In today's episode, I am discussing closing with confidence on my podcasts, Get Me Ready to Buy and Get Me Ready to Sell. Closing is a process that involves persevering through various tasks even after a property is under contract. My guest, Amy Spicer, is a licensed attorney in Tennessee and Mississippi, specializing in transactional real estate law. Although this episode is not intended to create an attorney-client relationship, Amy provides valuable knowledge and experience in the field.

• 3:13 - What is closing?
• 12:11 - Title Search
• 21:36 - Title Insurance
• 25:58 - Buyer, do this to avoid problems at closing

Oftentimes an owner's title insurance policy is going to actually be helpful for you when you go to sell the house, even if you don't have a title insurance claim.

Say hi, Amy, how are you?

Hi. We're great. It is fabulous fall here in the south. Fake fall, I mean, right? It was 103 yesterday, but we're doing well.

Thank you for joining me. This is an episode that's going to be on both of the podcasts that I have Get Me Ready to Buy and Get Me Ready to Sell. And we're talking about closing with confidence because once we get a property under contract either to buy or to sell, there's still some stress that we have to persevere. What I talk about is persevere through the close because there's a lot of different things that have to happen. And close isn't just an event, it's a process that has us get through there. However you handle the ultimate event side, some things in the background that are running constantly during the process. And then when we finally sign paperwork, either as a seller or a buyer, that's where we get to meet with you or wherever we're closing. Because this isn't just about in the MidSouth, it can be anywhere in the country.

Sure.

So, anyway, so my guest today is Amy Spicer. We've worked together for, I don't know, a year and a half or so now on closings, and I've been trying to get her on the podcast for a while and we finally got our schedules hooked up. Today was a little complicated. So thank you for the extra time that you're giving us here on this. So tell us a little bit about you and how you got into doing real estate, being a real estate attorney.

Sure. So I'm Amy Spicer. I am licensed to practice law in states of Tennessee and Mississippi, and I will, at the front, disclaim this does not create an attorney client relationship. This is merely my knowledge and experience as an attorney. You should seek your own legal counsel. If you have a question, or better yet, you can call my office and you can get a hold of us if you have property in Tennessee or Mississippi. But I've been licensed to practice law about 14, 15 years. I'm very happy to practice happy law. A lot of what we do every day is very happy. We do transactional residential and commercial real estate. I do not go to court anymore, and I do not miss that. I'm very thankful for many of my counselors that do, but I at home surety. Am one of six attorneys licensed again in Tennessee and Mississippi that could assist you. So I'm glad to be with you today.

3:13 - What is closing?

Okay, good. All right. So I mentioned early on, as we were kind of doing the introduction, that closing is a process, but closing also happens as an event. And what actually happens at that event for either party, buyer or seller, what are we doing in your office or wherever we're closing? What are we doing in that office at that particular moment?

Sure so the word closing you're exactly right, is defined contractually different across the 50 states. And so what actually is closing versus funding you hit the nail on the head are two very different things. But once you see me in my office, you're going to sign, if you're a seller, a stack of papers about that thick. And if you're a buyer with a lender, especially if you have an FHA loan and down payment assistance, you're going to sign a stack of papers about this thick and the seller is going to convey the property in full to the buyer, and then the buyer is going to sign that they fully receive the property as the buyer. Then oftentimes they are also promising that property as collateral to the bank through what we call a mortgage or through a loan. And the bank has all kind of paperwork that you got to sign and make sure that their mortgage is secured to that property. And you have promised all of the stuff and things that they want you to promise in order for them to give you that exorbitant amount of money to purchase that property. So essentially, from my office's perspective, we want to make sure that we have the correct people coming in and signing the correct documents, because at the end of the day, we're going to issue a title insurance policy that assures the buyer owns the property outright, and the lender could foreclose if there's ever an issue.

And so when we come to your office, we're just going to assume that I'm bringing one of my clients to your office. When we come to your office, especially if it's a buyer, we're also signing at your office all those loan documents that go back to the bank. They have nothing to do with the agreement between the buyer and the seller. And it's just for us, it means they don't have to go to the bank and sign paperwork there for the loan, but they can do it all in one spot, which is why it takes a little bit longer and buyers have more paperwork to sign.

