Take time to thoroughly read closing documents

August 02, 2013|Benny L. Kass | Housing Counsel
  • Thoroughly review real estate documents
Thoroughly review real estate documents (Imagezoo)

Q: In my 20s —23 years ago — I bought my first house in California. When I signed the final paperwork at the escrow office to close, I read thoroughly the contracts for the first time in my life and saw many boilerplate statements. I also read a boilerplate paragraph that did not make sense to me and asked the escrow officer to explain. She said something to the effect that she did not know the contents of the paperwork and could not explain the meaning.

At the time, I was young and trusting, the paragraph was a boilerplate, and I didn't want to create a scene. Thus, I thought what a dimwit she was to not know the meaning of contracts that she routinely asked customers to sign as part of her job. However, I accepted her answer and signed everything.

Now, a wiser, older and more experienced person, myself having bought and sold several properties, I realize I was the dimwit for allowing that first escrow officer to ever get away with such a nonanswer. Part of the experience I gained is that I learned that real estate people hate working with engineers and scientists because we (I am one by advanced education and experience) read every last word of all our documents and gain a firm understanding before agreeing to anything.

Real estate people, in general, would rather have dumb customers who follow their instructions so they could move on to the next and many customers quickly. The seasoned person I am now would never allow such an answer to sway me again and would ask for clarification from her boss and go up the chain if need be.

If in the same situation again, what is my recourse short of hiring a lawyer to read and clarify the wording to me and void any penalties that 1. I must pay, 2. delay escrow, and 3. that the escrow or other party may use as an excuse to penalize me for not finalizing the transaction as agreed?

A: You couldn't have said it better. People kick the tires on their new (or used) car, but fail to read the legal documents on a real estate purchase that may be the largest financial transaction in their lives.

First, what's the harm in hiring an attorney to review your documents? The cost may be $300 to $500 (unless there are major complications, in which case you really want a lawyer on your side) and will give you peace of mind.

Second, regardless of whether you retain a lawyer, you have the right to demand that you receive a copy of all legal documents you will have to sign in advance of the actual settlement (escrow) date. You should be able to review those documents at least two to three days in advance.

Third, if the clerk who is conducting the settlement (called escrows in many Western states) cannot answer your question, I would demand that someone in authority — and with knowledge — come in to give you the answers to your questions. And if they can't, I would delay the settlement until such time as you can get your questions and concerns answered. However, that may impact on the seller, who needs the sales proceeds to purchase something else. Obviously, you don't want to be in breach of contract by not closing on a timely basis.

That's why I would demand that you be able to review all documents a day or two before the scheduled date.

Can the escrow or settlement company somehow penalize you for delaying the settlement? I would love to take that case: "Judge, my client went to closing and asked questions about the loan documents, but the settlement person did not know the answers. Now they want to penalize my client. Judge, it should be the other way around; penalize the company for incompetence."

No, I don't think they will dare try to penalize you under those circumstances.
