What Are Some Examples Where Having Closing Protection Coverage Would Protect My Clients?
Whenever the discussion of Closing Protection Coverage comes up amongst Title Agents, it generally centers around the protections afforded the Lender. This is because the Lender always requires the coverage and few buyers and sellers request the protection. Most case law involved in the defense or use of Closing Protection Coverage, involves Lending Institutions, but the ordinary consumers have the same right to the protections Lenders require.
Think of an instance where you’ve had a closing and there was some type of closing error involving the numbers. How many times have you’ve had to request multiple closing statements because this or that item was not addressed. With all the communication and data entry input that goes into peoples’ names, addresses, loan amounts, purchase prices, commissions, tax prorations, payoff calculations, legal descriptions, points, closing costs, government fees, warranties, inspections and repairs, it isn’t hard to envision a simple mistake or a big one. That mistake may not be something that affects the parties’ legal ownership interest and therefore not covered under the Title Insurance Policy. Closing Protection Coverage can give the client the peace of mind that a National Title Insurance Company, with significant financial resources, will stand behind the mistake and not just the local Title Agent.
One of the operative conditions of the coverages afforded under the Closing Protection Coverage, is that the Title Agent must have received and accepted “closing instructions” from the Addressee. Now Lenders provide Title Agents very specific and detailed closing instructions on every transaction. So do your Buyers and Sellers. The Purchase Contract acts as the closing instructions to the Title Agent from the Buyer and Seller. In their duties as Escrow Disbursing Agent, the Title Agent reviews the Purchase Contract and attempts to comply with the terms and conditions set forth between the parties in the Purchase Contract. What happens if the Title Agent makes a mistake? What happens if the vesting of the new deed is not what the Purchase Contract called for? What happens if the Title Agent doesn’t prorate taxes properly pursuant to the Purchase Contract? What happens if the Title Agent doesn’t collect the correct amount to pay in full the seller’s mortgage? What happens if the Title Agent fails to transfer an adjacent lot that was supposed to be part of the deal? The ownership of the property isn’t necessarily in question, but a closing error has caused a loss to somebody.