Sure. Obviously, banks are not just going to hand you over a cachet full of hundreds of thousands of dollars. They are going to make sure that their mortgage is legally secured on the property. Which means you're going to sign what we call a deed of trust. So all the buyers who are going to be on the title to the property are going to sign a deed of trust that just pledges we file it in the public record, tells the world that this property, we owe the bank money on this property. Excuse me. And then when we go to sell the property, when we do a title search, we pull all the public records and my office knows that a bank is going to be contacted to get a payoff on that. Consequently, should a home buyer pay off their entire mortgage before they sell the property or refinance, the bank is then going to file a subsequent release to that. But that deed of trust and the note right, your promise to pay the bank the money you're borrowing hello? Are the two generally most important documents that a buyer is going to sign if there's a loan. But they do have to also sign to receive the property or technically there is a lapsed conveyance. Isn't that fun? So you cannot convey property to somebody who doesn't receive it either. So that's when it kind of gets in the weeds for closing. But essentially you're going to come to my office, you're going to show some IDs and you're going to sign a whole lot of documents and you're going to leave having sold or owned that property outright.

And I know buyers and sellers can be all kinds of ages, numbers of them. For a typical seller, if it's two people married or they jointly own the property, if two people are coming in to sign typically about how much time should they plan to be there signing their paperwork?

Generally we say about a half hour. We could if I know you've got to get somewhere, take shorter. We could if you've got a bunch of usually it ends up in stump the chump questions at the end. It could take longer. We're there for as long as you need me. But usually about a half hour for a buyer.

And if you're a buyer, how much time should you expect if there's two of you coming to sign paperwork?

Usually for a buyer it's going to take about an hour.

Okay. That's kind of my experience of what I kind of tell them. Rule of thumb. So just know and if you're selling a home, just know that when that buyer is going to go to closing they're going to be a whole lot longer than you. They're going to be a little more stressed out because they're going through borrowing all this money and they're making this huge commitment to be able to buy your house. So sellers are probably going through some stress of leaving behind memories and things. But buyers are also going through a different type of stress to be able to close on that home to actually get title. You mentioned earlier about transfer of title. When does that title technically transfer ownership to the new owner?

So this is going to be state specific. It's going to be different in every state in the country. And obviously I'm going to point you to what it says in the contract for when title actually transfers. Usually again, I'll speak to Tennessee and Mississippi, it's going to say title is transferred with signing of documents and payment of funds. So in our world there's a difference in closing, which is signing the documents and funding, which is when the seller's title company receives all of the money. So not until the seller's title company receives all of the money has the property fully transferred essentially to the buyer's ownership. So I say all the time to our clients, no bees, no honey, no keys, no money. Why are keys mentioned? Because it's not the buyer's house yet until the seller's title company gets all the money. So if you're a buyer anxiously anticipating to get into that beautiful new home that you just purchased, you have to wait until all the money is transferred and it has to be good funds, which means we care that a bank is open, the federal wire desk is open to be able to transfer those funds. So if you don't have a great real estate agent like Jeff Jones who's going to tell you not to close at Friday at 04:00 p.m., we are bound by wire banking hours. So there's a lot to coordinate. As far as timing of closing, it's going to be important to make sure that your expectations are known to your real estate agent so that your real estate agent can best direct with the title company, with what time the seller is signing, coordinating all of those things. Also remember we had this happen this week. Your client or seller or buyer or somebody might not be signing geographically close to you. So even if their title company is down the street, they may be signing in Chicago and shipping those documents to the title company. And so that is additional time and space that's going to be between funding because a lot of title companies are included, will not fund based on copies. They have to have an original that is going to be filed in the public record before all of everything is done and dusted. So that's a lot of plate spinning. So again, make sure your expectations are known for when you need keys. Even if you don't need keys, you think, oh, I'm just having the place cleaned, we don't need in. No, that's the same thing. You need the keys.

