IMPORTANT NOTE: These questions and answers are based on North Carolina Law. They have no application for real property located outside of North Carolina. The answers to these questions will probably be different for land located in other states. Even in North Carolina, the facts of your specific situation could change the answers given below. Therefore, these answers are for information only and are not legal advice. My act of providing the information below does not, by itself, create any attorney-client relationship between you and me.
Please read the following frequently asked questions and navigate to the Q&A to see the answer.
Why Do I need a lawyer for my closing?
If I have to get a lawyer to do the closing, does that mean my closing costs are higher?
Can I, as the buyer, select the attorney of my choice for my closing?
Why should I retain Jeff H. Adams to do my closing?
What do I need to bring to closing?
The house I am selling is in my name only. Does my spouse have to attend the closing?
If the mortgage will be in my name only, does my spouse have to attend the closing?
My spouse has my Power of Attorney. Can she sign for me at closing so I won't have to attend?
When can I, the seller, get my money from the closing?
Why isn't my paid-off old mortgage canceled?
Can getting a home equity line of credit cause any problems?
Why is my home equity line of credit delaying the refinance of my first mortgage?
Should I get a survey, even if my lender doesn't require one?
Can a notary public do my closing?
Q. Why do I need a lawyer for my closing?
A. Conducting a real estate closing is the practice of law, which only an attorney can do. In North Carolina, your mortgage lender will require that an attorney be selected to conduct the closing. Also, North Carolina real estate law is quite complex and you need an attorney to examine the title records for prior conveyances, liens, encumbrances, and errors in the deeds in the chain of title.
Your attorney then negotiates with the title insurance company for insurance coverage insuring your title against adverse claims of ownership, liens, and easements. Unlike other states, the closing attorney in North Carolina is a totally separate party from the title insurance company. The actual 45 minute closing, where the closing documents are signed, represents only about one-fifth to one-tenth of the services your attorney is providing you for your real estate transaction.
Q. If I have to get a lawyer to do the closing, does that mean my closing costs are higher?
A. Definitely not! States like North Carolina, where a lawyer does the title examination and the closing, have the lowest closing costs in the nation. Realtors' commissions and mortgage lenders' origination fees go up over time, since they are based on a percentage of the sales price and loan amount, respectively. But North Carolina attorneys generally charge fixed closing fees, and these fees have not increased in the last 10 years (at least).
The lawyer's role in North Carolina closings gives the homebuyer another great advantage: Thanks to the skill and professionalism lawyers bring to the closing process, North Carolina has the lowestrate of post-closing title claims or disputes in the nation.
For a thoroughly researched article on this subject, comparing North Carolina to other states, by Chris Burti, Vice President and Legal Counsel of Statewide Title Insurance Company, click here. If this does not work in your browser, try clicking here, or go to Statewide Title's home page and surf to Newsletters, then the December 1999 issue. The article, entitled "Set the Record Straight," responded to to a factually misleading editorial that appeared in the Raleigh News and Observer; the editorial is reprinted in full on Statewide's page, below Mr. Burti's article.
Q. Can I, as the buyer, select the attorney of my choice for my closing?
A. YES. If you are buying the property, you are paying the closing attorney. Don't let any involved party tell you you must use a certain attorney for your closing -- remember, the closing is for YOU, not for someone else who won't be living in your house or paying your mortgage. Choose a lawyer who will represent YOU -- not one who is trying to make someone else happy. Your realtor or lender won't walk away from the deal if you insist on choosing the lawyer yourself.
If they recommend a certain attorney, their recommendation is certainly worth considering. But often a buyer finds out later (around closing time) that someone has already hired the lawyer for them, without telling them or making this clear, so be sure to speak up early in the process and communicate with everyone in the "loop." Otherwise, sometimes around closing time, it turns out two separate lawyers have been hired, and each is preparing to do the closing!
Q. Why should I retain Jeff H. Adams to do my closing?
A. Jeff H. Adams, Attorney at Law has over 30 years experience in North Carolina real estate law, and has supervised thousands of real estate closings and title examinations, all over North Carolina. His closings are pleasant, relaxed and worry-free, thanks to his vast experience as a real estate attorney. If there is ill will and tension at a closing, it usually comes from the frustration of dealing with an inexperienced attorney or other party. You will not experience any of this at Jeff H. Adams's closings. In addition, you will find his rates to be reasonable, probably the lowest anyone will quote you.
