It used to be the norm that all parties to a transaction showed up to closing — at the same time, at the same title company, in the same room. Real estate agents, buyers, sellers, the settlement agent, and the lender would attend, and settlement was a formal event (formal attire and all!).
Now more and more closings are “split.” Buyers and sellers choose separate title companies, and close their respective transactions at separate times, in separate companies, sometimes on separate days.
What are the benefits to a split closing?
Quicker settlement. When parties sign separately, they do not have to be present for the other party to sign papers, thus facilitating a quicker settlement. Also, practically speaking, the parties do not end up in lengthy discussions about the property sold at the table.
Non-fiduciary relationship. When one title company handles both sides of the settlement, the title company must act as fiduciary to both parties. They must remain neutral, and cannot advocate on either party’s behalf. In a split settlement, if you are the seller, your chosen title company can advocate on your behalf.
Confidence in results. In a split closing, each realtor typically recommends a buyer or seller to use his or her preferred title company. The realtor can make a justified recommendation based upon past experiences with the title company chosen, and have a greater level of confidence in the company representing his or her client.
Drawbacks to a split closing?
Potential miscommunication or lack thereof among title companies can cause delay. The more parties involved in a closing, the greater potential for communication issues. Each title company is relying upon the other’s due diligence.
Delay in resolving issues. Split closings can make it more difficult to resolve title issues on the day of closing. When all parties attend closing and one title company is involved, communication is facilitated more easily and parties can more efficiently discuss and resolve walk-through and inspection issues.
Delay in recordation. Title companies in Virginia have two days to record and disburse funds post-settlement. In a split closing, one title company must deliver closing documents to the other. Often they are over-nighted, creating an additional day’s delay in the disbursement of funds and recordation of the deed.
In a split closing, it is important that you or your client choose a reliable title company that values communication and resolving issues timely. Call Highland Title & Escrow to handle your next settlement!