There's a lot of liability if those cleaners got or if those cleaners started a fire, anything can happen there. Our listeners. You should have a real estate agent who's explaining all that to you. And if you're this far into it, you should have also been contacted by whoever you're closing with because they'll contact you too, to make sure they have the right phone number, the right email address. At least that's the experience in our market. And as Amy made a disclaimer at the very beginning, I don't have any kind of agency relationship with you either, unless you have asked me to represent you buying and selling, and you're in my market in Tennessee or Mississippi, where I'm licensed to practice real estate. But you should know these things, and it is going to vary from state to state. You will hear stuff about Escrow. And in our market, from what I understand, escrow is where our money gets stored. And it may be a technical thing, but like in California, I've been told it could take 30 days after closing for money to transfer. Sitting there. It just varies. So you just need to know in your state, talk with your real estate agent. Talk with your real estate attorney to make sure you understand what's going to happen in your state, where you're located to where you'll know when you're actually able to get possession and take ownership of that property.

12:11 - Title Search

And then we've been talking about title, and I know one of the things that you do in the background is a title search. What does a title search do?

So a title search is going to look through the public land records for the geographic location of the property. It's going to search the names of the people involved on the contract, and it's going to search the property generally by tax parcel, sometimes by address, usually. Remember, we can only go by the contract. So we're going to search the geographical land records for the property, and we're going to hope to uncover all of the past deeds, usually at least for 50 years, if not to the last warranty deed. We're going to search for judgments, liens, bankruptcies, divorces, probate, anything that could challenge the buyer's ultimate ownership of the property. That is what we're going to look for. It's essentially exploratory surgery because a lot of people say, hey, what is title insurance? Why do I care? Because oftentimes the property you're going to purchase is the largest investment you're ever going to make in your entire life. And just because for the same vein, you wouldn't have an inspection or make sure it's not full of termites or make sure the foundation is good or it's got a great roof, if the paperwork is wrong, you might not own anything. And so people kind of understand, okay, I can see that there's broken windows or rotting wood, but when we pull a title search, it's going to do the same thing for all the paperwork. And sometimes it's perfectly fine. And I think this is great, wonderful insure it all day long and sometimes we go, oh my gosh, this thing has been through tax sales. The seller is currently in bankruptcy and divorce. They inherited it from their great grandmother and everybody's dead and it overcomplicates things. And so that's oftentimes, to your point, the sort of duck's feet under the water that people don't see us doing in the background, they just think, oh, I'm going to go in and sign the paperwork. Oh, it's great. But at the end of the day, if you don't know and you're not trusting an experienced title attorney title company, how do you know you own your house? So hopefully a title search will give us all of the things that need fixing in order to ensure that you do.

Don't give any details, but briefly, just give a kind of 50,000 foot view of an incident where you've seen somebody come back and make a claim against title.

Sure, it happens. A lot of people think title insurance is you hear these things, oh, it's bogus. Oh, you don't need it. Oh, you do a title search. But several times there are mortgage companies that are bought and sold. I mean, obviously 2008 happened, okay? We all know it happened. And so those mortgages, just because they're not currently collecting on that mortgage doesn't mean that it's completely gone if there is not a separate release. Remember I said earlier you're going to sign a deed of trust that tells the world you owe the bank money on the property, but then if the bank doesn't file a release that says, hey, you good, then technically they can always come back and recover on that. And so a lot of the times a seller will say, hey, they haven't attempted to collect on this. It's what we call an ancient mortgage. It doesn't mean it's gone, it just means that they haven't tried to collect, which is a potential claim. We are seeing a whole lot of fraud, a lot of seller impersonation fraud. We've recently seen a fair amount of fraudulent deeds. So there are always criminals attempting to steal not just your tangible property, but also your real property. And public records are very readily available, which is both wonderful and terrible such that those can get in the wrong hands. So that would be claims from ancient mortgages. Also we are seeing claims from just people who have not gotten everybody to sign off on the deed. Oftentimes we have an older person who was able to purchase property and then that's handed down and people just think they've inherited it because somebody told them they inherited it. And there's not really a challenge yet, but once it goes down through the generations, if all those steps aren't taken care of, then you could have a challenge from your cousin, third cousin from the left who didn't sign off on their requisite portion of the property. Oftentimes too, we'll have judgments that are missed. Somebody in bankruptcy doesn't had one, not a claim. But somebody the other day called. They were talking about selling a property and they mentioned they were in formal bankruptcy. And I said, well, wait a minute, you're unable to do that. And they were very confused because their mortgage from their primary residence was not included in their bankruptcy plan. And so they truly believed that that property as an asset was not over the umbrella of that bankruptcy. But when you file bankruptcy, just like when you file for divorce, you tell the court, hey, these are all the things we own. These are all our assets. These are all the debts. This is everything. And technically you're in charge of it. And so without an order from the bankruptcy court, you cannot convey real property. And quite innocently, this seller just thought they could. And so it's little things like that that are, yes, very idiosyncratic. But if you do not have an experienced professional at the helm, there again your largest asset is in jeopardy.

