Even experienced private lenders miss these important details when titling a property.

Nothing can be more frustrating than discovering last-minute titling hiccups before your closing or being told your closing date has to be moved.

Why do these glitches occur? Here, in no particular order, are several of the items often overlooked. Make sure none of them become culprits for you and your clients.

Not Getting the Correct Information

The beginning of the transaction starts with obtaining the correct legal address (not an abbreviated form) and property type from the borrower. Property owners should be able to provide a copy of their vesting deed with the full legal description and/or map reference number issued by the tax assessor of the county in which the property lies. This ensures from the start the title abstractor examines the correct property. Some borrowers make up their own addresses for duplexes and triplexes by adding unit numbers that are legally incorrect. One possible solution is to default to the address on the tax bill.

With investment properties, the purchaser needs to know whether there is a current tenant. If there is, the seller needs to provide the current lease and rent roll. These are vital to the transaction and especially important for the settlement agent to complete the final numbers correctly.

The seller’s contact information is also vital for moving a file through the pre-closing process faster. If there are any vesting, estate, forbearance, or bankruptcy issues, being able to reach the seller immediately will help mitigate any delays caused by information discovered last-minute.

Working with the Wrong Title Company

Freddie Mae and Fannie Mac, as the purchasers of nearly all mortgages, have certain titling requirements, so most title companies will follow these to a T. However, private lenders don’t sell their loans to Freddie/Fannie and do not need to follow their requirements. Private Lenders likely have different needs entirely.

If the settling agent has never had exposure to this before, they 1) may not be willing to deviate from what they’re familiar with and 2) may cause delays as they pursue items they would need for Freddie/Fannie loans or miss different requirements that are unique to the private lender. For example:

Title Commitment (a closer look at the requirements section):

• Warranty deed verbiage from the seller (or the personal name of the borrower) to the new borrowing entity on refinance transactions
• Security instrument verbiage ranging from the borrower entity to the correct lender name in the finalized loan amount.
• Outstanding mortgages, liens, and/or judgments being listed in the exceptions section, rather than in the requirements section
• Rental restrictions—the lender and buyer/borrower may request to review the association closing letter or estoppel
• For homeowners, association violations that need to be remedied before closing or providing enough time for the buyer to review and determine whether they will accept the property as is and agree to correcting the violations after purchase is essential.
• Entity name being listed incorrectly throughout documents (It needs to match the filed articles of organization. Any missing punctuation could nullify the proper legal transfer during recording.)

Closing Protection Letter or Insured Closing Letter:

• Entity name is incorrect
• Lender’s addressee information is incorrect or missing ISAOA/ATIMA (The lender’s title order to the settlement agent must include the correct mortgagee clause, loan number, lender name, and proper mailing address, if different from the mortgagee clause’s address.)

HUD or Settlement Statement:

• Missing fee structures or judgments and liens needing to be paid
• Missing HOAs or special assessments from the county
• Not setting the tax estimate/tax escrow high enough (In most cases figures are based on previous years’ taxes that include a homeowner’s exemption or temporary discount. Every jurisdiction does taxes differently. Possible solutions: Some lenders may try to verify this themselves and put pressure on the title if there is any uncertainty.)
• Missing rental restrictions (Be sure to review the Covenants, Conditions, and Restrictions, also known as CC&Rs.)

Miscellaneous Items

There are multiple details when it comes to the title and closing. The following round out some of the most commonly overlooked.

Don’t be surprised to learn there was a payoff or the title to the property is vesting in something other than the entity of the borrower.

Also, make sure the signers on your documents match your authorized signers. Do the articles of organization and entity documents match up to the signers and their title? Having a complete and accurate organization chart can be an issue. The longer you spend collecting and reviewing organizational documents, the more time you lose; however, what can appear to be a clean organizational chart based on verbal representation is not always the case. Have there been any recent changes, such as a previous partner who is no longer involved or a recent divorce?

When a lender orders insurance, the title company needs an invoice showing whether the insurance is due or paid. If the insurance is paid, the title company needs the balance from the agent along with the address on where to send the funds.

A big help is having the analyst, loan officer, or lender let the borrowers know what day the documents are dated so the borrower does not try to negotiate a different time with the notary. Then the notary must notify the title company, who then notifies the lender. If the docs are date sensitive, they need to be redrawn for the new date.

Signing locations must be coordinated ahead of time! Signers at different locations, signers on vacation, or signers who want to sign at a public location rather than at home can all be problematic.

Sometimes closing funds are not received—don’t let that be the case for you!

Finally, if an underwriter considers the transaction “high risk,” then additional endorsements and or documentation may be requested.

And here’s a bonus glitch to consider:  Borrowers, buyers, and lenders often forget that a title commitment has a limited shelf life, usually 30 to 90 days, depending on the underwriter and the jurisdiction. It must be updated to check for any new liens, such as mechanics and construction, that may have been filed and recorded before your closing that could put your lien in a second position if the closing extends beyond that period. This can come as an unpleasant surprise when a closing takes longer than expected and can create additional interest costs for your client, particularly when the update reveals a new lien that must be accounted for before a clear to close can be established.

Working with the right title partner who communicates frequently and provides detailed lender (closing) instructions goes a long way to having a good experience each and every time. Since real estate is all about referrals and repeat business, it’s important to get everyone involved in the transaction to the finish line with the least amount of pain.

Remember, not all title companies are alike. Due to their underwriters’ requirements, they may or may not be able to insure without meeting some additional requirements. Be sure your partner is flexible and able to help you when you need it most.