forwarding address
   9. Other information based on how the Seller holds title to the property
   10. Coordinate with Real estate agents. KVS contacts both agents to determine what to collect at settlement for their commissions, administration fees, and any other information (such as bills that need to be paid to a Contractor or reimbursement to the agent).

Work closely with Buyer’s Lender. 

1. Lender Title Order. This ordinarily includes the exact loan amount, full name of the lender and whether there will be one or two loans.
2. Prepare title insurance commitment for the Lender (also called binder). This set of documents includes: a letter to the lender that states KVS will issue title insurance if certain requirements are met, a current status of title, a preliminary settlement statement, and instructions for how the lender can wire the funds to KVS at closing. 
3. Obtains loan documents from the Lender (also called the closing package) along with the specific closing instructions. The final Closing Disclosure (CD) is issued by the Lender (while working closely with KVS) and the settlement statement is finalized (showing the same numbers as the CD).
4. Settlement date. KVS works closely with each agent to schedule a time with the Buyer and Seller that works best for them.
5. Final closing documents.  In addition to Lender documents, KVS prepares any remaining documents needed for closing including, but not limited to, the deed, county required forms, and affidavits. 

What happens at the settlement table?

Nowadays, the Seller usually signs their portion of the closing documents prior to the settlement date. So, you will most likely be signing your portion of the closing documents with a KVS attorney and your real estate agent. The attorney from KVS will go over the CD/settlement statement and explain all the documents that are in the closing package. The signing usually takes 30-45 minutes to complete. 

Note: the settlement statement is commonly referred to as the ALTA.

Be sure to bring a government-issued ID, such as a valid driver's license or passport.

You will know in advance how much money is needed for closing and will have the option to wire the funds to KVS or bring a cashier’s check that is made payable to KVS Title.  If you decide to wire the funds, KVS will discuss the process with you and provide secure wiring instructions. 

At closing, you will receive the keys to your new home. Congratulations!

What happens after settlement?

After settlement, KVS returns the original lender’s loan package and presents the Deed, Deed of Trust, and any other documents for recording.  After the Deed has been recorded, the Deed is mailed to the Buyer to keep for their records. 

Additional KVS duties: 

1. Wire seller proceeds from the sale 
2. Wire seller loan payoff 
3. Send the condo or homeowner’s association money that was collected at settlement 
4. Pay the final water bill (if applicable) upon receipt 
5. Pay third-party vendors in the transaction such as surveyors and pest inspectors (and others).