Some lawyers in North Carolina have been more and more relying on independent, non-employee "free lance title abstractors" or "free lance paralegals" to whom they farm out their title examinations, rather than examining the title themselves or using supervised employee paralegals. The "abstractor" then examines and reports on the title, with little or no supervision from the lawyer, though the NC State Bar has proposed rules that this practice is unethical and unfair to clients. There is no licensing or training required to call yourself a "title abstractor," and I know from personal observation, that the product of these abstractors ranges from good and conscientious, to hopelessly inept and even "fly-by-night" – and that their use creates a much greater risk of title problems arising after closing. Examples I have seen are mortgages on the wrong property, property being conveyed that doesn't exist, buying property that still has an outstanding mortgage or that someone else still owns, etc.
In order to give my clients title opinions they can be confident in, I either examine the title personally or get another lawyer to do it, all at no greater expense to you, my client. Remember that even the most skilled and honest paralegal, whether "free lance" or in-house, is not a licensed attorney and may miss problems in the title that raise important legal issues-which is why the NC State Bar requires any attorney using them to also supervise their work. Would you like it if your dentist didn't look at your teeth, but only at a report faxed from a "free lance dental hygienist?"
Q. What do I need to bring to closing?
A. You will need to bring some current (not expired) government-issued identification with your photo on it, such as a driver's license, passport, or military ID. This is required in North Carolina for notarizing your signature. If you are married, you will also need to bring your spouse (see questions below).
You will need to bring some current (not expired) government-issued identification with your photo on it, such as a driver's license, passport, or military ID. This is required in North Carolina for notarizing your signature. If you are married, you will also need to bring your spouse (see questions below).
If you are the buyer, the money you bring to closing needs to be in the form of "certified" funds, such as an official bank check, certified check, cashiers check, or money order (or wire transfer, or even cash), made payable to the trust account of the closing attorney.
Sellers often think they need to bring their original deed to closing, but this is not really necessary in North Carolina. Once an original deed has been recorded (AND ASSUMING IT HAS BEEN RECORDED, THIS IS ESSENTIAL IN NORTH CAROLINA), the recorded copy of the deed (in the books of the County Register of Deeds Office), replaces the original deed as the official deed. Of course, you do need to bring your keys to the property.
The above guidelines are only general; in your specific situation the closing attorney might modify or add to them.
Q. The house I am selling is in my name only. Does my spouse have to attend the closing?
A. Yes, your spouse must also sign the deed. This is because spouses have potential property rights in any real property their spouse owns, and they must release those rights if the property is conveyed. This is true even if you, the owning spouse, got the property before you were married, or inherited the property from your family, or you have a prenuptual agreement.
Q. I am married, but my house is in my name only, and my spouse will not be a co-borrower on the mortgage. Does my spouse have to come to the closing?
A. Yes, with one exception (see below). This situation is really the same as the one in the question just above. Even if your spouse does not co-own the property with you, he or she must also sign the mortgage (which is almost always called a "deed of trust" in North Carolina). When you get a mortgage loan, you convey to your lender a property interest in your house, and your spouse's potential property rights need to also be subject to the mortgage. The rule is, "One to buy, and two to sell."
There is one possible exception to this, that applies only to closings where you are purchasing the property in your name only and simultaneously getting a first mortgage loan for said purchase. If the proceeds for the first mortgage loan are being used for purchase money and closing costs only, it is probably not necessary for your spouse to sign the deed of trust. You will need to discuss this with your closing attorney, to see if the exception applies to you. This exception does not apply to second mortgages to finance part of the purchase price, or to mortgage loans you get later; such as a refinance first mortgage loan, or a home equity line of credit.
Of course, if you are buying real property in your name only, for cash, that is, you are not getting a mortgage loan, your spouse is not needed at the closing.
Q. My spouse has my Power of Attorney. Can he/she sign for me at the closing so I won't have to attend?
A. Possibly. You need to inform the closing attorney that you want to do this, because he or she will need to see the Power of Attorney beforehand to see if it is valid for your real estate closing. Also, the attorney will need time to prepare additional documents in this situation, and the original Power of Attorney will have to be recorded. I often see Powers of Attorney that the persons filled out on a form they got at an office supply store; I HAVE NEVER SEEN such a "homemade" Power of Attorney that was valid for a real estate closing.
(IMPORTANT NOTE, added 1-27-2000: Thanks to a recent change in North Carolina Law, eliminating the requirement of a "seal," many such "homemade" Powers of Attorney, prepared from software, etc., might now be valid for a real estate closing, but it is still critical that they be reviewed by the attorney before closing.)
Please note also that a Power of Attorney, though perfectly valid, might have been written to be used only for an earlier, specific closing or transaction. Such Powers of Attorney, containing a limitation to specific property, a specific mortgage loan or lender, or an expiration date, are very common. In this case you will need to sign a new Power of Attorney.
If you are a borrower on the mortgage, your lender also has to approve your non-attendance at the closing through the Power of Attorney; many lenders will require you to attend anyway. (If you want the loan). Most lenders that allow Powers of Attorney, require that they be specific for the transaction, as described above.
