Settlement agent
A settlement agent is the person, other than a party to the transaction such as the lender, seller, purchaser or borrower, who provides escrow, closing or settlement services on a Virginia real estate transaction and is listed as the settlement agent on the settlement statement or closing disclosure.
Outside the deal, and named on the statement
Virginia's definition turns on two facts about a person who provides escrow, closing or settlement services: the person is not a party to the transaction, and the person is listed as the settlement agent on the settlement statement or closing disclosure.
means a person, other than a party to the real estate transaction, that provides escrow, closing, or settlement services in connection with a transaction related to real estate in the Commonwealth and that is listed as the settlement agent on the settlement statement or closing disclosure for such transaction.
Va. Code 55.1-1000
The same section says who the parties are, so the first half of the test has edges. A party is a lender, seller, purchaser or borrower, and with a corporate purchaser it also takes in any entity that is a subsidiary of that purchaser or under common ownership with it. Everyone else who provides those services is on the outside of the deal.
The second half has a backstop. A person outside the deal who conducts the settlement conference and receives or handles money is deemed a settlement agent, subject to the chapter's applicable requirements. The work those services cover, from ordering title insurance to recording the deed, has its own entry under settlement.
Registered with one of three licensing bodies
Every settlement agent subject to Chapter 10 of Title 55.1 must be registered with the appropriate licensing authority, and the chapter names three: the State Corporation Commission, the Virginia State Bar and the Real Estate Board. Each settlement agent must also exercise reasonable care and meet the chapter's and its licensing authority's requirements on licensing, financial responsibility, insurance, bonds, audits, escrow account analyses and record retention.
The role is not reserved to lawyers. The chapter separately defines a lay real estate settlement agent, and one condition of that definition is that the person is not licensed as an attorney. Which kinds of firm may act as a settlement agent, and when one of them may counsel a party on the law, are set out in who can close a real estate sale in Virginia.
Whether a particular firm is registered, and with which body, is a question for its licensing authority, not for the firm's own letterhead.
A malpractice policy, a fidelity bond and a surety bond
A settlement agent that is neither a title insurance company nor a financial institution covered by 55.1-1003 A 5 must also carry three minimums under 55.1-1004 B.
| Coverage | Statutory minimum |
|---|---|
| Errors and omissions or malpractice insurance policy | $250,000 |
| Blanket fidelity bond or employee dishonesty insurance policy | $100,000 |
| Surety bond | $200,000 |
The name a buyer or seller finds on the closing papers
For a transaction the chapter governs, the settlement statement or closing disclosure must be in writing and identify the settlement agent by name and business address. That line is where a buyer or a seller can read, in writing, who the settlement agent is.
The services in the statutory definition include ordering title insurance, receiving and disbursing funds, and handling or arranging recording. The order those pieces run in, from ratified contract to recorded deed, is laid out in settlement in Virginia, and whether the signing itself can happen by video is covered in whether a Virginia closing can happen remotely.
The name also matters to the IRS, because the Form 1099-S filing rule turns on who is listed, a rule set out in what documents you need to sell land.
Not sure who will be named settlement agent on your sale?
Whoever the statement names, a seller still works with that office. Tell Lowell the county and the contract date, and he can walk you through what the role covers, with legal questions kept for your own attorney. No cost, no obligation.
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Questions about this term
Does a settlement agent with no employees still need the fidelity bond?
It can ask to be excused from that one. Under Va. Code 55.1-1004 B, a settlement agent with no employees except its owners, partners, shareholders or members may apply to the appropriate licensing authority for a waiver of the fidelity bond or employee dishonesty requirement. The waiver is written for that requirement alone; the errors and omissions or malpractice policy and the surety bond are separate items of the same subsection, with no waiver attached to them.
Does the settlement agent work for the buyer or the seller?
The statute describes a job rather than a side. The language Va. Code 55.1-1007 requires in a contract to purchase real estate of not more than four residential dwelling units describes the settlement agent's role as coordinating the collection of documents and the collection and disbursement of funds needed to carry out the contract; when part of the price is financed, the purchaser's lender instructs the settlement agent on signing and recording loan documents and disbursing loan proceeds. Under Va. Code 55.1-1006 a seller may also retain a Virginia-licensed attorney to represent the seller's interests in the closing.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Va. Code 55.1-1000: definitions for Real Estate Settlement Agents Code of Virginia
- Va. Code 55.1-1003: who may act as a settlement agent Code of Virginia
- Va. Code 55.1-1004: standard of care, insurance and bonds Code of Virginia
- Va. Code 55.1-1006: choice of settlement agent and a seller's attorney Code of Virginia
- Va. Code 55.1-1007: required contract language Code of Virginia
- Va. Code 55.1-1008: escrow funds and settlement statements Code of Virginia
- Va. Code 55.1-1014: registration of settlement agents Code of Virginia
- Instructions for Form 1099-S Internal Revenue Service