Yeah, and I know you've said this before, we go by what's written in the contract and pretty much everything is negotiable. I know on my end I can just fill in blanks, but we can put anything in there in negotiating. And you help me understand a little bit better why I go through the process on my contracts to purchase of putting in the property address, putting in the parcel ID number, even going through and finding the legal description, it's like, why do we need all three of these in here? And now I understand that better. And especially I've had to deal with this before and I'm working with a buyer right now that we're looking at a piece of property that the listing says it's 4.6 acres. However, the parcel ID says it's one acre. There is a 3.6 acre second parcel, same owner, deceased, same person inherited that says they're selling it all. But the listing agent only put in one parcel ID. Well, I already know if we go to make an offer, I'm putting in two parcel ID numbers and two legal descriptions so that we know all of those parcels are included in this purchase. So we don't have to worry about that. And this can be changed in the contract, but typically in our market, who pays for the title search?

Sure. And Jeff, you hit a great point that also needs to be outlined in the contract. Who is paying for the title search, the title attorneys, the doc prep, the recording, the title insurance policies. Oftentimes they're not huge costs, but that is where agents get absolutely. We see more money issues with those little things and they tend to be sort of the straw that broke the camel's back right after a long time of negotiation. And you're all through a lot of escrow, a lot of closing. And then we get to these who pays for what? Generally in our geographical area, which is in the mid South Memphis metro area, the seller is going to pay for the cost of obtaining the title search. The buyer is going to pay for the cost of the lender's and owner's title insurance premiums. Each party is going to pay for their own attorneys and doc prep, and then buyer is going to pay for the cost of recording the warranty, deed and deed of trust.

I do know the ones I see in Tennessee. It spells out seller pays title search, buyer pays title insurance. I guess it's a given that you're paying for your own attorney. What I'm hearing from you is I need to have language in my contracts from this point forward that specifies that my client, whether it's buyer or seller, is paying for X when it comes to closing, any other closing costs are going to be responsible for the other party. Okay, we need to be wrapping this up because I know we were a little delayed getting started. We said title search, title insurance, just real quickly.

21:36 - Title Insurance

You mentioned title insurance for the buyer, the new owner, and title insurance for the lender just real quickly. Those two different options.

Yeah. So a lot of people is title insurance necessary? Do I get it? When I see the settlement statement, it looks like I'm going to save $2,000 by not getting it. Talk to me about it. So lenders title insurance is going to be required if you are using a lender, if you are financing any portion of the property, and it's not through seller financing or other private means. So that is going to be a required policy which will require a title search, require attorney examination, will require all of those things. Many of the larger title insurance companies are going to give a discount if you buy lenders title insurance policy and owners title insurance. Owners title insurance is optional, just like any insurance is optional. Do you want car insurance, do you want homeowners insurance? But oftentimes that discount is going to be substantial. Pretty substantial, yeah. So for owners title insurance, it is a one time premium. You are going to pay it the day you close on the property and it is going to protect you the whole time your name is on the deed. So when you consider risk versus reward for paying that one time fee and having that coverage the whole time your name is on the deed, oftentimes it is incredibly affordable for the coverage that you get. And like I said, because they give that simultaneous issue discount, oftentimes it's going to be $200, $400, $600 ultimately in a difference if you were not buying owner's title insurance and just buying lenders title insurance. Because if you just buy lenders title insurance by itself, that lender's title insurance is going to be more expensive.

