Greg: Hi, Steph. Nice to see you. It’s been a couple of weeks.
Steph: Hi, Greg. How are you?
Greg: I’m doing well. Thanks. The last time we got together for the podcast, I think one of the last times at least, we talked about some things that people were doing that made your job a little bit harder, 5 things not to do at a closing but I’d like to talk to you a little bit today about some things that might make the process before we actually get to the closing a little longer. Are there some things we can do heading into a closing that will make the whole process go smoother or some things we shouldn’t do?
Steph: I think that to have a smoother closing, you want to try to manage the expectations of your client. I think that’s one of the keys in a successful real estate transaction is that good communication seems to be key. Going into a contract, if you know things ahead of time such as there’s about 6 key things that you can look out for that could potentially be situations that are a little bit more complex, that require a little bit more communication upfront that can really help if you do the work on the front end, it can really help the backend getting to closing because that’s what we’re all here for, to try to get the deal closed.
Greg: That’s right. That makes a happy seller, a happy buyer.
Steph: One of the things is if you’re listing a property, your title to the property, really it’s a great idea to get on the Jefferson County Land Records website and check out to see what it says. You can also get on the PVA website. Tax records aren’t always correct because whoever is paying the tax bill might not be the owner of the property. It could be just the person the bill is going to but you look to see who holds title and we can also check that for you because if your property is held by a trust, then the documentation for the trust will need to actually be available.
The closing attorney who handles the closing will require you to produce a copy of the trust so that the title company can give and insure. It will be an insurable title. The title company, the underwriter requires that the attorney have a copy of the trust in their file evidencing that there is a trust. It’s signed and notarized, that there is authority to sell, purchase real estate, that it’s revocable and …
Greg: This is something that the buyer and the agent should be looking for at the very beginnings. When they find a house they like, usually I guess on the listing, it might say sold by such and such trust or on the contract, it might even say that, right?
Greg: If it’s in a trust, I guess on a contract, it should be signed by …
Steph: The trustee.
Greg: Once a buyer sees signed by trustee, they should ask their agent or the agent should know to say, “All right, let’s make sure the seller …” Actually, you’re saying there’s a physical trust, like a paper.
Steph: Yes. I think especially more and more, it’s more common that people are putting property into trust especially some of the higher value properties around the county. What it is, is you can’t assume that your seller is signing individually. They may be signing as trustee. Right from the get, it’s good to have the trustee sign the contract. Otherwise, you’re going to need to do an assignment of the contract to the trust. You need to make sure right from the start that you identify who is your seller and are they holding title as a trustee versus holding individually.
Greg: That makes sense.
Steph: The things that we’re looking for is a physical document, a trust that names the trustee, that gives them the authority to sell as a revocable trust and the beneficiary is the same as the settler. Those are the standard conditions that a lender will require the attorney to certify in order for a buyer to purchase the piece of property and trust. When you’re taking property, those are the things that usually we’re going through in order to hold property in trust if they got a loan to get the property.
Greg: If I’m the buyer, I don’t have to read the trust. I don’t have to ask for a copy of the trust but if I’m buying a house and I want you to close this transaction, I can say to the seller, “Please provide Steph Horne with a copy of the trust.” Then that little checkbox for me, the buyer is checked off and then you’re working ahead of time to make sure that it really is the right kind of trust and put together properly so that when we get to closing, no issues.
Steph: Yes. We have some excellent attorneys in town that prepare trusts and do that type of estate work. Usually, the trust, I mean it’s very rare that we’ll have a trust that does not give the power to sell real property. It’s just literally an underwriting condition. We’ve got to have a copy of the trust in it where it shows they have that power in our file. It is just something that needs to be done but it is a time consuming process if the seller can’t find the trust. Maybe they’re successor trustee. That’s just one to think about is who is your seller, who is your buyer, are they using a trust. It will add a little bit of time, a little bit more effort and just to know upfront the attorney will be needing a copy of the trust whether you’re buying or selling with a trust.
Greg: That’s a great piece of advice.
Steph: Yes. Then, the other thing to think about is if you have a deceased owner, a deceased seller. What that means is that your seller that is signing the contract is either an heir, an administrator of an estate or an executor of an estate. The questions that the attorney will be asking immediately upon getting the contract for the title order will be looking at the title and seeing has it been probated or not, is there an estate open at the courthouse, how does the seller hold title. Those issues, we handle pretty quickly but they can add time if the seller really hasn’t done the probate or if it’s been probated and it’s still within 6 months of the date of the probate from when it was started or if it’s been 2 years and we need to do an affidavit of descent because they’d be not probating. The heirs would be signing and selling.
Greg: In this situation, if you’re on the buying side, you really have to trust and hope that the sellers have set it up properly, that by the time the house is on the market, they’re on board, that they have the right paperwork in place.
