If you’re buying a house, you may be feeling overwhelmed by all the real estate jargon in the mountain of closing documents. “There are a hundred pieces of paper in front of you. You feel like you’re signing your life away and they explain the documents to you, but you don’t really understand what those entail,” says Clint Fagan, an attorney with Transformation Title & Escrow. “I enjoy the opportunity to explain the documents in layman’s terms, so each and every client has a clear understanding of what they are signing. It’s my task to conceptualize it in real life rather than on paper to understand the meaning and effect behind it.”
TITLE SEARCH
A title search provides the complete history of a home. It is used to confirm that the current sellers actually own the property and have a right to sell the property. It will also show any claims or liens on the property that could affect the purchase. “Our responsibility is to get the correct title and a clear title. We want to confirm whether there are things that can adversely affect the property so the person investing in the property is doing it properly,” Clint says.
DEED
A deed is a legal document that conveys ownership of property or an asset to the buyer and includes a description of the property. “Deeds are the most important documents in the closing process because they transfer all rights to the buyer,” he says.
RESTRICTIVE COVENANTS & EASEMENTS
As restrictive covenants significantly affect the use and value of properties, it is crucial to understand what restrictions are bound to the property you plan to buy. “Sometimes there are restrictions that may not fit the use of the buyer. As an example, the buyer wants to build a barn, but there are restrictions on the property that say no exterior buildings,” Clint says.
Additionally, buyers need to understand easements. They are common in any purchase of property and typically referred to under Texas law as utility easements. “It is important to understand them so, after you buy a house, you are not surprised to notice a big utility box on the property. It may be an eyesore but it supplies electricity to other houses in the neighborhood and your place was selected for it.” Easements should also be presented to the buyer to consider before purchase.
ESCROW AND SETTLEMENT STATEMENTS
Escrow is used to protect the buyer and seller; an escrow account is used as an intermediary account to bridge the monetary side of the transaction.
A settlement statement is a document that summarizes all the costs owed to the home buyer and seller, something especially important since the 2008 real estate crisis. “The settlement statement is important, especially for the buyer, and particularly if they are borrowing money for purchase or refinancing. Substantive changes such as a standard Good Faith Estimate form and a revised settlement statement were issued by HUD under the Real Estate Settlement Procedure Act (RESPA) in 2008. These changes benefit the home buyer and create a healthier real estate and financial transaction,” Clint says.