Whenever you go to a title company to close on the purchase or sale of real property, a number of documents will be thrust in front of you. While you will then do your best to scan these documents in a couple seconds, you will probably sign them anyways without having any idea what you just signed away. Thus, I’d like to take a few moments to describe to you what you just did, so that next time you go to a closing you display your new knowledge and explain to the closing agent at the title company the legal effect of the documents you signed and how they should be better doing their job. They’ll appreciate you dearly for the suggestions and for the refresher course.
While there are probably a dozen or so documents you’ll end up signing, the documents that are most common in a financed transaction are a Warranty Deed, Deed of Trust and a Promissory Note. A Warranty Deed is a written document that conveys legal title to real property and warrants that the Seller has good title to convey the property to the Buyer. It is to be distinguished from a Promissory Note or a Real Estate Lien Note which is a promise to pay a sum of money to a lender. Meanwhile, a Deed of Trust provides the Lender or Seller with remedies, including foreclosure, if a Buyer defaults on the Promissory or real estate lien note. This is similar to what we think of as the mortgage.
One thing to check is whether the purchase price has been included in the Warranty Deed. In Texas, it is customary to recite that the consideration paid is “Ten dollars and other valuable consideration.” This is done to maintain the confidentiality of the total purchase price. While recording gives the public notice that a transaction concerning the property has occurred, and therefore preserves the chain of title, it is traditionally believed that it is not the public´s business what the purchase price was. If included, the purchase price may be something that the tax office takes note of when they are assessing your property taxes. Of course, the parties can always choose to show the actual price if they wish.
You will also have an opportunity to review and sign the HUD-1 settlement statement. This is the breakdown of where the money goes. Typically the costs for the appraisal, survey, document preparation fees, title company fees and lending fees are all included in this document and have been allocated to either the Buyer or Seller pursuant to the real estate contract you signed for the Purchase or Sale of this Property.
Unfortunately, while I’ve covered the most common documents you may see at a closing, there will likely be additional documents that you may see based on your specific type of transaction. Please remember to take your time and feel free to ask questions to the closing agent at the title company during a closing. If you feel that you need additional help reviewing your closing documents or would like further explanations, please feel free to contact us.