You are here

What Does a Real Estate Settlement Company Do?

settlementSpecific laws, acts and regulations are passed to ensure that home buyers are of the utmost concern for the various companies associated with the buying and selling process. Real estate agents, lenders, construction companies, title insurance companies and more are involved in the process.

Signed into law by President Gerald Ford in 1974, the Real Estate Settlement Procedures Act was designed to ensure that the companies involved in the real estate process weren’t inflating prices or facilitating a “bait-and-switch” tactic.

According to Investopedia, “Originally passed by Congress in 1974, the latest RESPA regulations were published on November 17, 2008 and were scheduled to go into effect on January 1, 2010. Before this act was created, it was a common practice for a lender to advertise a loan at a certain rate of interest provided the borrower use the lender's title insurance company or other affiliate at a greatly inflated price. The affiliate would then pay the lender a portion of the inflated fee as a kickback.”

RESPA was also intended to help consumers become better shoppers for settlement services, and to ensure that home buyers aren’t forced to purchase title insurance from a specific company on condition of a sale.

The Good Faith Estimate is the signature piece of the new version of the law, which has helped to establish a new definition for a “GFE application.”

Working with a Settlement Company

While you can choose your own settlement company to work with during a real estate purchase process, many real estate agents or brokers will have a good-standing relationship with a particular settlement company. And because of the law, home buyers can rest assured the transaction will go smoothly.

The settlement agent or officer must be a neutral party because he or she is working with all sides of the transaction and shouldn’t have a bias in any direction. His or her job is to make sure all the terms of the contract are met, such as holding financial deposits in trust, writing closing instructions based on the purchase agreement, gathering all legal documents, collecting documents from the buyer’s lender and making sure all the conditions of the contract are met.

The settlement officer also has a role in all the parts of the title insurance. He or she will need to order a title examination or preliminary report, secure the title insurance, clear all title insurance issues and make sure that the entire process goes on smoothly. 

Settlement officers carry out written escrow instructions that state what all parties have agreed upon in the purchase documents, but they cannot offer any advice about property values or any other legal advice. This includes mortgage rates or terms if the buyer signs loan documents in the presence of the settlement officer.

If you’d like to learn more about available real estate in DC, don’t hesitate to contact us. We’d love to assist you in the search for a new place to call home in the nation’s capital.