Q. When can I, the seller, get my money from the closing?
A. In North Carolina, the closing attorney is not allowed, under the current rules of the North Carolina State Bar, to disburse any funds, including the seller's proceeds and the realtor's commission, until the deed and deed of trust are recorded in the County Register of Deeds office. This means that you will not get your proceeds check at the closing table. If you recall a closing where you got your check during the closing, then it took place in another state, or the attorney was operating at a time when the applicable State Bar rules were different. The attorney's office will need at least one hour after closing to deposit the purchase funds, update their title search (to make sure no liens or adverse conveyances have been recorded just before or during the closing), and to record the documents. My office is right next to Cameron Village Shopping Center in Raleigh; you might want to spend that hour doing some shopping!
Q. I recently closed on the purchase (or refinance) on my home, and now I've applied at my bank for a Home Equity Line of Credit. The bank said they would have a title examination done at their expense. Now they say they can't open the Line of Credit, because a prior mortgage is still outstanding on the title. Why isn't my old mortgage canceled?
A. This situation can easily be avoided. When the prior mortgage lender is paid off, their deed of trust is not canceled right away; in North Carolina they are allowed 60 days to accomplish this. Sometimes, due to various problems, this takes even longer. Then the old deed of trust shows up as still outstanding, when the bank's attorney does the title search.
What you should do here is insist that your bank pay your own lawyer (the one who just did the closing for you) to do the title search. Remember that even if they don't mention a title search as part of the process, they are getting one done. Since your own lawyer will have proof the prior mortgage is paid off (payoff statements, canceled checks, etc.), he or she can get around this problem. Also, they have already searched your title so they just have to update their work; therefore they can get this done faster.
(Note: A paid-off lender is obligated to cancel your deed of trust. If they fail or refuse to within the allowed time, they could have to pay damages and other penalties, including attorney fees).
Q. I am thinking about getting a home equity line of credit. Can this cause any problems?
A. The advantages of home equity lines of credits include tax-deductible interest and lower interest rates than credit cards. However, since they are mortgages, default in payment can result in foreclosure on your home. Also, please read the next question and answer.
Q. I'm applying to refinance my first mortgage, but a home equity line of credit I already have is causing a delay. What does this credit line have to do with my new first mortgage?
A. The home equity line of credit, or other second mortgage, was a second mortgage when it was recorded in your county register of deeds office. Whether something is a first or second mortgage - that is, its lien priority - depends on when it was recorded, not on the type of mortgage it is. If you refinance your existing first mortgage, the new "first" mortgage would then actually be a second mortgage, and what was previously your "second" mortgage-your home equity line of credit - would become the first mortgage. This obviously would be unacceptable to your new first mortgage lender; therefore they will not extend you a new first mortgage, unless your existing second mortgage lender agrees to subordinate their lien, that is, they agree that their existing second mortgage, though recorded earlier, is junior to the new first mortgage (of course, another solution is to simply pay off and close the existing second mortgage). This is accomplished by a deed of subordination, prepared by the closing attorney, signed by your second lender, and recorded. Your second lender might agree to this quickly, or they might not, or they could refuse to subordinate, for example if you are getting cash out from the new first mortgage. Be aware also that some of them will charge a fee to process the subordination request - $100 is typical, though I have seen fees as high as $300 for this.
Local banks or credit unions, if you have your home equity line of credit with them, can offer quicker turnaround times in getting subordinations approved, though some national second mortgage lenders (the type that advertise on TV or send out direct mail) have subordination departments that also provide quick processing.
We sometimes encounter borrowers who did not know they had a second mortgage, for example, they responded to a TV ad, signed some papers for a loan or credit line before a notary public, and were not aware they were agreeing to a second mortgage on their home.
Q. My lender says they don't require a survey (or appraisal, inspection, termite report, etc.). Am I safe if I don't get one?
A. When you are buying a house, not getting a survey map, or another of the reports listed, can be very risky, depending on the circumstances. Adequate protection for your lender (who faces potential loss only if you default), is not adequate for you. You should note that your lender has the same title insurance coverage whether there is a recent survey or not, but this is emphatically not true for the homeowner - your title insurance policy will not cover any matters that would be shown by a recent survey, unless there is a recent survey. Note that the attorney only gives an opinion as to title to yourland - this opinion, while crucial, is not a "certification" of where your house is located within the land boundaries. The only professional who does that is a Registered Land Surveyor. I have seen cases where no survey was ordered, and it turned out a driveway (or the house itself!) was halfway on a neighbor's lot.
Q. My lender says a lawyer isn't required for my closing; a notary public can do it.
A. That's a great idea. Just make sure the notary is also a lawyer.