Order the title insurance commitment

  • A title policy insures you own the property and will pay you the insured amount, typically the purchase price, if it turns out you do not own the property. The title policy does not insure any increase in value over the purchase price and you bear that risk.
  • Title insurance replaces the prior practice of attorneys reviewing the “abstract of title book” prepared by an abstract company and setting out all recorded documents affecting the property, and issuing their opinion as to ownership

Review the commitment title insurance policy. Your attorney will review the commitment for, e.g.

  • Title company requirements before they will issue the title policy, e.g.:
    • release of seller’s prior deed of trust
    • review of trust agreement or other entity documents, corporate articles of incorporation or limited liability company articles of organization and operating agreement
    • affidavits as to adverse possession is specific cases, etc.) and
  • “Exceptions” to coverage that the title company is not insuring for:
    • easements
    • restrictions
    • covenants
    • “parties in possession” (tenants)
    • adverse possession (ownership interests by 3rd parties based on their long standing acting like an owner)
    • mechanic’s liens
    • facts that an accurate survey would show (e.g., encroachments)
    • matters affecting the property not shown in the public record (e.g., easements by long use)

Order the survey

  • surveys are often well advised to make sure
    • you are buying all the property you expect
    • there are no problems such as encroachments of buildings on the property you are purchasing or onto property of others

Review the survey (your lawyer will likely also do this)

  • compare the survey legal description to the one to be used for closing
  • look for encroachments by buildings, etc. on the property being purchased onto adjacent property or vice versa,
  • check location of easements, etc.

Apply for 3rd party financing:

  • Application form
  • Income tax return and verification of income
  • Appraisal (bank arranges)
  • Credit report (bank arranges
  • Other documents required by bank (survey etc.)
  • Loan Terms:
    • “Term” (i.e., 15 or 30 years)
    • Balloon payment (e.g., after 5 years)
    • Points charged (often to obtain a better interest rate)
    • Fees (credit application, appraisal, document preparation etc.)
    • Interest rate
    • private mortgage insurance (PMI) (PMI is not like credit insurance that pays off the mortgage if calamity strikes. It pays the lender, but you still owe the debt and the PMI carrier will try to collect)
    • if adjustable interest rate:
      • index rate (i.e., what is base figure and points difference)
      • when adjusted
      • how often adjusted
      • maximum annual adjustment
      • cap rate, i.e., the maximum rate that can be charged

Order inspections: [repairs are often paid for by seller up to a set limit if required]

  • General (structure, roof etc.)
  • Mechanical (HVAC, hot water heater, plumbing, etc.)
  • Termite [treatment often paid for by seller, and repairs often paid by seller up to a set limit if required
  • Hazardous waste inspection
  • Water system, including the well, if any
  • Urea-formaldehyde insulation (out gassing can cause health problems)
  • Radon gas

Provide any required notices, e.g.,

  • failure of inspections condition
  • objections to title report

Order any necessary repairs or e.g.,

  • termite treatments and or repairs indicated after inspections

Schedule Closing

Agree on a time and date for the parties to meet at the closing company and schedule that time with the title company.

Documents to be prepared for Closing

  • Deed (to transfer ownership of the real property)
  • Bill of sale (to transfer ownership of any personal property included)
  • Affidavit of adverse possession (seller’s confirmation there are no competing ownership claims, prepared by the title company)
  • Affidavit of no mechanic’s liens/unpaid work (seller’s confirmation that there has been no work within the six month period for which mechanic’s liens can be filed, prepared by the title company)
  • Affidavit of non-foreign status (to be signed by seller to satisfy an IRS requirement, because withholding is required if the property is owned by “foreign persons” to make sure they pay any tax due before leaving the country in which case collection is difficult, prepared by the title company)
  • loan documents (except for the application, normally prepared by the lender)
    • deed of trust
    • note
    • guaranty
    • various notices, etc.
  • Settlement statement setting out the flow of funds for each of seller’s and buyer’s side of the transaction
    • starting with purchase price
    • application of the down payment
    • loan proceeds
    • loan payoffs
    • pro-rations (e.g. real property tax, closing expenses; etc.)
    • amounts due from buyer
    • amounts due to seller

Other items to be completed simultaneously with or after closing:

  • Transfer utilities and telephone
  • Insure the property
  • Schedule movers
  • Register children in school
  • Make sure title policy is issued and received
  • Make sure the deed is received after recording