Commercial Real Estate Blog by Madison

Real Estate Closing: When it Comes to Closing Time, It’s Not Quite A Happy Hour

The big day has arrived.  The buyer, seller and lender have finished their jockeying for position and decided on the settlement terms for the purchase of a Commercial Real Estate property.

Today, commercial real estate settlements take on one of two forms.  There is either a face-to-face, sit-down closing or one done by mail in escrow.  Unfortunately, given the current real estate environment, lenders are requiring more sit down closings.  More on this later.

The Closing Process

Often overlooked is the role of the Title Insurance Agent in these processes.  Here’s how it works.  In a typical sit-down closing, the title agency will send a representative to the closing.  The representative will “mark up” the title and/or deliver a pro forma title insurance policy.  He or she will also collect the original documents to be delivered to the clerk for recording along with the appropriate fees.  This way, the buyer and lender leave the closing “insured’ as the title agent has assumed the responsibility to send the documents for recording. The title agent might also disburse the funds from closing. Frequently, the lender and title agent disburse funds.

In an Escrow closing, the title agent acts as a repository or clearing house for the various parties’ documents and funds.  The transfer documents and closing funds are deposited with the Escrow Agent, pursuant to some form of Joint Written Escrow Agreement.  Thereafter, the Agent circulates the documents and disburses the funds when all conditions of the Escrow Agreement(s) have been met.

Title Agents Ensure a Smoother Closing

The market hangover over from the last few years has resulted in modifications to the interaction between borrowers and lenders.  Lenders now prefer to see their borrowers at the closing table.  Many now insist that settlement take place at the face-to-face meeting with a title agent present.  The presence of the title agent helps to resolve any last minute title issues that may arise, such as the recording requirements of a particular jurisdiction or the attachment of the proper description to the documents. Given the excesses and the actions of some borrowers in the last few years, the lender’s appearance requirements are not unreasonable.  Of course, escrow-style closings still take place.  For pure convenience, I think most would still prefer “by mail” closings.  However, in this electronic, e-mail frenzied, fast-paced Crackberry world, a small charge of endorphins from the human interaction at a sit-down closing cannot be discounted.  (I’ll share more about the “closing room” in my next blog posting…. Don’t miss it!)

The bottom line: civility, professionalism and the involvement of an established title agent go a long way to alleviating any last minute issues at the closing table.

Be sure to read more posts by Mike Donini.

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