Understanding our jobs at settlement

“Ouch.”  This was uttered softly by a buyer at a settlement I conducted several years ago.  The word may have accounted for 25 percent of his English vocabulary but that single word said his interpreter was doing her job.

“Ouch” meant that he understood that in six months his mortgage rate would change, or more correctly stated, spike. His adjustable rate mortgage (ARM) terms included a margin so great that even if interest rates plummeted, his rate would be increased, markedly. Ouch. Worse, if he refinanced within two years, it would cost him about eight grand in pre-payment penalties. Ouch.

This buyer’s agent must have been thinking ”Ouch,” but for other reasons made clear to me when he asked to speak privately in the hall. “What are you doing,” he asked, “trying to kill this deal?” The agent not-so-patiently explained that he had invested a lot of time and had made many calls to find financing; and here I was trying to give the buyer reason to walk. This agent made clear that my conduct was not going to get me any more referrals.

So be it. As settlement agent, my job was to assure that the buyer understood the details of the transaction and that settlement occurred according to those terms. That the buyer was unaware of his mortgage terms meant that someone else had not done his or her job.  Settlements are not pro forma. They are hugely important and deserve the appropriate attention. There should be no consternation when obligations are defined, terms explained and the process described. This process may seem tedious and may cause your blood pressure to spike when someone covers something that you’ve taken care of or calls you out for something you missed. That’s the job of the settlement agent.

What’s your job at settlement?  Everything has gone well to this point and your client is ready to settle on terms previously reviewed and clearly understood, including those complicated ARM provisions. At the top of your to-do  list is assuring that the agreement of sale is satisfied.  Did the seller deliver what was promised? Scan the terms, addenda, corrective proposals and determine that all obligations have been satisfied.  If the buyer elected an inspection but never followed through, then by the terms of the Standard Agreement that contingency was waived. As a buyer agent you may want the buyer to initial and date “waived” that you write on your copy of the agreement. It’s your proof that you were not remiss; the buyer cannot later successfully claim that it was your fault he missed the inspection.

Settlement is the last opportunity to determine that there are no loose ends.  In many locales, you use a pre-settlement walk-through form to acknowledge that the property was delivered in its as-promised condition, or that tasks remain to be completed after settlement.  Regardless of the form or method, make sure the review happens and that all loose ends are resolved.  I suggest that this process takes place before the title agent begins his or her work. No sense reviewing the financial terms and mortgage documents if settlement is not going to occur.

Next, sit back while the title agent reviews the HUD settlement statement. Follow along and note anything that doesn’t jive with the agreement or the arrangements with service providers. Check your fee as well to make sure it is accurate. Mistakes happen. They are harder to repair after funds have been disbursed and the party’s over. Listen as the mortgage note is reviewed. Are the terms as you anticipated? You’d think the buyers would catch any mistake but we’ve all experienced buyers who are thinking about paint colors and moving and are not paying attention to the committed interest rate.

Be part of the process; stay in the background but ready to pitch in. Help gather documents for photocopying, get copies of drivers’ licenses. If the title agent is less experienced, gentle reminders may be appreciated. Did we get the deed signed? Yeah, we’ve all missed something at a settlement at some time or another and having a backup is easier than chasing parties after they’ve left the closing office.

When the closing agent’s done her job and the thanks and congratulations are exchanged, you’re almost there. As the new owner, the buyer needs keys, garage openers, appliance manuals and miscellaneous items that are appurtenant to the change of ownership. I’ve conducted closings when these things are ready to go. The prepared agent comes across as so much more professional than those who have waited to the last minute to consider this exchange, as trivial as it seems. Some say it’s all in the packaging.

Post-settlement follow up is tell-tale. Now that you’ve been paid will you be on top of your game? How long will it take before the listing broker’s sign is removed? Is that something that the buyer agent can, or should, help resolve? And if there were loose ends, will you be timely in your participation of the tying of those ends? A job well done, from your initial involvement to the last, is better than any marketing you can buy.