And this is a whole different podcast episode. But the reason that that lender is asking for all that stuff is they're protecting the money that they're borrowing. So even though you might want to refuse homeowners insurance, the lender is going to get it on your behalf and you're going to pay for it. The lender is also collecting typically one twelveth of your annual taxes. So they make sure the taxes get paid typically may not be in every case, but they want to make sure that the local government they want to make sure if there's any damage from any kind of accident or catastrophe or somebody comes up, makes a claim on it, that they can still get their money out of it, that they've invested. So they're going to make sure that they have title insurance protecting them, homeowners insurance protecting them as well as making sure the taxes are paid.

Sure. I often get asked, hey there's all this insurance, I'm buying homeowners insurance, I'm buying owner's title insurance, I'm buying lender title insurance. What's the difference? Homeowners insurance is going to protect the physical structure of the property, right? Fire, you mentioned tornado. Lenders title insurance is going to protect only the bank in case they have to foreclose. It does absolutely nothing for you, the buyer. Owner's title insurance is going to protect your ownership interest. On paper it's going to say that as of the day of closing backwards, you own that property outright and if somebody comes to challenge you, we'll protect you. And again, when you consider this is the largest investment you may ever make, this is a legacy changing event for your entire family. When you consider the cost versus reward, I would think it's worth it. But again, we're happy to talk to you. It is totally optional. Oftentimes too, as just a matter of logistics, I see an owner's title insurance policy as a get out of jail free card for when you go to sell the property. So a buyer's title company is the one that actually issues that policy. Well, insurance is a risk assessment. So just because I pull the public records and I say, okay, oh, my gosh, this is crazy. There's six things wrong with this, and we fix them and we're fine, it doesn't mean that when you go to sell this property, a different attorney is going to have a different assessment. And they may say, oh, my gosh, they did that? This needs to be fixed. And so oftentimes an owner's title insurance policy is going to actually be helpful for you when you go to sell the house, even if you don't have a title insurance claim.

25:58 - Buyer, do this to avoid problems at closing

Thanks for all that explanation. And just real quickly, a couple of things. What could cause problems for the buyer at Close? When they show up to sign documents and we go, uhoh, you're not able to sign, what are those issues that could cause a problem that we need to make sure we don't allow to happen?

Always the hill I die on is using your correct name. I need the correct name that matches your driver's license, that matches your Social Security card, that matches your passport. If you have more than one name, tell your agent, put it on the contract. The lender needs to have the same name as the title company, needs to go on the contract, needs to go on the deed of trust. All that needs to be the same. Secondly, marital status is going to matter. It does matter who has to sign the deed of trust even if they are not going on title. If you are married to them and living in a house with your spouse, potentially your spouse may have to sign the mortgage documents as well. And then again, like we said earlier, timing of closing. If you're expecting the seller to complete a bunch of repairs before closing, if you are expecting to get the keys in order to measure for drapes or have the carpet removed, then you need to tell your agent that we are concerned about who signs what, when and when the money gets where. Those expectations of timing. And then finally we've had an uptick in people attempting to transfer funds from not automatically good fund sources. What do I mean by that? When you go to buy a house, you're going to wire the title company money in order to pay for it, right? Those are your closing costs. That's what you need to bring to the table. And oftentimes that needs to be a wire. My office doesn't accept cashier's checks at all and we've had an uptick of people using Chime, using Venmo, even using other companies that are not banks that cannot wire funds. And you've got $20,000 stuck in an account that you can't send me and it is an issue. So yes, those are the things name, marital status, expectations and then make sure your funds are automatically good and you send a wire.

Okay. Hey Amy, thank you so much for joining me on the podcast today. I hope that we've been able to help folks have a little more confidence when it comes to closing on their property so that they can live where they want to live, whether. They are moving out of what they're selling or moving into what they're buying. We know that they're selling or buying because they're ready to live somewhere different. And I appreciate you for being here with me today and I look forward to continuing to work with you.

Thanks so much. Happy closing.

Yes, thank you. Have a blessed day.

Yes, you too.