Real Estate Settlements Explained
To help fix the problem of “delayed disbursements” in a real estate transaction, the VA code was amended in 1980 to require settlement agents to disburse funds within two days of closing. While there is more to this “Wet Settlement Act” than just disbursement, it helped pave the way to Virginia attorneys and title companies conduct settlements, recordings and disbursements.
Linda L. Butler at William & Mary Law School wrote a more scholarly article surrounding the Wet Settlement Act which provides important history. This blog will look at the practical implications of the Wet Settlement Act.
What is a real estate closing?
A real estate closing occurs when the seller has signed the deed conveying the property to the buyer, all parties have signed the final settlement statement, and the settlement company is in possession of all closing funds. If one of these items is missing, the deal is not closed.
What is a wet settlement and a dry settlement?
A wet settlement or wet closing is the term we use to describe the situation above. That all parties have executed appropriate closing documents and the settlement agent is in possession of all funds. At this point, the settlement agent is able to record the applicable deed and/or deed of trust. A dry settlement or closing occurs typically when documents have been signed but all funds are not accounted for. Dry settlements are not legal and can cause many problems. For instance, there is an appearance that the deal has officially closed and parties can make plans based on that fact, such as moving forward on a closing of a subsequent purchase.
What is involved in disbursing a closing?
Once a file properly closes, all funds are deposited in the firm escrow account. Typically, the next business day, our title examiner will record the deed and mortgage instrument and pay the appropriate recording fees to the city/county. The examiner will also perform a title update to insure no last minute liens or judgments were filed prior to closing. Once the deed is in line to be recorded, the settlement firm can start releasing and disbursing funds. As noted in the West Settlement Act, settlement companies have 48 hours to disburse but most of the time, this takes place within 24 hours or one business day.
What other role does a settlement agent play?
Not only is a settlement agent responsible for prepping appropriate closing documents for the buyer and seller and working with the lender to execute any loan documents, but the agent is also responsible for maintaining an escrow account and keeping impeccable records. Many buyers, sellers, and real estate agents don’t fully understand the fiduciary duty involved in being a settlement agent. Settlement agents act as stewards of millions of dollars of funds on a daily basis and that’s not to be taken lightly. If money doesn’t make it to the right place, the liability can quickly fall on the settlement agent. In addition, the proper documents have to be recorded with the local clerk’s office as mentioned above. The recordings serve as public notice that proper owners and lenders are all correct.
It’s good to know that a title settlement seems to be a smooth process so long as all sides provide all the necessary documents and funds as soon as possible. It seems easy enough and I’ll make sure to hire a good settlement agent to help me in the near future. I’m planning on selling my land title to a neighbor since I’m moving away soon. It’ll be good to have a settlement agent fix everything for the two of us to avoid any troubles and so we won’t have to be mixed up in all the technicalities we would otherwise have to face.
My parents are planning to sell our beach house soon but they don’t really have any idea how to do it. Thanks for explaining that a settlement agent would deal with the closing documents for both buyer and seller and even work with lenders to process loan documents. I hope they can find a great agent than can take care of this soon.
Thanx for the info. I have been looking for any legal info about paying liens the sellers have against them or their property and the role title/trust company play after the settlement. After I sold my home, I wanted to clean up my credit. Went on my credit report and seen 6 weeks after the sale my judgement lien I had placed against me and my home the real estate agent said would be paid with the profits of the house sale were NOT paid. So I paid it. approx. a month later i received a check the title company sent to the collector and collector sent to me was rejected for overpayment. The title company (3 months) later has still not reimbursed me the money they took at closing to pay the judgement. I still have the check payable to the collection agency that was rejected. The title company says they will send me a part of the money i paid. I told them they violated the law by not paying that judgement within the allotted time so i paid it. I see from your web page i am legally entitle to a full refund . I think , maybe, I can lodge a formal complaint against the title/trust company and perhaps should consider taking legal action against the title company for negligence and stalling to reimburse me my payment. Do I have it right?