It is an exciting event; buyers are purchasing their new home, their castle, their fortress of solitude. It should be a happy time, and a great experience for them and their family. However, purchasing real property has never been more complicated with all the governmental oversight involved these days, and more and more we see stressed out buyers on the day of closing that unfortunately aren’t as excited as they should be. But how can they avoid this outcome?
Well, one way is to be as prepared as possible for potential “pitfalls” during the financed closing process. A good real estate agent will be well versed in the process to guide buyers along the way, along with the other parties in the transaction, e.g. real estate attorney/title company, mortgage lender, accountant, etc. But despite all that professional involvement, buyers could still get tripped up. Here is a list of some things to watch out for to help keep the transaction on track, and the buyers’ stress-level down.
Logistics: if you are working with financed buyers, help them understand the challenges of being mailed the loan and closing documents, that they must have access to a notary and witnesses for certain documents, and be able to get to an overnight carrier for delivery of documents. Buyers can no longer “pre-sign” mortgage documents due to TRID rule delivery requirements. It is always best to have financed buyers in town for their closing, if possible. Otherwise, they will be required to sign the mortgage documents where they are on the day of the closing, overnight them, and disbursements will be delayed until the following business day (assuming the documents arrive and are correctly signed). This may or may not be ok with the sellers, especially if there is a weekend and/or holiday in between signing and disbursements. Address this issue with everyone as soon as you become aware that the buyers will be signing elsewhere.
Homestead Issues: if the property being purchased is going to be the buyer’s homestead and the buyer is going through a separation or divorce proceedings but is not yet legally divorced, then both spouses must sign the mortgage since all rights to the property (including rights under FL homestead laws) must be encumbered by the mortgage. It does not matter that the property is going to be titled in only one name! Similarly, if a couple is recently married, they both must sign the mortgage. And once again, this is even if title will be held in only one of their names. Failing to identify this issue as early as possible could be catastrophic for the transaction.
Powers of Attorney: if the buyer is granting another person the authority to sign loan/closing documents for him/her via a power of attorney (“POA”), both the buyer’s lender and the closing agent must approve the form of the POA, so getting a copy to them both as soon as possible is crucial. The original POA must be produced by closing and recorded along with the mortgage, so confirming the original exists and is available is also crucial. A POA terminates on the death of the principal. Even if the POA is “durable” and has language stating it survives the death of the principal, it does not. A durable POA can survive the incapacity of the principal if it adequately addresses this issue. Typically, two witnesses unrelated to the principal must witness the POA’s signing and it must be notarized. And finally, a POA makes for a lengthy closing when a loan package is involved, as documents must be signed in a very specific and detailed fashion. Prepare the buyers to budget at least 1.5 hours for the closing.
Side Agreements: Lenders are entitled to know all the details of a transaction, especially when it comes to monetary agreements between the parties. For example, if the buyer is leasing the property back to the seller after closing, or receiving credits from the seller at closing for repairs or otherwise, this must be disclosed to the lender. The lender will require the buyer to sign affidavits at closing stating that either there are no such agreements, or that they have been fully disclosed to the lender. Anything done outside the purview of the lender is not appropriate and could be illegal. Communicate often with the closing agent and the lender on any issues arising due to inspections, logistics, or otherwise that could result in a separate agreement between the parties so that everything in the transaction is transparent and correctly dealt with. If your instinct is to keep something secretive, or you are given advice to do so, it is typically not a good idea.
In all types of real estate transactions, especially financed deals, be sure to contact a Florida licensed real estate attorney to discuss the issues presented here, along with any others that may come up specific to the transaction.