Steph: Yes. It’s interesting assumption that because the house has been listed for sale and a buyer gets in a contract with the seller who is either an heir or a executor or administrator, there’s an assumption that everything is handled properly but that’s not always the case because the people that are doing estates are not the same people that are doing real estate. We’re different attorneys. There is a little sometimes a disconnect and we want to make sure that the seller does have valid power to sell and it can just take a little bit more time and effort to make sure that the probate was handled properly, that we’re ready to sell and that’s just something that adds … We’re talking about here just potential time added onto the process. If there isn’t power to sell, sometimes you need to get a court order to sell and you have to wait 30 days after the court order plus the day.
Greg: It sounds like it’s just a good idea to have you double check that, say, “If I know that I’m buying under these circumstances, let’s have Steph check it out, make sure that we’re proceeding along,” the same as, I guess a property inspection, right? You have to schedule. You have to do it. Let’s have Steph do the paperwork on the side, the checking on the side so that when I get to closing, again, no surprises at the end, right?
Steph: Yeah. How it will work is just once you get in the contract, we’ll get the title order. If it’s a cash deal or if it’s a lender deal, Horne Title would receive the title order. Then, we deal with a lot of estates and a lot of folks who are purchasing from somebody is deceased from either the family or from the executor. We’re used to dealing with the paperwork. It’s very routine for us to go through it, make sure it was handled properly once the title gets back. We’ll know that right away and be able to tell you where you are in the process, just keeping that communication open and having an attorney actually the one reviewing the title.
It’s really surprising to get closer to a closing when you think it’s going to be within 30 days to learn very … When you think you’re going to be closing, that you’ve got to wait an additional 30 days to get that court order to sell. I hear that happens in Louisville that there’s not really an attorney involved in checking that title work to verify that the estate was handled properly and they’re going all the way up to closing and then it’s delayed because of these issues. At Horne Title, Sarah Michael and I, we check every title that goes to the office and identify any issues with the estate so we can identify quickly and then know where we hare and communicate that. Remember, it’s about communication and making sure the expectations of the client are kept up to date on the situation.
Greg: There are 2 things that buyers, and I guess sellers and Realtors, and everyone should keep an eye out for. Do you have maybe one more?
Steph: Yes. If there’s a commissioner’s deed, if that is the vesting deed, it’s very important because …
Greg: I have a simple question for you. What is a commissioner’s deed?
Steph: A commissioner’s deed is something that was issued by the commissioner’s office because it’s gone through a foreclosure. If there’s been a foreclosure, the person that buys it at the share sale then takes title via a commissioner’s deed. If the source of title is a commissioner’s deed meaning it’s sold by a bank or the person that took title via commissioner’s sales, they bought it at the courthouse steps, then that’s a title that you know is a little bit more complex and you’ve got to make sure that all of the people who had liens against the original owner …
Greg: … are clear.
Steph: … were joined in the foreclosure. Having an attorney review of those tougher titles and identifying any issues is just really important from the get.
Greg: These are all issues that it seems like the buyer is probably not in a great position to do on their own.
Steph: No. It’s something that if you’re getting a good deal which is what you’re doing usually if you’re buying a house …
Steph: … that has been come off foreclosure and you’re somebody who has fixed it up and you’re buying it, it’s a really … They got it for premium. They fixed it up and they’re flipping it, in a sense, to you, the new owner. It can be a wonderful property. You just got to make sure not only is the property a very great deal and a cool property. You got to make sure that who you’re hiring to do your title, to do your closing has checked out in detail the title because we run into some funny things. A lot of times, it’s homeowner’s association dues or condo dues that if you try to close with just one of these notary closing because they try to get you to use a notary closer. They say that, “We’ll pay your title insurance if you do this,” but what happens, we see it a lot on the back-end in further closings, is that they never pay the homeowner’s association dues, that person, the bank, when they held it.
Greg: That complicates …
Steph: They just never pay it. Later, it comes back to really bite the current owner because they end up getting stuck with the dues. In the closing, they sign off that pretty much we’re not paying. They make you sign a release that if it turns out there’s something else due, we’re not paying it. You’ve really got to make sure in these foreclosed properties that you’re purchasing it without homeowner’s association liens or some other lien that’s still on there and wasn’t joined in the foreclosure and it does have a valid lien because a lot of times, they’re pushing it through really quickly.
Greg: Wow. That’s all great information. My brain is getting full but maybe on a next podcast or one of the future ones, we can talk about homeowner’s association dues and how those get calculated and how you deal with them as a closing attorney. Then, maybe we can also talk about some other things that buyers and agents and sellers need to look out for to help the whole process goes smoother but I think for now, why don’t we leave at those 3 examples you gave. I think that is great information for a buyer. I had not thought of a couple of those. I really appreciate your time today and I’m looking forward to the next episode.
Steph: Thanks. Thanks a lot.