Closing day for buyers and sellers looks very different. Different paperwork, different obligations, and very different outcomes. An important shared step to any closing is paying off liens and mortgages resulting from the seller’s prior obligations. If done correctly, the new owners can rest assured their only obligations are to their new lender, and that their title is otherwise clear from old lenders’ claims. Likewise, sellers can celebrate the milestone of paying off obligations and move forward to their next journey. Alternatively, if done incorrectly, the consequences can be devastating.

What are some common issues that may arise on closing day?

Common closing day issues include last-minute financing problems, title issues, home inspection concerns, or delays in paperwork processing. It’s crucial to stay in close communication with all parties involved and have contingency plans in place to address these potential challenges effectively.

What kind of liens are of concern?

When most people think of liens, they think of unpaid debts. Unpaid taxes, unpaid construction costs, or fines. While these are certainly concerns closing agents look for, there are other ways a lien may be placed on a property. The most common being a mortgage, HELOC (Home Equity Line of Credit) or Green Energy loan for improvements such as solar panels. These obligations are some of the largest financial claims on a property, and in the case of Green Energy liens, may even attach on the tax bill. Failure to follow the proper payoff protocols can easily result in unwanted financial obligations for the buyers. Other examples of possible liens include unpaid municipal fines for code violations, attorney costs resulting from lawsuits or unpaid legal matters, and even unpaid lump sum child support. Understanding the diverse nature of liens and their implications is crucial for a successful real estate closing day. From unpaid debts to mortgage obligations and even lesser-known liens like municipal fines or legal costs, navigating these financial claims requires meticulous attention to detail. By ensuring a thorough lien payoff process, both buyers and sellers can confidently embark on their respective journeys with a clear title and peace of mind. Stay informed, stay diligent, and pave the way for a smooth closing day experience.

What process needs to be followed to ensure proper payoff?

To ensure a proper payoff, sellers or closing agents must contact the lien holder or their attorney for an official payoff statement. This statement outlines the final payoff amount and includes details on principal balances, accrued interest, attorney’s fees, and administrative costs. It’s crucial to follow the detailed instructions provided in the statement to prevent payment rejection or delays leading to extra fees. Common fees include remaining principal balances, interest accrued on the unpaid balance, any applicable attorney’s fees, and additional administrative costs. Detailed payoff instructions are also included in the final statement and must be followed exactly as written. Failure to follow the payoff instructions can result in rejected payments, improved payoff allocations and delays resulting in additional fees or interest due. By meticulously adhering to the payoff process, both buyers and sellers can secure a smooth closing day with a clean title and peace of mind.

What happens if the payoff is not done properly for closing day?

If a payoff is not properly completed or is not paid off in full, the lien-holder may attach a claim to the property. Not only does this impair the current owner’s ability to sell the property and pocket any additional proceeds from the sale, but it may also result in a financial obligation if there are not enough proceeds to pay off the line. Furthermore, liens typically continue to incur interest the longer they are left unsatisfied. What once started as a $150,000.00 mortgage balance or a $500 municipal fine can quickly spiral into larger sums due before the lien-holder will record a Satisfaction of Claim and release the obligation. Failure to satisfy a mortgage or lien can also result in the inability to issue title insurance and can cause title issues down the road for the new owners. If the mortgage or lien is held by an individual, rather than a traditional lender or service-provider, there may be additional hurdles and challenges to obtain a payoff statement or official release. Resolving claims brought by an individual rather than a traditional lender may require the assistance of an attorney, which can be time consuming and costly.

Closing day is often thought of as a day of celebration and excitement. Many people do not think of the unforeseen complications that may follow if a lien is not properly resolved. Whether you are the buyer or seller, it is important to work with a knowledgeable closing team made up of highly professional realtors, closing agents and possibly even attorneys. This team will help ensure you can move forward without fear of complications. If you are part of a closing process with complicated payoffs, or you have been affected by incorrectly paid off liens, contact the attorneys at Lacey Lyons Rezanka to find out how we can help.