By Robert J. Ramseur, Jr., Vice Chair, Real Estate Commission
As a lawyer who has practiced real estate law in North Carolina for over 20 years, I have seen my fair share of real estate transactions: residential and commercial, challenging and simple, stressful and enjoyable- and everything in between. Admittedly, I viewed the real estate closing process early in my career through a narrow lens, one that focused simply on my role in the process. I was so wrapped up in the zealous representation of my client that I often failed to recognize and appreciate the hard word and dedicated professionalism being exhibited by the other participants in the closing process.
Two events in my career radically changed my focus and shaped the way I practice today. First, I was chosen to serve on the Joint Forms Committee of the North Carolina Bar Association and the North Carolina Association of Realtors®. Next, I was appointed to serve as a lay member of the North Carolina Real Estate Commission. Service on the Joint Forms Committee and the Real Estate Commission afforded me the privilege to work with some exceptionally smart and dedicated real estate brokers from all over the state. It allowed me to step back from the daily grind of office work and see things from a different perspective, providing me with great insight as to the true mechanics of the real estate transaction. It enabled me to appreciate how critical it is for every professional involved in a real estate transaction to be an active participant in the success of that transaction.
I suspect that many of you may be in a place where I found myself many years ago, focused on day-to-day survival rather than how the pieces of the transaction should properly fit together to benefit your clients. Last month I was asked to speak at the Real Estate Commission’s North Carolina Educators Conference to discuss the implementation of the TRID Disclosure Rules by the Consumer Financial Protection Bureau. To prepare for my presentation, I sent an email to real estate lawyers across the state asking for feedback on issues and problems that they are experiencing with TRID. To my surprise, the responses were extremely consistent – the TRID Disclosure Rules were actually not a problem at all. In fact, most of the feedback was positive – consumers appeared to like the new closing process and despite a rough start, lenders and closing attorneys were beginning to understand and streamline the process.
Another surprise was that I received a tremendous amount of feedback requesting that real estate brokers become more active participants in the closing process. It was a remarkable call to action – closing attorneys wanted brokers as partners in the process, not just passive participants. A variety of closing attorneys from every corner of our state- urban, rural, large firm, small firm, solo practitioner, residential, commercial- responded that they wanted and needed your assistance in making the closing process more efficient. The feedback contained consistent themes and constructive advice that I have summarized below. So how can you, as a licensed Real Estate Broker, assist North Carolina’s closing attorneys in streamlining and simplifying the closing process?
Attorneys suggested that many issues and closing table delays would be prevented if brokers simply exercised caution when placing a property under contract. Is the buyer’s name really “Betty Sue” or is it actually “Elizabeth Susan”? Did your contract provide for a non-closing cost credit from the seller to the buyer- something that most lenders have not allowed in a decade? Did you ask for the closing attorney to draft an addendum to the contract rather than undertaking the task yourself?
The 2008 banking crisis and the 2015 implementation of the CFPB’s TRID regulations have created due diligence requirements and timing challenges for lenders and other professionals that take time to navigate. A contract that calls for a short due diligence period and a quick closing is simply not feasible in today’s environment. Before adding dates in a contract, make sure that you have communicated with the lender, the home inspector, the surveyor, the closing attorney, etc. to make sure that your client can meet the due diligence and closing deadlines without difficulty.
Many closing issues would be minimized if your clients have made alternative plans in the event of a closing delay. If your closing is scheduled on a Friday afternoon of a holiday weekend, it is a good idea to insist that your clients not schedule movers that day. Try to avoid closings on Fridays and the last day of the month. Caution your clients against scheduling painters and hardwood floor installers the day of closing. Have your clients wire their funds to close several days prior to the closing. Many attorneys reported that most of the stress in a closing delay was unrelated to the actual closing- it was created by the fact that buyers had not made any contingency plans for a delay. Anticipate challenges before they arise so that your client can easily adapt in the event of a delay.
The TRID regulations have made it extremely difficult for closing attorneys to make last minute changes to the settlement statement and Closing Disclosure. Get invoices to the closing attorney as soon as you receive them. Remember that many lenders require that any changes to the Closing Disclosure and settlement statement be approved by the underwriter prior to closing. Fill out closing information sheets immediately and completely- closing attorneys need that information to prepare for closing. Obtaining a payoff statement or homeowners’ association statement can take 7-10 business days, so every minute is critical in attempting to avoid a delay.
If you tell the closing attorney that you will follow up with an email, make sure you follow up with an email. What is the closing attorney’s preferred method of communication? Are you checking to see if the closing attorney has everything ready for closing or are you just assuming that he has it under control? Effective communication between the broker and closing attorney is essential. Attorneys crave your active participation in the process as it makes for a smoother transaction and reduces the chance of a closing day surprise.
Are you frustrated that the new TRID closing procedures appear to have reduced your participation in the process? There may be a good reason why- lenders and closing attorneys have had to spend vast sums of money upgrading their systems to protect consumer privacy and they tend to exclude those participants in the process who have not. Privacy was one of the primary mandates of the new TRID Disclosure regulations and lenders are going to great lengths to comply. Consider upgrading to an encrypted email system. Never send social security numbers or wiring instructions via email. Get rid of that outdated email provider and invest in your business. In fact, consider bringing back some of the methods that we used to use to conducting business- reintroduce yourself to the telephone, the fax machine, Federal Express and hand delivery.
While there is some variation as to what documents closing attorneys send brokers to review prior to a closing, there is no doubt that closing attorneys want your assistance in carefully reviewing those documents for accuracy. In addition to reviewing the commission calculation, look for other potential errors. Review them with your client prior to closing. Remember that closing attorneys are human and another set of eyes on a settlement statement is extremely helpful. Once the transaction has closed and the funds have been disbursed, it is difficult, if not impossible, to make corrections and adjustments.
On behalf of real estate lawyers across the state, I want to thank each of you for being our partners in this process. Without you, our task would be next to impossible. With you, we can accomplish great things for our clients.
This article came from the May 2017-Vol48-1 edition of the bulletin.