When you’re buying a house, don’t you want an experienced set of eyes checking out the closing papers for errors and potential overcharges?
Of course. But under the new federal real estate settlement procedures that took effect late last year, an unexpected problem is taking shape: Many lenders and title companies are refusing to provide copies of the final closing documents to real estate agents representing homebuyers. That, in turn, is threatening to jeopardize one of the traditional services agents perform for their clients — scrutinizing closing statements for inaccuracies that could cost them money or delay the settlement unnecessarily.
Yet in a recent internal survey of members across the country, the National Association of Realtors found that 54.5 percent of agents reported they had experienced difficulties obtaining the Closing Disclosure form used under the new federal rules, and that half of these agents detected errors when they finally reviewed them. The errors included incorrect fee charges, commission splits, taxes and failure to include seller concessions to the purchasers, among others.
In some cases, when Closing Disclosures had to be changed and re-issued — triggering a mandatory three-day waiting period for the purchasers and delaying the settlement — sellers have balked and even canceled sales. Eric Post, principal broker at BHGRE Realty Partners in Portland, told me “we’ve had some situations where this caused the termination” of entire deals because the delay “wasn’t acceptable” to the sellers.
Dan Galloway, an agent with Redfin in the Washington D.C., area, said under the previous system, agents routinely received a copy of the HUD-1 closing form, which summarized the costs and credits for both the sellers and buyers in one document. Typically the HUD-1 was prepared and delivered by the settlement or title agent or attorney closing the transaction. Now lenders are solely responsible for preparing and delivering the Closing Disclosure, the replacement for the HUD-1, directly to the buyers. Lenders are often reluctant to deliver it to any party not expressly designated in the government’s rules. The rules are silent about sharing a copy with the buyers’ real estate agent. Lenders also cite federal consumer privacy regulations that they feel constrain them from providing a Closing Disclosure to a realt estate agent because the document contains “non-public” personal information. Though title, escrow and settlement agencies typically are local, frequently the lender is located hundreds or thousands of miles away and may not be adequately informed about local real estate tax practices, transfer fees and other charges.