Hudkins Law is a real estate law firm specializing in title and settlement services for residential and commercial real estate transactions. The firm has established Best Practices to achieve successful, safe, and timely transactions. Our goal is to complete a successful conveyance and to safeguard client funds, maintain privacy, and provide the best customer service in the industry. This Blog is dedicated to our firm’s Best Practices.
The Mission of the Closing Attorney
When a law firm or title company is engaged by a Buyer of real estate to handle a purchase closing, you may wonder why that same law firm manages a Seller’s mortgage payoff. The reason is the key to a successful closing. The primary goal of the closing attorney is to ensure that the title to the property is free of all liens and encumbrances when it is conveyed to the Buyer.
The Closing Attorney’s Title Examination
Early in the closing process, the closing attorney completes an in-depth title examination. This examination involves researching and reviewing all of the deeds in the history of the ownership of the property. If the subject parcel was once part of a larger tract of land or subdivision, that larger real estate interest must also be examined. One can think of the subject property as a leaf on a family tree. To examine the title properly,
we must review the entire “ancestry” (i.e., the entire “tree) to see how that one “leaf”, or subject property, originated. While the title attorney is searching for encumbrances and liens (including mortgages, Home Equity Lines of Credit and IRS or municipal tax liens), we also review any restrictions or covenants of record.
More information on easements, restrictions and covenants in subsequent Blogs. If a former owner of the subject property died during the course of their ownership, the title attorney must examine Probate records to confirm the decedent’s Estate was handled properly and that there is no chance that a creditor or heir could make a claim against the property. Likewise, a thorough review of Court and Registry filings must be
reviewed if a former owner filed for Bankruptcy during the course of their ownership, or if the property was ever in foreclosure. Title Examinations are conducted by using the locus state’s title standards. The NH Title Standards may be viewed here: https://www.nhbar.org/uploads/pdf/2014TitleExamStds-CleanVersion.pdf
Paying-Off a Seller’s Mortgages and Other Obligations Associated with the Real Estate
When a closing attorney identifies a mortgage that must be discharged or “paid off” in order to clear the title, we are obligated to disclose this mortgage to the title insurance carrier that will be insuring the transaction. More about title insurance in upcoming Blog posts! This disclosure is in the form of a “title commitment” which stipulates all of the conditions that must be fulfilled in order to issue an owner’s title insurance policy
to the new Buyer. A payoff statement is requested from the mortgage lender and the closing attorney adds the payoff amount to the list of the Seller’s obligations or expenses that are deducted from the Seller’s proceeds at the time of closing. Since the closing attorney issues the title insurance policy and is working on behalf of the Buyer to guarantee “clear title”, it is required that the attorney maintain complete control over
the delivery of the payoff funds. Payoffs are remitted to a mortgage lender either via Federal Express or wire transfer.
Delivery of a Seller’s Pay-Off
Hudkins Law often receives requests from Sellers and their attorneys to release the payoff funds to either the Seller or their attorney. The dialogue below is actual email correspondence between Attorney Jacqueline M. Hudkins and Title Insurance underwriter, Attorney Jane O’Sullivan of Old Republic National Title Insurance
Company. This communication illustrates the endorsement of Hudkins Law’s Best Practice by a nationally recognized title insurance carrier to never relinquish control over payoff funds to a third-party.
Email from Attorney Hudkins to title insurance underwriter, Attorney Jane O’Sullivan
Old Republic National Title: http://www.oldrepublictitle.com/newnational/Index.asp
Dear Jane,
Our law firm policy is to remain in control of the delivery of payoffs. We do this by shipping payoffs via Federal Express so that we may track and confirm receipt. In the past, we have hand delivered payoffs and they have not be credited in a timely fashion because not all retail branches of banks staff employees that are trained to accept and post payoffs. As a result, we’ve discontinued our practice of hand-delivering payoffs to local branches. Likewise, it is our law firm policy to not release a payoff check to a seller’s attorney as we cannot control the timeliness of the remittance and we do not believe that we are fulfilling our obligation of taking prudent steps to pay off all liens listed on a commitment if we pass this important duty along to another party.
Please kindly confirm that our practice is in line with not only title standards but also your standards for the issuance of title insurance.
Response from Old Republic Title:
Jackie –
This will confirm the following. As the title insurer for a proposed transaction, we will not undertake the additional risk of having your firm, as the settlement agent for the transaction, not handle the disbursement of all settlement funds including and in particular those payoffs of recorded mortgages and other liens against the property as we are insuring marketable title to the premises free and clear of all liens for the new purchaser and their lender. If the funds were delivered to anyone other than
the intended lien holder, we could have a claim situation. Also, under the closing protection letter, we are responsible for your office as our settlement agent for following the lender instructions which include the paying off and securing releases of all existing recorded liens to assure that the lender has a first priority lien. Accordingly, while we are mindful of parties wanting to minimize expenses and keep their payoff figure minimized, we cannot and will not undertake such a substantial risk. We have been requested in the past by various sellers and/or their respective counsel to deliver their own or their client’s payoff. While I have no doubt that every attorney has the intention of delivering the payoff in a timely manner and this is not a question of integrity but rather we are mindful that there are circumstances beyond the control of any individual that could impede the timely delivery of the payoff. As escrow agent, we require and support your offices’ need to maintain the integrity of the escrow process. Please let me know if you would like to discuss further. Thank you.
Jane
Jane M. O'Sullivan
First Vice President | Northern New England Counsel
NH/VT State Agency Manager
Old Republic National Title Insurance Company | Old Republic Insurance Group
Hudkins Law PLLC was founded in 2006 by Jacqueline M. Hudkins. The firm provides title and settlement services for residential and commercial real estate transactions. Each real estate transaction is managed by a team of Attorneys and Paralegals to guarantee continuous coverage throughout the entire closing process and combines the expertise of Real Estate, Title, Trust, Estate Planning and Corporate Attorneys to offer competitive flat fee pricing. The firm employs ten Attorneys and a team of paralegals and maintains offices in Bedford NH, Concord NH, Claremont NH, Windham NH, New London NH, Hampton NH, Keene, NH, Norwich VT, & Andover, MA.
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